Xiaomi’s overseas growth engine threatened by pandemic

Other Chinese companies might be facing difficulties in this aggressive political climate, but Xiaomi seems to be getting on just fine if 2019’s numbers are anything to go by.

What is worth noting is this is the financial period prior to the disruptions caused by coronavirus, running through to December 31. Xiaomi noted there was certainly an impact to offline sales and manufacturing capabilities are only running at 80-90% of capacity, but it seems to have weathered the storm quite well. However, the most promising growth is coming in the markets where COVID-19 is causing chaos today.

As you can see from the numbers below, Xiaomi had a very good 12 months.

Q4 2019 Year-on-year FY 2019 Year-on-year
Revenue 7,956 +27.1% 29,001 +17.7%
Gross profit 1,105 +38.5 4,023 +28.7%
Smartphone 4,339 +22% 15,968 +6%
IoT and lifestyle 2,746 +30% 7768 +40%
Internet services 802 +41% 985 +23%
Others 68 +31% 255 +85%

Figures in millions (US$)

Xiaomi is of course primarily a smartphone business, but ventures into parallel segments are starting to look very successful. The IoT and lifestyle segment is an obvious move, these are hardware products which are increasingly based in the connectivity world, though internet services are an interesting one. Few companies have been successful when attempting to wrestle profits from internet giants, though Xiaomi seems to be gathering momentum.

In the internet services business, Xiaomi is pushing very aggressively into multiple segments. News services, advertising, gaming, the Youpin e-commerce platform, fintech and TV internet services are just some of the areas. Naturally, some of these efforts will fail, but Xiaomi only needs a few to succeed to gain a foothold in the software and services world. These successes will allow Xiaomi to build credibility, the critical foundation for expansion and diversification.

And while these numbers are very promising for a business which has seen rapid growth over the last few years, much of this has been fuelled by the international markets. This could present a problem for those shareholders who might expect the same results in 2020.

Over the course of 2019, the overseas markets accounted for 46.8% of group revenues. At any other time, having the international business unit as the growth engine would be a very positive thing, but at a time where COVID-19 is set to take a considerable bite out of industry profits, the domestic business unit will have to accelerate to pick up the slack.

Western Europe, India and LATAM are three areas where Xiaomi has seen considerable success in recent memory, though these are all the markets which are facing the prospect of a coronavirus encouraged recession. Looking at the individual markets in the final three months of 2019, Xiaomi was the leading smartphone brand collecting 28% market share, the second largest in Spain were 65.7% year-on-year growth made 22.8% market share, while it ranked fourth in both France and Italy where shipments increased 69.9% and 206.2% respectively.

The Chinese domestic market is a very interesting one. Although this is a country where 5G got off to a sluggish start compared to some, the deployment of 5G base stations from the three major MNOs is accelerating at an unprecedented pace and consumers have seemingly bought into the craze; China Mobile recently said it has secured 15 million 5G subscriptions. This momentum will force China through a smartphone refreshment cycle, and with Xiaomi owning roughly 9% of market share, this could prove to be a very profitable period, even more so if success in the overseas markets can be brought to China.

With reports in China suggesting society is resisting a second wave from the pandemic, consumer spending might well recover adequately, though whether this is enough to compensate from what would appear to be a downturn in Xiaomi’s international markets remains to be seen. Western Europe and India are important growth engines for the ambitious firm, though these are two regions where the risk of COVID-19 is significant.

Europe wants to force all mobile phones to use the same charger port

Six years ago the European Union started ‘encouraging’ mobile phone makers to unite around a common charger format, but they didn’t take the hint.

The encouragement was introduced as part of an update to the Radio Equipment Directive, through which the European Commission tries to control that market. In the name of reducing waste (without detailing how) and simplifying their use, MEPs voted to mandate the move towards a universal charger port for mobile phones. At the time the EC decided nudge theory was the best place to start.

“The modernised Radio Equipment Directive is an efficient tool to prevent interference between different radio equipment devices,” said EU spokesperson Barbara Weiler at the time. “I am especially pleased that we agreed on the introduction of a common charger. This serves the interests both of consumers and the environment. It will put an end to charger clutter and 51,000 tonnes of electronic waste annually.”

How many consumers were consulted for them to come to that conclusion is unclear, but who can honestly say they bear no emotional scars from having to switch between two or three port formats every now and then? Similarly it’s not immediately obvious what ecological benefit of a unified charger will be, since devices always come with one anyway, but what do we know?

