Apple and any possible trade tension fallout.

Discussion in 'The Okie Corral' started by WeeWilly, Oct 8, 2018.

  1. WeeWilly

    WeeWilly

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    Let me start by saying I use Apple products, not exclusively, but do use iPhone's, iPad, etc. My wife worked at Apple many, many years and uses only Apple products, so we are Apple fans.

    We actually don't own any AAPL any longer having sold the last of our holdings this month. I didn't sell for any other reason than we have been flattening our market exposure lately and Apple was above its historical valuations and felt it was time to take profits.

    My wife and I were hiking the other day and discussing Trump's trade startegy and I mentioned that I thought things could get much worse between our two countries before they improve. My wife wondered if Apple had any plans to diversify their manufacturing sourcing startegy as China pretty much makes all of their iPhones.

    I said I sure hoped they have, because a day could come where Trump announces trade rules that could basically make sourcing iPhones from China unprofitable, or even impossible. Getting an iPhone made in some other country probably wouldn't take very long. Getting 10's of millions of iPhones made in some other country, might take quite a while.

    That same day, after we got home, I read that David Einhorn (Green Light Capital) had sold all of his Apple holdings, one of the catalysts he cited was the ongoing trade dispute with China and Apple's ability to get the iPhone sourced elsewhere.

    I may have to take a look at Apple as a possible short going forward. The good news is there are a lot of shares outstanding so getting a borrow shouldn't be too difficult. The bad news, is Apple pays a dividend (raising the expenses associated with a short position) and their services business has an enormous gross margin, so their going forward value metrics likely will see some upgrading as time goes on.

    I won't be doing anything quickly and likely only will enter a short if things get significantly worse between us and China, but I am going to be watching. :)
     
  2. Michael43

    Michael43

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    i wouldn't be surprised if the tech oligarchs get some sort of carve out. IIRC Apple builds the Mac Pros in Austin, I would love for them to reshore more.
    I believe there was talk of Foxconn opening a manufacturing plant in Wisconsin- i would wager the chinese do not let this happen.
     

  3. racerford

    racerford

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    Weren't going to be doing some assembly in India due to their rules? If you automate the buld process enough, it doesn't need to be assembled offshore. The machines cost about same everywhere it is the human component that varies. Also the productivity of US workers general exceeds those of other countries. Maybe not china, but many places.
     
  4. WeeWilly

    WeeWilly

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    I don't know, they are pretty practical when it comes to doing business. I don't doubt Apple could spool up operations just about anywhere, it is just the two hundred million plus iPhones a year number that seems the challenge.

    Foxcon has factories that are medium sized cities. You aren't going to build that in a few weeks, a few months, maybe even a few years.

    I know Tim Cook came from the buying side, I just wonder if he has taken the current trade issues with China seriously?

    I will watch this one pretty closely. :)
     
  5. MinervaDoe

    MinervaDoe

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    It would be better to take the hit from pushing back on China trade inequities sooner than later.
    It will never be a level playing field with these folks.
    https://www.nationalreview.com/magazine/2018/10/15/chinas-geopolitical-power-play/

     
  6. G19Tony

    G19Tony Sneet CLM

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    What language is that you speak? :confused: It is interesting though. In the model railroad world, just about all the locomotives are made in China, it appears, and practically in one factory. Well, they just closed up, and nobody can get anything right now. ETA unknown. I suspect it takes awhile to find another factory and spool up. o_O
     
  7. Bourne911

    Bourne911

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    +1
    [​IMG]
     
  8. WeeWilly

    WeeWilly

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    That is kind of what I am thinking, only supersized. Apple sold 200+M iPhones last year, while they have more than a fortress balance sheet, if the music stopped for say, a year, it may not put them out of business, but the stock would take a massive hit. :)
     
  9. Taz

    Taz

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    Didn’t they already get a carve out for the tariffs? China needs Apple possibly more than Apple needs China at this stage.

    China is at a tipping point. If their growth continues at this level they have a chance to be self sufficient. Meaning they will be both consumers and makers. Till they reach that point they desperately need western consumers buying their crap. This is why they have conceded to some of the DJT “requests”.

    For the West, it’s vital that we establish an internal sources of supply for as many things as possible and other outsource avenues for those that can’t be brought back yet.
     
  10. WeeWilly

    WeeWilly

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    Correct at current levels, they are carved out. I am not talking about current tariffs, I am talking about if things get much worse. 200+M phones will take a while to build elsewhere.

    I just can’t figure out how the get that many anywhere else, for a really long time. :)
     
    Last edited: Oct 8, 2018