In the stock market, China risk is reemerging. The U.S. is amending an export rule to block the sale of certain semiconductors to Huawei. This is in addition to prior restrictions on exports of U.S. technology to Huawei.
There is a swift response from China in a tweet by Hu Xijin, the influential editor of the Global Times, which has close ties to the Chinese government. He said China may declare Apple, Qualcomm and Cisco as unreliable entities and stop buying planes from Boeing.
In the previous trade war between the U.S. and China, Apple CEO Tim Cook was successful in keeping both President Trump and the Chinese government happy. The big risk is that Cook may not be able to pull off that feat again.
A lot of money is tied to the S&P 500 Index. Apple carries a heavy weighting in the index, so if Apple is hit more than the other three stocks named in the tweet, the stock market will suffer as a result of poor sentiment.
MacDailyNews Take: There’s always been “China risk.” With the 5G iPhones looming and the very real prospect of effective COVID-19 treatments and eventual vaccine looming, smart investors look to take advantage of buying opportunities (see: AAPL at $212.61 on March 23, 2020).
Apple just keeps getting screwed. Tim Cook spent all that time and effort trying to get cozy with China and now all the frenemy strategy is going to go down the toilet. I’m only looking at this short-term risk and I’m not smart enough to see the big long-term picture. I honestly don’t know if this export rule is a good thing or not. I only see it through the eyes of an Apple shareholder. This is a global economy and U.S. businesses can’t only thrive on American consumers or American supply chains. What Tim Cook did makes plenty of sense if you want your company to have a large customer base. Is Apple too dependent upon China for production and sales? I don’t know how to answer that question.
What about Tesla? Is Tesla’s value suddenly going to plunge or just Apple’s value. Wealthy Apple investors are always seeing risk in everything that involves Apple in even a small degree. I’m not concerned about a one day share price drop in Apple. I’ve seen that before and it doesn’t usually last. I just don’t particularly enjoy reading these articles that seem to target Apple unfavorably when I’m sure there must be plenty of companies highly dependent on what happens with China.
Working with an authoritarian country that, has for years, has worn a shiny capitalistic hat, was bound to cause problems. China has been long involved in not-so-friendly geographic tussles with their neighbors. It’s hardly a stretch that it be extended to business and economics.
There are a number of pretty smart business/econ minds that have postulated/wondered how long we/other countries can continue to play in the same box as China. They play with very different econ rules (GAAP is maybe/maybe not to China) and it requires everyone else to absorb the problems when they move the/their goal posts…wealth is hard to forsake.
China doesn’t just want to play…it wants to win. Their 5G reach is another step in that direction and Huawei is part of another reach to “own.”
Btw, AAPL is targeted because of leverage…it’s 1-2-3 on the “richest” list . TSLA is a drop, in comparison. TSLA may/may not make a profit on any particular qrt. Apple will make billions and is quite dependent on China.
And what is Tim doing? Starting all over again in India. He be lovin’ him some cheap labor.
When Team USA and Team TAIWAN launch an army of robotic manufacturing factories we will find we dont need cheap labor. The sooner we get off the crack pipe (CCP reeducation labor camps, technology transfers, and out right theft of apple innovation) the better. It’s gonna hurt but usually life saving surgery isn’t pain free.
Apple doesn’t need cheap labor now. The labor cost is only a small contributor to the finished price. What Apple does need is abundant labor. Their contract assemblers’ plants each employ upwards of 350,000 workers who are willing to relocate from their original homes to the plant location for seasonal work. That would clearly have been impossible in America for multiple reasons.
Replacing them with fully-automated assembly plants would cost Apple considerably more than the USA is devoting to its coronavirus research effort. That expenditure would be repeated each year, as retooling an assembly machine for a new model is a lot more expensive than retraining human workers. Apple customers are willing to pay a premium, but that only goes so far.
I’m sure Apple has been working with all possible speed to reduce its dependence on China, but it cannot invent a viable alternative out of thin air.