Anyway, for all the EC’s efforts we’re still faced with the bleak situation of having to contend with up to three charger formats and, quite frankly, it won’t do. If mobile phone makers won’t respond to encouragement, it seems, then more assertive techniques are required to ensure compliance with the grand plan.

So recently there was a call to introduce common charger for all mobile phones, which noted ‘The Commission’s approach of “encouraging” industry to develop common chargers fell short of the co-legislators’ objectives. The voluntary agreements between different industry players have not yielded the desired results. A common charger should fit all mobile phones, tablets, e-book readers and other portable devices, MEPs will insist.”

Now, by happy coincidence, or perhaps not, the industry is gravitating towards the USB-C format anyway, especially at the top end, so it’s presumably just a matter of time before it becomes ubiquitous. When that does happen the EU bureaucracy will be able to pat itself on the back for chalking up another win for consumers and the environment.

Samsung claims the 5G lead after 6.7 million shipments

It might be nothing more than a symbolic milestone for the moment, though Samsung us claiming it is leading the way for 5G device shipments at the close of 2019.

After claiming to have sold 2 million devices at IFA in September, Samsung seemingly romped through the final three months with a total of 6.7 million 5G device shipments for 2019. The figure eclipses the 4 million target the firm set itself, though as its main Android competitor (Huawei) is being stifled by political friction, it is hardly surprising Samsung has stormed into the lead.

What is worth noting is this is nothing more than a bit of posturing. 6.7 million devices is simply a drop in the ocean of potential and could be dwarfed by an aggressive campaign by Apple in the US or Huawei in China. That said, you cannot argue with the figures; in the absence of main competitors, Samsung is maintaining its leadership position in the 5G segment as well as 4G.

“Consumers can’t wait to experience 5G and we are proud to offer a diverse portfolio of devices that deliver the best 5G experience possible,” said TM Roh, President of the IT & Mobile Communications Division.

“For Samsung, 2020 will be the year of Galaxy 5G and we are excited to bring 5G to even more device categories and introduce people to mobile experiences they never thought possible.”

While many analysts do not share Samsung’s belief that the consumer is clawing at the walls for 5G connectivity, there are likely to be more sales across the year. Firstly, geographical coverage will improve to whet the appetite, and secondly, 5G will come as standard on device; device shipments will most likely organically increase.

What will be worth keeping an eye on is the choices made by device manufacturers over the coming months as flagship models are pumped and hyped at industry conferences. Perhaps the most interesting element will be the ways and means by which the OEMs work with Qualcomm.

It has become widely accepted that the latest Qualcomm chipset features in the majority of flagship smartphone devices throughout the year. However, this year some OEMs will have a choice to make; to integrate or not to integrate?

Over the next few months Qualcomm will begin shipping both the Snapdragon 865 and Snapdragon 765 chipsets. The Snapdragon 865 is more powerful, though 5G is on a separate modem, potentially decreasing the power efficiency of devices. The Snapdragon 765 has 5G connectivity integrated, though is notably less powerful. Whichever chipset OEMs elect for, there will be a trade-off to stomach.

Looking at the rumours spreading through the press, it does appear many of the smartphone manufacturers are electing for the Snapdragon 865 and a paired 5G modem in the device. Samsung’s Galaxy S11, Sony Xperia 2 and the Google Pixel 5 are only some of the launches suggested to feature the Snapdragon 865 as opposed to its 5G integrated sister chipset.

5G might not have gotten off to the blistering start some in the industry would have been hoping for, but there is still plenty to come. With Mobile World Congress kicking-off in just over two months, there is amble opportunity for new devices to be launched prior, during and just after the event, while the iLifers will have all eyes cast towards September for Apple’s launch.

Imagination re-wins Apple as customer

Almost three years ago, Apple decided it could get by without Imagination Technologies as a supplier, but 2020 gets off to a flier for the UK chip firm resigning a licencing agreement.

Details are thin on the ground for the moment, though this completes a very circular story for the Hertfordshire-based company. Imagination Technologies has now confirmed Apple has signed a multi-year agreement to access a “wider range of Imagination’s intellectual property”.

The original deal between the pair was signed in 2014, though it only took three years for Apple to decide it wanted to move operations in-house. This is becoming an increasingly common tactic for the iLeader, the acquisition of Intel’s 5G modem business is another example, though it seems Apple was not able to replicate the success of Imagination Technologies’ graphics cards.

