- Hold onto your hat. The tariff story changes faster than the weather in Denver
- According to President Trump, nobody is “off the hook” when it comes to tariffs – and that includes smartphones
- Analysts expect U.S. wireless carriers to provide mostly generic guidance during next week’s earnings calls
Whoosh.
That’s the sound our heads getting whipped around as we’re trying to parse through the latest on tariffs and smartphones.
Over the weekend, we heard that 125% tariffs were not going to apply to smartphones. Then on Sunday, President Trump posted on social media that no one is “off the hook” from tariffs and cell phones are still subject to the existing 20% tariffs. U.S. Commerce Secretary Howard Lutnick was on “ABC News This Week” saying cell phones would face a new “special focus-type of tariff” along with semiconductors in the next month or two.
During a White House briefing on Monday, Trump talked about short-term tariff exemptions for auto companies and was asked specifically about Apple products and other phones. “They’ll be maybe things coming up. I speak to [Apple CEO] Tim Cook. I helped Tim Cook recently and that whole business,” he said.
Take that as you may. Where does that leave us today, April 15: the official Tax Day? Analysts who spoke with Fierce say it’s anyone’s guess. Keep an eye on the clock, because things could be entirely different in an hour or two.
“It’s so fluid. Everybody you talk to says we don’t know how to plan in this environment. That’s the feedback,” said IDC analyst Jitesh Bhayani. “Everybody’s concerned.”
Carrier earnings next week
The PR teams at Verizon, AT&T and T-Mobile are no doubt working overtime to prepare their messaging for the inevitable tariff questions their execs will get during their quarterly earnings calls next week. (Yes, we know, carrier execs are pros at these kinds of things, but they employ PR for a reason.)
What kind of guidance will the execs give in these tumultuous times? Theories vary on how executives will handle it. Some analysts doubt they’ll say anything beyond the standard “we’re evaluating our options” and decline to give any new guidance. Others say it’s possible they could lower guidance knowing what they know.
The position on tariffs changes by the hour so it is hard to plan for it precisely, but operators do have contingencies for different scenarios depending on how they play out.
Chetan Sharma, CEO , Chetan Sharma Consulting
“From a carrier perspective, I don’t expect answers beyond generic indications that they are planning for different tariff scenarios and that they are putting in place alternative strategies,” said AvidThink founder Roy Chua.
Generally speaking, the buzzword permeating all markets, including telecom, is “uncertainty.”
“I don’t think there is a CEO who will know precisely how things shape up as uncertainty has become the norm, so one has to keep their options open on how they react to ever-changing landscape,” Chetan Sharma, president of Chetan Sharma Consulting, told Fierce.
How consumers are responding
Carriers already have been reporting record low handset upgrade rates as people hold onto their phones longer. Last year’s expectations for AI driving handset sales turned out to be off the mark.
“Buyers haven’t been flocking to stores looking for the latest models,” Gerrit Schneemann, senior analyst at Counterpoint Technology Market Research, told Fierce. “The beginning of the year was really lackluster.”
The threat of higher prices on cell phones due to tariffs probably isn’t driving a lot people to upgrade now.
“To me, that indicates they’ll just hold on longer than they already are,” Schneemann said. “We’re just uncertain of what jobs are doing, what the rent is doing, what groceries are doing. I think smartphones and other electronics are probably going to be on the back burner a little bit more than they might have been five years ago.”
Given that Apple has been stockpiling iPhones and other devices – chartering cargo planes full of iPhones and other products from India and China to the U.S. – and the 90-day reprieve announced last week, Apple can probably ride it out until the iPhone 17 launch in September, he said.
Smartphone manufacturing in U.S.?
The overall stated mission of the tariffs – getting more manufacturing onto U.S. soil – so far hasn’t penciled out for Apple or other smartphone suppliers. A 2017 video of Cook explaining Apple’s China manufacturing is making the rounds again, where he explains it’s cheaper and more efficient to manufacture in China.
Nvidia on Monday said it’s ramping up AI chip and supercomputer manufacturing plants in Texas and Arizona. But analysts said relocating cell phone manufacturing to the U.S. would make everything more expensive because the materials that are needed are not here in the U.S., and it would drive up the cost of the device.
“Even if you were to build it, nobody would be able to afford it,” Schneemann said.
It’s all negotiable
Much reporting has focused on how much tariffs would drive up the cost of an iPhone. By CNET’s calculations, if Apple passed on 145% China tariff costs onto customers, the iPhone 16 Pro Max with 1 TB of storage would increase from $1,599 to more than $3,900. A 20% tariff would put the same iPhone at just over $1,900.
But U.S. wireless carriers buy their phones from Apple and other OEMs and sell them to consumers at subsidized rates. How much they can negotiate with their handset suppliers is unknown, but IDC analyst Jason Leigh suspects there will be some give and take.
“I think at a certain point, the carriers and the smartphone manufacturers are going to meet in the middle, just because if the carriers suddenly say, ‘we’re not doing this anymore,’ then smartphone makers aren’t moving as many units and that looks bad for Wall Street. The flip side of it is if the smartphone makers stay their ground, the carriers can’t sustain it. They can’t eat an additional $300 per phone,” Leigh said.
Like so many things, how they react is up in the air. “To be honest, nobody really knows where this will all end up. The position on tariffs changes by the hour so it is hard to plan for it precisely, but operators do have contingencies for different scenarios depending on how they play out,” Sharma concluded.
