Fed’s Powell opens door to potential rate cuts at Jackson Hole
Investing.com -- Apple’s best response to rising geopolitical tensions is to stick with its current strategy rather than make dramatic shifts, according to JPMorgan analysts.
"We believe the most straightforward path is to continue, if not accelerate, its current strategy rather than undertake a dramatic strategic shift," JPMorgan wrote in a note Monday.
The firm said that while the idea of moving iPhone assembly to the United States has been considered, it "would face significant challenges in terms of cost and practicality, as the U.S. currently grapples with infrastructure and workforce limitations."
JPMorgan warned that shifting to a U.S. assembly footprint could "drive a 30% price increase in the near-term, assuming a 20% tariff on China."
Instead, JPMorgan recommended that Apple (NASDAQ:AAPL) focus on "expanding manufacturing capacity in countries like India, which offers a promising alternative to China," while "continuing to invest in the footprint of component suppliers in the U.S."
They emphasized that scaling further in India "makes the most sense from both efficiencies as well as economies of scale perspective."
The analysts also pointed out that investments in local U.S. suppliers would help Apple "address some of the U.S. administration’s concerns around local U.S. manufacturing."
Potential areas for investment are said to include "processors from TSMC’s U.S. capacity, Corning (NYSE:GLW) for display glass and cover glass, or potentially optical companies, like Coherent (NYSE:COHR) and Lumentum, for sensors."
Highlighting the economics of an iPhone, JPMorgan noted that "the $1,000 price point is primarily composed of components, which account for ~50% of the total price, followed closely by Apple’s profit, which accounts for ~45%."
The assembly and suppliers’ profits represent only a small portion of the final cost, the firm added.