Although Apple is still a highly profitable company, slowing growth and increased costs for the iPhone have presented a problem on the spreadsheets. As a result, CEO Tim Cook has attempted to supercharge the ‘software and services’ division to generate momentum, while bringing more of the supply chain in-house is another way to create efficiencies and profits. Imagination was a victim of the latter.

As a result of losing Apple as a customer, and more than half of the company’s annual revenues which were tied to the firm, Imagination Technologies saw its share price plummet 70% and eventually have to succumb to being sold to Canyon Bridge, a Chinese-backed private equity firm, for £550 million. At the peak of its powers, Imagination Technologies was worth more than £2 billion.

The agreement with Apple comes a month after the launch of the A-Series chipset, which Imagination Technologies CEO Ron Black described as the “most important GPU launch” in 15 years. This is of course little more than posturing from the CEO, though Apple clearly bought into the buzz, that or it figured out that designing and manufacturing GPUs is more difficult than it first thought.

Apple eyeing up $1bn Intel smartphone chip purchase – sources

Reports emerged about Apple’s interest in Intel’s smartphone modem business a few weeks back, and now the rumour mill is back up-and-running as more sources suggest conversations.

According to The Washington Post, a deal worth $1 billion, including various patents and staff, is entering advanced talks. Apple has always been a business which wants to control its ecosystem and such a deal would take it one step closer to developing critical components for its devices.

Although the Intel smartphone business unit has been viewed as somewhat of a failure in recent years, it is certainly more developed than Apple’s in-house capabilities. This is an area which is a significant focus for Apple and incorporating the Intel smartphone business into its own operations could help save it years of development work.

This is of course not the first push into the semiconductor world by Apple. Not only has it announced plans to open a 1,200-strong research facility in San Diego, but it effectively ended its relationship with GPU firm Imagination Technologies in 2017. Apple said it would begin to phase out Imagination Technologies in favour of its own GPU components.

For Apple, this seems like a logical move considering the squeeze which is being placed on smartphone manufacturers worldwide. There are several reasons smartphone shipments are declining year-on-year, but the increasing price is certainly a powerful factor.

The iPhone has consistently underpinned profits at Apple, though the global slowdown and challenge to market share from Chinese brands threaten this. Apple is regularly being undercut by rivals, while entry into new markets such as India has been challenging because of the price of devices. Owning more elements of the supply chain, especially components, can help the iLeader reduce the price of handsets and become more competitive in the era of innovation mediocrity.

This is also a slight change in mentality when it comes to Apple’s acquisition strategy. Rarely does the iChief go for the big-ticket acquisitions, preferring to swallow up smaller providers in pursuit of innovation, but it does appear context is ruling above in this instance, assuming the reports are true of course.

For Intel, this would appear to be a very satisfactory exit from a challenging segment. Although the team has always had ambitions in the smartphone segment, it has never been able to make it work. The unit has consistently undermined profits and recent R&D efforts have focused on 5G in other device segments. This transaction would appear to be a win-win for both parties.

US consumers need more than incremental gains from 5G

The last few years has seen an increasing number of consumers hold onto devices for longer, and the trend does not seem to be changing right now.

According to research from NPD, the second-half of 2018 saw the number of consumers in the US holding onto devices for longer increase yet again. The global slowdown in the handset market has been well documented, and this report demonstrates the difficulties users are having to dig deep into pockets to fork out for much the same.

“Rising price tags, extended longevity of new generation devices, and lack of innovative features beyond imaging enhancements, are a few factors reducing consumer motivation to upgrade,” said Brad Akyuz of NPD.

“The emergence of 5G could help to accelerate upgrade cycles, as consumers will look to leverage faster speeds for mobile entertainment, but despite strong consumer awareness, this is expected to be a longer-term result.”

When asked how old devices were, 29% of US consumers said at least two years old. Less than 20% of the respondents indicated they were ready to upgrade their device in the first-half of 2019.

This is perhaps not the news many in the industry were looking for. 5G is supposed to be a shiny new red ball to get the consumers excited, but NPD does not appear to believe it will be enough to turn current trends.

The issue which many in the consumer world seem to be facing is a lack of innovation. New devices are appearing each year, but there doesn’t seem to be anything new. The camera is better, the battery lasts longer, the device is lighter and shinier. But these are all incremental upgrades perhaps not justifying the price increases. Unfortunately, 5G seems to be falling into the same trap.

What does 5G offer you according to the telcos today? Faster download speeds. An improvement, but not exactly the breakthrough many were hoping for, especially when you consider the incredibly limited coverage maps. It is being sold as another incremental upgrade right now, and that clearly does not get the consumer excited anymore.

