IPHONE ISSUE: Yuanta analysts said that vendors in China’s supply chain with higher sales exposure to Apple would be most affected by the higher US tariffs
By Chen Cheng-hui / Staff reporter
The latest round of US tariff increases on Chinese goods would affect market sentiment in the short term rather than Taiwanese technology chains, market watchers said last week.
However, if the punitive tariffs extend to Chinese imports that have not previously been targeted, the impact might escalate and sectors that use more labor — including Apple Inc’s supply chain, as well as consumer electronics and computers that Taiwanese companies produce in China — are likely to face increased pressure, they said.
The US on Friday increased tariffs on US$200 billion of Chinese goods to 25 percent from 10 percent, affecting products including electronics, machinery, automobiles, bicycles, petrochemicals, steel, machine tools, hand tools, plastics, and screws and nuts, the Bureau of Foreign Trade said.
US President Donald Trump has threatened tariffs of 25 percent on another US$325 billion of Chinese imports if no trade deal is achieved.
“As iPhones are nearly 100 percent assembled in China and the US market contributes up to 44 percent of Apple’s iPhone sales, vendors in the supply chain with higher sales exposure to Apple will be impacted the most by the higher US tariffs, if consumer electronics such as iPhones cannot be exempted from Trump’s higher tariffs,” Yuanta analysts led by Wang Deng-cheng （王登城） said in a report.
These vendors include flexible printed circuit board suppliers Flexium Interconnect Inc （台郡） and Zhen Ding Technology Holding Ltd （臻鼎）, smartphone camera lens supplier Genius Electronic Optical Co （玉晶光）, contract electronics manufacturer Pegatron Corp （和碩） and metal casings supplier Catcher Technology Co （可成）, the analysts said.
The US$325 billion of Chinese goods involve smartphones, computers and other electronic gadgets, therefore the impact on Taiwanese manufactures with operations in China could be great, Taiwan Institute of Economic Research （台灣經濟研究院） Economic Forecasting Center director Gordon Sun （孫明德） said.
The effect of higher tariffs on Taiwanese networking firms would only last for a short period, as some of them — like Accton Technology Corp （智邦）, Wistron NeWeb Corp （啟碁）, Sercomm Corp （中磊）, Gemtek Technology Co Ltd （正文） and Arcadyan Technology Corp （智易） — started relocating operations in the third quarter of last year, Yuanta analysts said.
For suppliers of auto parts, the worst-case scenario is that China would take retaliatory action against the US by raising tariffs on US-made vehicles back to 40 percent from 15 percent, which would increase pressure on local suppliers for Tesla Inc, BMW AG and Daimler AG, the analysts said.
Semiconductor firms would be affected relatively less by higher US tariffs, as design and production are almost entirely done in Taiwan, while firms in the power management sector would also see limited impact, having moved some of their production bases to Taiwan and Southeast Asia, they said.
A greater concern would be whether global trade shrinks as a result of the escalating trade dispute, Yuanta analysts said.
Such escalation would send ripples through global financial markets, with Taiwan not spared, Sun said.
An iPhone is displayed at the Carnegie Library Apple Store in Washington on Saturday. Photo: EPA-EFE