The trade war between the United States and China has split many of the top technology companies. Apple (NASDAQ:AAPL) has seen its massive Chinese production footprint challenged in this environment. It is exploring new production locations. For example, it has tried out new production for its AirPods in Vietnam.
The new set of Trump administration tariffs on China takes effect on September 1. It is possible that some Apple products, including AirPod earbuds, Apple Watch, and the HomePod speaker. The administration pushed back this date to December 1, and there is likely to be tweaking before the final hammer is brought down.
Production is not the only pressing question going forward. Apple is relying on Chinese consumers to fuel its growth for the long term. iPhone sales were down 30% in China in the first quarter of 2019. Huawei, the Chinese technology giant, saw smartphone sales growth of 41% in the same quarter.
Apple saw a slight 1% uptick in sales in the third quarter. However, net profit slipped 13% year-over-year to $10 billion. Sales in China posted another drop at 4% to $9.16 billion. This was an improvement from a 22% drop in the second quarter. Without China’s figures, Apple revenues rose 17% in the quarter.
The tech giant is still in good health, but headwinds generated by the U.S.-China trade war will likely frustrate earnings in the near term. Still, we’re looking at a price-to-earnings ratio of 17 which is favourable. Apple stock is still worth picking up in August.