Heading back to the research, only 33% of consumers stated they would have an interest in purchasing a 5G device when it become available. Note the word ‘interest’ here; the actual figure is likely to be a lot smaller when the realities of handing over money come into play.

Although these reports are far from gospel, they do indicate market sentiment and give the industry a nudge in the right direction. 5G is being sold as an incremental upgrade on speed alone and that doesn’t seem to be good enough. Admittedly, there is little more which can be sold at the moment, but telcos and the handset manufacturers will have to dig deeper into the creativity mines if they are to turn the trends of the last few years.

EE 5G hits the ground running

Sneaking in-front of Vodafone to debut on May 30, EE’s 5G proposition will be launched across six cities in the UK with a range of different devices and interesting bundling options.

While the launch of the network was announced last week, BT Consumer CEO Marc Allera gave much needed colour to the deployment plans at a media event in London and to be fair to BT and EE, it does look pretty impressive.

From today, customers will be able to pre-order bundles from EE as well as choose from multiple devices. The Samsung Galaxy S10 5G will of course be one of the options, though customers will also be privy to exclusive deals with the Samsung Fold, Oppo Reno 5G and the LG V50 ThinkQ, as well as Huawei’s FWA device and the HTC 5G Smart Hub.

While all of the devices certainly promise a lot, the LG approach is perhaps the most interesting. The device itself is pretty much as you would expect, though a separate module is also included, allowing the device to be clipped in to add an extra screen (as you can see below). Head of LG Mobile UK Andrew Coughlin said the product has been designed with multi-taskers in mind, with each screen working independently of the other.

The device also has the potential to open up entirely new experiences when it comes to gaming.

LQ Images

What you will not see over the next few months is a Huawei device launched in partnership with EE. Allera suggested the pause button has been hit on this relationship, due to the difficulties the firm is facing with its Android licence. If EE cannot guarantee performance of the device throughout the customers mobile contract, it will not partner with Huawei.

But onto the launch itself, six cities will experience the 5G euphoria on Day One, with another 10 added to the mix over the remainder of 2019. Building on the already completed work, EE plans to upgrade 100 base stations to 5G a month, taking the total to 1500 by the end of 2019.

“Today is Day One of our 5G journey, we are going to be the first in the UK and one of the first in Europe to bring our customers 5G,” said Allera.

qrf

Always connected is not a new concept from EE, though it would not be a surprise to see the message ramped up over the next couple of months. With 4G, broadband, wifi and, soon enough, 5G, EE has a lot of connectivity assets to shout about. When you combine these different segments with the largest geographical 4G coverage of all the UK MNOs, this is a selling point which would genuinely interest our internet-obsessed society.

That said, advertisements will need a bit of ‘sexing up’ if they are to catch the attention of the mass market.

On the speeds side, it does look like EE will be launching its 5G network with the ambition of reaching 200 Mbps. However, the message will be more focused on reliability and consistent experience as opposed to peak speeds.

“Peak speed might be the headline, but it is not the story,” said Allera.

fznor

Creative tariffs and bundling are where EE might be able to attract the most attention. 5G customers will not only gain access to faster download speeds and more reliable connections but will get the option to choose from various different zero-rating options to make the most of the connectivity euphoria. These options can be swapped out as the customer desires.

Finally, EE will be also be the exclusive partner of Niantec for the highly-anticipated follow-up to Pokemon Go; Harry Potter, Wizards Unite. Although Pokemon Go was a bit of a sham when it came to delivering on a genuine augment reality experience, the Harry Potter game looks much more immersive and truer to the definitions of AR. Considering the popularity of Pokemon Go, Niantec could certainly be onto another winner should it be able to nail the AR experience with this new title.

fznor

What is worth noting, is this is only the first phase of the EE 5G strategy. The aim will be to have 5G present in 50 cities across the UK by this time next year, though in the first phase it will only be in the busiest areas. Although the geographical rollout will be quite limited, 8% of base stations will be 5G, these assets will deliver 25% of the total traffic running across the EE network.

The second phase of the deployment, starting in 2022, will see the rollout of EE’s brand new 5G core, as well as the introduction of new spectrum. This will be when the UK will be able to experience a genuine 5G network, with the prospect of cloud gaming, AR and immersive content living up to the promise. The final phase, 2023, will see the introduction of mission critical applications focusing on the low-latency angle of 5G.

