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Author: YiStock   |   Latest post: Wed, 11 Jul 2018, 11:13 AM

 

Sino - US Trade War, really that bad? -YiStock

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国旗哦 1 - Sino-US Trade War: Who Will Be the Beneficiary

 Here is some of my view points with regards to this drama:

 

1) US set 25% Tariff on USD 50 billion on China goods export to USA. Many China & US analysts CLAIMED that consumer in US will suffer. Really?

 My View: I would say NOT really. I will use apple Iphone as example. Reason i used it is because everybody were scare the trade war may eventually becomes technology war and harm the tech sector

apple-suppliers-around-the-world

Iphone has probably 100s of part manufactured and assembled world wide. The impact will be not that bad compared to most could imagine. 

Let look at numbers,

The iPhone X smartphone costs $357.50 to make and sells for $999, giving it a gross margin of 64 percent, according to TechInsights, a firm that tears down technology devices and analyzes the parts inside. The iPhone 8 sells for $699 and has a gross margin of 59 percent. The finding is surprising because technology products tend to become more profitable as they age and the parts for them drop in cost.

If you like to see the details costing, you may click here. 

 

What is the catch here? IF, eventually TRUMP want to tax 10% on iphone X, which is assemble by FOXCONN in Zheng Zhou, China, based on USD 357.50:

USD 357.50 x 10% = USD 35.75 (being 10% tariff) ;

But, USD 35.75 tariff / USD 999 selling price *100% = 3.57% <<<< this is what iphone buyer will get if all tariff are to pass through to Iphone buyer. 

Now, CNY vs USD rate:

Q1 2018 - 6.3589;

Q2 2018 - 6.3741; (CNY depreciated 0.23%)

July2018 - 6.6358; (CNY depreciated 4.11%)

Nov 2018 (updated) - 6.95 (CNY depreciated 9.4%)

Manufacturing and assembly business involved lowest skill. Innovation and design are where the big fat meat is. I do not see Apple cannot absorb such low effective tax sum of 3.57%.

In this case, the depreciated CNY has actually surpassed the impact of tarrif by 5.83%. 

What if CNY depreciated 10% or 15%? Apple iphone margin actually become better?

Apple has more room to adjust selling price up/down to boost its sales.

Above scenario is 10% tariff and based on my own logic.

Could this be LPPL drama??

 

2) Now, drama drama....people scare china ban iphone.

My view: historically, we saw china ban lotte retail business in China because Lotte sold land to US to put blaster in their golf course.

If you don't buy clothes from lotte, can you buy from Giant / Jusco? Sure can..

If you ask apple fans not to buy iphone but to buy huawei, oppo, xiaomi? Seriously?

There are 330 factories in china involve in Apple supply chain, Mr Xi will not use the stone to smash own toes. 

Do you see apple tim cook come out and support Trump / Xi like lotte? Apple Tim cook very smart, he no support anyside. He only say possible consequences. 

 

 

Conclusion:

1) I think this is really LPPL drama. 

2) Tariff are on cost, not final retail price, impact is not that scary and can be manupulated by currency.

3) We saw the list so far has not include smart devices, if so, above will be the most likely scenario.

I'm very sorry for being Rude.

 

Cheers,

YiStock

 

 

 

 

 

 

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