GLOBAL SMARTPHONE SALES – ANNUALISED VOLUME
Q4 2013 – Q1 2025
Apple used to be the world’s most profitable company. But its core iPhone business – 50% of sales – is set for a double hit from President Trump’s tariff war:
- Current CEO Tim Cook made his name by building out Apple’s vast supply chain in China
∘ Now, this is set to cost the company at least $900m in tariff costs this quarter - Apple has also always had a strong position in the Chinese market
∘ But last quarter it dropped to No. 5 as consumers chose to support local brands
These problems add to the underlying issues in the global smartphone market, as the chart highlights. The market went ex-growth back in 2017 and since then, annualised volume has fallen 20% from 1.5bn to 1.2bn in Q1 this year.
APPLE SAW LOWER SALES AND INCOME IN CHINA
Mainland China smartphone vendor market share, Q1 2023 to Q1 2025
Sadly, Apple’s problems don’t stop there. Trump’s tariff war isn’t just causing problems for its supply chain and US sales. Understandably, Chinese consumers aren’t happy either.
Apple’s Q1 sales in the important Chinese market were down sharply as consumers chose to support local brands, as the Canalys chart shows:
- Chinese sales rose 5% in Q1 as Beijing added subsidies to support consumption
- Apple, normally a market leader, fell to 5th place as sales fell 9% and revenue fell 2% – China was the only region to see a decline
In the US, Apple also has a major problem in the important Services area – 28% of total revenue. US courts have referred it to federal prosecutors for a criminal contempt investigation. The company has allegedly ignored an order to allow software developers to avoid paying a 30% commission to the Apple Store when customers download an app.
THE iPHONE CONFIRMS THE TARIFF WAR MAKES NO SENSE FOR THE US
The Bill for an iPhone 16 Pro
Trump’s tariff war is likely set to devastate the US economy if it continues. Retailers’ shelves are already due to start emptying this week, as we have discussed. And the iPhone highlights why the war makes no sense:
- The new tariffs, even if they stay at the current 54%, will dramatically increase costs
- As the Wall Street Journal chart shows, the cost of an iPhone 16 will rise by almost $300
- Almost certainly, Apple will want to increase the sales price to protect its margin
So the tariffs will inevitably increase inflation, and/or reduce profits for US firms in their domestic market.
Reshoring iPhone assembly makes no sense. Labour costs would rise 10-fold from $30 to $300, given the difference between the US and China. Component costs would also rise.
US CONSUMERS WILL PAY THE COSTS OF THE TARIFFS
China is Trump’s main target with current US import tariffs of 145%. And he has claimed that China will bear the cost of his tariffs.
But US consumers know better. They rushed to buy before prices rose. Q1 US sales were up 12% as Apple flew in 1.5m iPhones in March to front-run the impact of the tariffs. And as the Wall Street Journal warned:
“Apple is facing an uphill battle as it plans to shift its production out of China (as) …it’s difficult to replicate Foxconn’s ‘iPhone City’ in Zhengzhou”.