Interestingly enough, despite all the criticism faced by Huawei in the press, EE will be launching its 5G proposition with Huawei at the core of the network. This is unavoidable and will only be temporary, EE will gradually phase out Huawei from the core, but it is a fact which has seemingly been overlooked or cleverly managed out of the public domain by the BT PR team.

5G is about to become very real for the consumer and soon enough there will be a battle between the MNOs to fight for attention. EE and Vodafone might be scrapping for the 5G lead right now, but this approach from EE looks very promising.

Google wins FCC approval for gesture control tests

Google has finally won regulatory approval from the FCC to start testing the more advanced features of Project Soli, a radar-based motion sensor to allow the user to control devices through gestures.

The approval document, which you can read here, will allow Google’s Advanced Technology and Projects unit greater freedoms in testing the technology, which might look familiar if you are a fan of Tom Cruise’s Minority Report. Just when innovation is grinding to a halt in the smartphone segment, Google’s whacky scientists are working on something which could completely revolutionise the smartphone.

Project Soli initially came to be in 2015, though due to concerns the radar system would interfere with other spectrum users, power levels were limited. However, the waiver now allows Google to play with higher power levels while users can also operate the devices when on airplanes.

The idea is of course very simple. Radar sensors are in a small chip which features in the device, which detect hand and finger movements with high accuracy. Various different movements could be used to operate different features of a smart device, perhaps making the touch-screen redundant in the future. Check out the video at the bottom of the page for more details.

Interestingly enough, the FCC has not only decided Google is allowed to pursue this technology as there are no technical reasons not to do so, but also believes this project could be in the public interest.

“We further find that grant of the waiver will serve the public interest by providing for innovative device control features using touchless hand gesture technology,” the document states.

The last few years have been a bit of a baron time for smartphone innovation. Apple’s recent financial bombshell perfectly demonstrates this; not even Apple can rise above the mediocrity of innovation and grow revenues. This sort of innovation might just be what the smartphone segment needs.

And perhaps this is a sign of things to come; who knows what a smartphone or smart communications device will look like in the future. Maybe users will revert back to having two separate devices; one specialised for entertainment and the other for communications. With gesture control and voice recognition technologies, is there any need for a screen if communications is the purpose? And if you don’t need a screen, do you need such a big battery? Devices could become significantly smaller and much more power efficient.

Over the last 20 years, mobile communications devices have changed significantly. From big to small and back to big, foldable, slidable and closable, through colourful, sleek and offensive, the concept of the mobile device has always been changing. Who knows what it will actually look like in ten years’ time…

Qualcomm points the industrial espionage finger at Apple

The long-running legal battle between Qualcomm and Apple has been stepped up a level as the chipmaker effectively accuses the iLeader of industrial espionage.

After Apple released the iPhone XS without a shred of Qualcomm technology inside, it was only going to be a matter of time before there was a reaction. In a filing with the Superior Court of California, seen by Bloomberg, Qualcomm suggests Apple leaked trade secrets to Intel to overcome performance and develop a more suitable alternative in its chips.

The accusations come as an amendment to a complaint filed in November, which again suggested Apple broke confidentiality agreements by sharing information with Intel. With the trial already scheduled for April 19, if the judge allows this amendment it could push back the courtroom date. Qualcomm are pushing for the timetable to remain the same however.

The filing states:

“Apple has engaged in a years-long campaign of false promises, stealth, and subterfuge designed to steal Qualcomm’s confidential information and trade secrets for the purpose of improving the performance and accelerating the time to market of lower-quality modem chips, including those developed by Intel. Apple used that stolen technology to divert Qualcomm’s Apple-based business to Intel.”

The initial complaint came from Apple blocking Qualcomm attempts to audit the iPhone maker’s use of Qualcomm’s trade secrets. At the time, Qualcomm suspected Apple was leaking information to Intel, though there was little evidence to support the claim. Apple had requested deep access to its software and tools, but with strict limits on how those products could be used. Apple’s reasoning was to improve the performance of the devices when using Qualcomm chips, though this is now being contested.

While this is the latest chapter in the long-running tale which has seen dozen of complaints and counter-claims lodged with the courts, it all comes down to a single issue. Apple believes the royalties charged by Qualcomm to use its technology in its products are too high. The original argument has blossomed into a complex tapestry, offering collateral damage to other companies in the supply chain, but keeping the legal team at both the technology giants in gainful employment.

Apple first began using Qualcomm chips in 2011, before eventually using them exclusively. In 2016, it started using some Intel chips though due to the difference in performance, it was unable to drop Qualcomm completely. After the legal back-and-forth started in early 2017, the relationship continued to deteriorate until the point Apple decided to exclusively use Intel chips in its devices.

