“U.S. companies counting on China for a major part of their growth have targets on their backs as Beijing and Washington ratchet up trade-war tensions,” Bruce Einhorn writes for Bloomberg. “President Trump’s decision to blacklist Huawei Technologies Co., the Chinese maker of smartphones, while also threatening bans on other Chinese technology companies, could open the door to retaliation against U.S. brands from hotels to sportswear to even Captain America.”
“State media last week said China is ‘well armed to deliver counterpunches,’ without giving specific details,” Einhorn writes. “As companies await China’s next move, there is uncertainty about what form retaliation might take… China could use the template it honed in 2017 when relations with South Korea deteriorated over Seoul’s decision to deploy a missile shield. The government curbed travel to South Korea, hurting cosmetics companies that rely on Chinese tourists, while local authorities shut most of Lotte Shopping Co.’s China stores, alleging fire safety violations. Consumers boycotted South Korean products, dealing a devastating blow to Hyundai Motor Co.’s sales.”
“The most obvious target is Huawei’s smartphone rival Apple Inc., which gets about a fifth of its revenue from China and manufactures its iPhones there. The Cupertino, Calif.-based company has already been suffering in the region, seeing sliding revenue as consumers buy more phones from Huawei and other local brands,” Einhorn writes. “Blowback from Trump’s Huawei ban could cost Apple about 3% to 5% of its iPhone sales in China over the next 12 to 18 months, according to Dan Ives, an analyst at Wedbush Securities.”
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MacDailyNews Take: Apple suppliers employ 1+ million Chinese workers.
We continue to strongly believe that for a company that employs over 1 million Chinese workers with its flagship Foxconn factory and is a major strategic player within the China technology ecosystem…from a supply chain perspective Apple will not have major roadblocks ahead despite the loud noise. Taking a step back, we ultimately believe there is a low likelihood that Apple and its iPhones feel the brunt of the tariffs given its strategic importance domestically as well as [Chief Executive Tim] Cook’s ability to navigate these issues in the past with Trump and K Street. — Wedbush analyst Daniel Ives
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