Apple Still Hopes for Positive Tariff Outcome for Mac Pro Parts After Trump Tweet
Apple CEO Tim Cook downplayed speculative reports on a fiscal Q3 earnings call Tuesday that the company was weighing moving production out of China to escape the Section 301 tariffs on Chinese imports. Apple is seeking List 3 tariff exclusions on Chinese imports of 15 categories of components for the Mac Pro desktop due this fall, prompting President Donald Trump’s tweet last week that Apple won't get tariff relief as long as it sources from China (see 1907260027).
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“I wouldn't put a lot of stock into those if I were you,” said Cook of the reports: “The way that I view this is the vast majority of our products are kind of made everywhere.” Cook referenced a “significant level of content in the United States,” a lot from Japan, Korea and China, and a “fair amount” from the European Union. That's "the nature of a global supply chain,” he said.
On the hope for exclusions, Cook said Apple has been making the Mac Pro in the U.S., “and we want to continue doing that.” The company is investing in capacity “because we want to continue to be here,” he said. In the request for exclusions, “we're explaining that and hope for a positive outcome.”
In the June quarter, iPhone revenue continued to slide, down 12 percent in Apple’s June quarter to $26 billion, though an improvement over the 17 percent year-over-year decline a year ago. Cook cited benefits from a government stimulus in China, consumer response to trade-in programs, financing offers and other sales initiatives, and growing customer engagement with Apple ecosystem. The company had a double-digit increase in services in the quarter, driven by game revenue from the China App Store after government approval of several game apps in the store.
Shares rose 2 percent Wednesday to close at $213.04 after June quarter results and the company’s guidance of some 16 percent sequential revenue growth vs. typical growth for the period of 10 percent or less. Chief Financial Officer Luca Maestri said Apple continues to have strong growth from “non-iPhone categories,” citing “great momentum” in wearables, which grew year on year from $3.7 billion to $5.5 billion, and more than 50 percent in June. He guided to September quarter revenue between $61 billion and $64 billion, including $1 billion negative impact from foreign exchange.
Apple’s services business continues to drive growth for the company, rising from $10.1 billion in the 2018 quarter to $11.5 billion, for 21 percent of revenue growth, said Maestri. All geographic segments had double-digit services growth, setting new June quarter records, he said. IPad revenue rose to $5 billion from $4.6 billion in the quarter, and Mac sales went from $5.3 billion to $5.8 billion, the company said.
Cook called the strong services performance “broad-based,” surpassing 420 million paid service subscriptions across the platform. Apple is on track to double fiscal year 2016 services revenue in 2020, he said. U.S. Apple TV monthly viewership jumped 40 percent, driven by the integration of content from 150 providers in one place, a simple interface and the marketplace transition to over-the-top services, Cook said. The company had revenue records from AppleCare and Music, cloud services and the App Store, he said.
On Apple’s buy of most of Intel’s smartphone modem business last week (see 1907250072), Cook said it will help Apple grow its wireless technology patent portfolio to over 7,000, accelerate development of future products and “further our long-term strategy of owning and controlling the primary technologies behind the products that we make.”
On a question on how Apple views the landscape of 5G phones launching on the Android platform, Cook cited Apple policy not to comment on future products. He said 5G is in “early, early innings” and “even more so on a global basis.”