While this is certainly a considerable customer for Qualcomm to lose it does not look like the relationship can be repaired. Reading between the lines, Qualcomm does seem to have accepted this and is looking to salvage something from the disastrous ending. For some, this could be seen as more pressure to force Apple into settling outside the courtroom.

That said, Qualcomm’s loss is Intel’s gain. Securing an exclusive supplier relationship with Apple is certainly a win for the business.

Apple warns of higher prices with looming Chinese tariffs

Apple’s relationship with the White House looks to be straining at the seams as the iLeader continues to criticise the impending trade war, while the President offers little knowledge of how supply chains actually work.

Using his favourite means to spread tripe, President Donald Trump took to Twitter to hit back at a filing make by Apple with the US Trade Representative. In the filing, Apple argues the tariffs would lead to higher consumer prices, slower economic growth in the US and Apple being exposed to higher competition from foreign rivals.

“Apple prices may increase because of the massive Tariffs we may be imposing on China – but there is an easy solution where there would be ZERO tax, and indeed a tax incentive,” the President wrote in a tweet. “Make your products in the United States instead of China. Start building new plants now. Exciting!”

While some of Apple’s products have been hit by the current tariffs placed on Chinese exports, the iPhone, which accounted for 56% of revenues over the second quarter of 2018, is yet to be effected. As a company which manufactures the majority of its good in China, Trump’s next tariff proposal, essentially covering everything coming out of China, would have a very negative impact.

On the surface, forcing Apple’s manufacturing process back onto US shores would be a political PR win for the President, though the move could be disastrous for Apple and iLifers. There might well be tax incentives in moving the manufacturing process back to the US, but cost of building the factories would be incredibly high, while labour costs are also much higher. Tax incentives might compensate for these incurred costs, as would a price hike to consumers, but there is a bigger issue at hand which the President doesn’t seem to understand.

Managing a supply chain in the manufacturing trade is more than simply understanding how much labour costs. It’s access to raw and manufactured materials, cheap energy and real estate and finally, skilled workers. Once the plant has been built, the transportation and logistics puzzle to access materials will have to be addressed. Finding the right plot will also be tricky, as real estate will have to be cost effective, but it will also have to be close enough to a large enough workforce. This in itself is perhaps the biggest challenge as important aspects of this workforce do not actually exist at scale in the US.

Precision tooling is an excellent example of one of these skills. Precision tooling is a trade which requires years of training, combining artisanal craftsmanship with precision engineering skills. Apple CEO Tim Cook pointed out a couple of years back at a Fortune conference China actually stopped being the low-labour market and instead has a skilled workforce which enables the manufacture of smartphones and other advanced electronics. There are of course cost savings to be made in Chine, but these skills are critical in the smartphone manufacturing industry, and simply cannot be created overnight in the US.

The risk for Apple when it comes to moving the manufacturing process into the US, isn’t simply the cost as President Trump is suggesting. There are immensely complicated supply chain issues which will take months and years to perfect, this was the case for China as well, but the manufacturing industry here has evolved with technology industry. Skills have been taken forward and adapted to the manufacturing process as more complicated techniques and processes become commonplace. The learning process in the US will have to be much sharper.

When you take these elements into consideration, the risk is much more than financial. Apple could probably absorb a couple of years of heightened manufacturing costs, such is the profitability of the organization, but what it cannot allow is for a glitch in the supply chain. This is an incredibly well-oiled machine which produces hundreds of millions of devices every single year. Poking, prodding, moving and shifting this machine will impact Apple’s ability to meet consumer demand.

On one side of the coin, this is not worst case scenario. Less products on the market create a sense of exclusivity, which is turn increases the value of the products. Many luxury brands limit supply to create this sense of exclusivity which inflates prices. Some in the accounting department might like this idea, but Apple is a different beast. Somehow, Apple has managed to create the image of an exclusive, luxury brand, while flooding the market with supply and still maintaining incredibly high prices. Its contradictory and defies logic in the branding and price game.

If there is money to be made, Apple will profit. If it can offer a customer an Apple product, it will make the offer. When there is an opportunity, Apple usually capitalises. However, this saga threatens to impact Apple’s ability to supply the masses with their iFix.

Most of the time, disagreements are about money. But President Trump doesn’t seem to understand anything more than surface complications here. Tax incentives and price hikes will not compensate for the massive issues the Apple supply chain could face.