Caixin
Mar 24, 2018 05:50 AM
BUSINESS & TECH

Chinese Mobile Phones, Laptops Unlikely to Be Hit by New U.S. Tariffs, Analysts Say

China exported 130 million mobile phones valued at $31.2 billion to the U.S. in 2017. Above: a mobile phone assembly line in China. Photo: VCG
China exported 130 million mobile phones valued at $31.2 billion to the U.S. in 2017. Above: a mobile phone assembly line in China. Photo: VCG

American consumers aren’t likely to face higher prices for iPhones and laptops because of U.S. President Donald Trump's planned tariffs on goods imported from China, industry experts predict.

Trump announced on Thursday plans to slap an import tax of 25% on about $60 billion of annual imports from China, citing intellectual property violations.

It’s still not clear which products will be targeted. Trump gave U.S. Trade Representative Robert Lighthizer 15 days to release a target list, followed by a 30-day public comment period. But the majority of products affected are expected to be from the high-tech sector.

About 80% of the mobile phones sold in the U.S. are manufactured in China.

But analysts say mobile phones and computers made in China are unlikely to be targeted because they are mostly exported under what is called “processing trade” — exports of final products made by imported parts. These fall under a different category than exported goods. Meanwhile, intellectual properties are usually well protected in the phone and laptop industries, analysts said.

China exported 130 million mobile phones valued at $31.2 billion to the U.S. in 2017. That was about 24.8% of China’s total mobile phone exports that year, according to Chinese customs data. China also shipped 83.49 million laptops and tablets valued at $32.3 billion to the U.S. last year.

Gao Shiwang, head of the industry development department of China Chamber of Commerce for Import and Export of Machinery and Electronic Products, told Caixin that he doesn’t expect mobile phones will be targeted.

Many Chinese mobile phone makers are so-called original equipment manufacturers (OEMs) for American brands and usually earn a very small margin for their assembly business, Gao said.

The top 10 Chinese mobile phone exporters are the source of about 96.8% of the total exports of mobile phones to the U.S. Seven of these are OEMs, including iPhone assembler Foxconn.

The story on the laptop industry is the same, with 93% of the laptop exports made by assemblers of global brands.

Even though some industry experts don’t expect the new tariffs will affect Chinese OEMs, Chinese manufacturers still express concern.

A person close to Foxconn said the company is paying close attention to the tariffs development and assessing the potential impact.

If Chinese OEMs are hit by the new tariffs, it could trigger a shift in the whole industry, some analysts said. Manufacturing of mobile phones and laptops could be moved to Mexico, India or Southeast Asia, they said.

An industry observer told Caixin that China’s semi-conductor industry would be especially hard hit by the tariffs, pointing out that Huawei Technologies Co.’s recent bans by U.S. carriers were partly because it uses its own chips designed by its HiSilicon unit.

Best Buy Co., the largest consumer electronics retailer in the U.S., reportedly will pull the Chinese company’s phones from its shelves in the next few weeks.

In January, AT&T scrapped a plan to offer Huawei handsets after U.S. government officials expressed national security concerns, according to media reports. That followed Verizon Communications Inc.’s decision to call off plans to offer Huawei phones in 2017.

Read more on the latest China-U.S. trade dispute

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