Apple and tariffs on China: how to respond

Apple’s dilemma: to eat or pass on tariffs

Apple’s stock took a 5% hit on Monday as the U.S. trade war with China experienced its most damaging day to world markets. Apple faces a choice: absorb higher manufacturing costs from goods impacted by a 10% tariff, or pass on higher costs to consumers. Wedbush analyst Mike Ives says eating the tariff will reduce the company’s profits by 4%. On the other hand, Apple can pass increased costs to consumers, increasing prices of already pricey phones amidst a slowing smartphone market. Ives believes this choice will reduce stock price by $25 to $30 per share. On Monday, investors devalued the stock without waiting to see what course management will take. Fortune

dis-rup-shun: Apple is swiftly moving production from Chinese plants to locations in India, Vietnam and the U.S. In addition, the company is increasing its emphasis on services: streaming music and cloud, which will, over the next few years, make the company less vulnerable to supply chain fluctuations. As Apple is seen as a star of the American tech economy, the company can expect consumers in Asia to stop buying its products, but we can assume that investors have already priced that shift into the stock price.

Facebook placing its name on Whatsapp and Instagram

Two properties that Facebook purchased in the last half dozen years were maintained as separate brands. In a reversal this year, Zuckerberg has not only replaced the founders with Facebook execs, but has decided to brand the Facebook alternatives with the parent’s name. Wired

dis-rup-shun: Zuckerberg must like press, as he will keep getting it if he continues to do dumb things. Facebook, for the past three years could win the prize of the most tarnished megabrand, as one misstep after another has brought the ire of users and regulators alike. Now the Justice Department is examining Facebook for being anti-competitive, so Zuckerberg decides to flaunt domination of social media properties — huh? Does the boss think that this branding move will improve the perception of Facebook, or is he oblivious to the fact that he will now dent the clean reputations of Whatsapp and Instagram?

Apple credit card available today

Apple’s reinvention of the credit card, a titanium numberless card that is a physical reminder of the card app on your iPhone is released to a limited audience today. The card, backed by Goldman Sachs, can be applied for easily in the wallet app and pays 1% cash back on transactions, and doubles to 2% when you use the iPhone rather than card, for transactions. Wired

dis-rup-shun: Why would you need a credit card from Apple? If you have never used Apple pay from your iPhone, you are missing real convenience. Because you likely already have your phone in your hand, by placing it on a scanner, you save a few digs, opens, searches, swipes and replacements. But even better, the iPhone app immediately confirms the transaction on your screen, and provides a history later when you wonder how much you did pay for that item. Apple is out to replace your wallet with your iPhone, and this is a nice step. The Apple card, with no account numbers printed on it, is certainly more secure and the fact that one doesn’t need a physical card makes going for a run or a quick errand that much simpler.

Electric cars gain another foothold

The number of electric cars available on used car markets has grown to almost 4% of all cars offered — signaling that EVs are becoming sufficiently commonplace and available for lower price points in pre-owned outlets. Saving the environment is important to many, but not as important as saving money. Affordable and used EVs enable both. Wired

dis-rup-shun: Pre-2000 attempts to make hybrid vehicles mainstream were quashed by falling oil prices, but this time around, it appears that EVs are gaining critical mass, or at least past the point of no return. EVs, with near zero maintenance costs and shorter ranges align well with a consumers that are very comfortable with ride sharing apps, life-as-a-service business models (low home ownership) where ownership of assets is less important, and more environmentally conscious. All companies selling expensive assets must consider the content-to-rent attitudes of young consumers.

 

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