Trump Tariffs: Even if it leads to some demand destruction …, S&P warning on smartphone and PC prices in the US

Smartphone and personal computer (PC) prices are expected to increase as manufacturers pass on higher costs from US tariffs to consumers, according to S&P Global Ratings. The agency predicts that even if demand decreases, companies will raise prices, particularly impacting the 45% of PC sales and the majority of smartphone sales driven by consumers.‘We expect PC and phone makers will pass on the higher cost to customers even if it leads to some demand destruction, especially for consumers who make up 45 per cent of PC sales and most of smartphone sales,’ the global credit ratings agency said in a research note, seen by ETTelecom. It noted that smartphone makers, such as Apple and its key suppliers, and personal computer (PC) manufacturers heavily reliant on China, are the most vulnerable to the US tariffs.The note added: ‘S&P Global Ratings believes the most vulnerable companies are those with the largest reliance on China’s integrated technology production infrastructure and the U.S. as a major end market.’ In particular, it said Apple and its key suppliers, including Hon Hai Precision Industry (Foxconn), may be the most disrupted due to reliance on China for production.Companies heavily reliant on China for production, such as Apple and its key suppliers like Foxconn, are the most vulnerable to the tariffs. Apple, holding over 60% of the US smartphone market as of Q4 2024, faces significant risk due to its China-based production, with iPhones accounting for nearly 50% of its revenue. The US represents about a third of Apple’s global smartphone shipments. Similarly, PC makers Dell, HP, and Lenovo face risks due to high input costs and reliance on Chinese manufacturing for laptops, with US PC sales contributing 15-20% of their operating profits.While Apple is shifting iPhone production to India, expected to cover most US-bound shipments by 2026, and Samsung relies on Vietnam and India for production, both companies remain exposed to potential tariff increases. The Trump administration has imposed a 10% baseline tariff on all countries, including India, with China imposing reciprocal tariffs. Although consumer electronics like smartphones and laptops are currently exempt, President Trump has threatened a 25% tariff on smartphones made outside the US, targeting brands like Apple and Samsung.S&P notes that Xiaomi, with no direct US market exposure and chip production in Taiwan, is less affected by US tariffs or China’s retaliatory measures. Meanwhile, the International Data Corporation (IDC) forecasts global smartphone shipments to grow by only 0.6% in 2025, down from a 2.3% projection, citing tariff-related uncertainties. India and Vietnam remain key alternatives to China for smartphone production, but additional 20-30% tariffs could disrupt the US market outlook.For PCs, Dell has shifted US-bound production outside China, and HP is expected to follow by June 2025. However, S&P cautions that moving assembly to the US won’t fully mitigate tariff risks unless critical components like processors and display panels from Taiwan, South Korea, and China are exempted.