In Smartphones and PCs, India, Vietnam Key Markets to Watch for US Tariff Risk: S&P
Smartphones account for nearly 50 per cent of Apple's revenue and the US represents nearly a third of its global smartphone shipments. Apple's smartphone dominance in the US poses a risk given its significant reliance on China production.
Chennai: Smartphones and personal computers are the most exposed segments to US tariff risk among tech companies that produce in Asia. As several companies are shifting their production from China to other Asian countries, India and Vietnam are key markets to watch out for, finds S&P Global.
These segments rely heavily on tariff-vulnerable markets for production and the US market makes up a third of global PC shipments for some Asia producers.
In the past three years, original equipment manufacturers have been increasing their production in India, Taiwan and Vietnam, bringing down the reliance on China. Tariffs on these countries pose further risk for the issuers with significant US smartphone exposure such as Apple and Samsung and their suppliers.
Smartphones account for nearly 50 per cent of Apple's revenue and the US represents nearly a third of its global smartphone shipments. Apple's smartphone dominance in the US poses a risk given its significant reliance on China production.
However, Apple is shifting its production supply chain to India, which will likely cover most of Apple smartphones shipped to the US by 2026.
Similarly, Vietnam and India account for the bulk of Samsung’s production base. Smartphone production is labour intensive, favouring production in countries with low labour costs such as India and Vietnam.
Taiwan’s Hon Hai is also expanding capacity in Mexico, India, Vietnam, and Europe. The company is also expanding its new businesses, such as electric vehicles, robotics, and digital health in countries including India and the US.
While shifting supply chains will be costly, many have already diversified their production enough to offset some of the tariff risk related to China. Or at least enough such that the US market can be supplied by non-China production.
However, many are still exposed to other Asian countries such as Vietnam and India. Whether the pause on reciprocal tariffs for these countries will resume are key risks to watch out for. Some have enough dominance in their niches to be able to pass on higher costs to their buyers or have enough financial buffer to withstand modest changes in costs due to tariffs.