- The 10% tariff on goods from China will impact smartphones
- Analysts who spoke to Fierce don’t expect imminently higher prices on most phones sold in the U.S.
- The prepaid segment could be hit hard
Higher prices are expected for smartphones sold in the U.S. due to President Trump’s 10% tariff on goods from China. However, analysts told Fierce they don’t expect higher prices to take effect immediately for high-end smartphones. It could be a different story for the prepaid segment.
That’s in part because the tariffs were expected and carriers and distributors had time to build up their postpaid inventories. Plus, most U.S. devices are purchased on postpaid installment plans with subsidies, trade-in discounts or both, and they’re not likely to get smacked with higher prices right out of the gate.
Techsponential founder Avi Greengart said he’s more concerned about jacked-up pricing for modems, laptops and fixed wireless access (FWA) gateways than high-end smartphones. And he said the prepaid phone segment – where even small price increases are meaningful and the supply chains are concentrated in China – “could be hit pretty hard.”
He singled out devices made in China by Motorola and TCL specifically. “Samsung could gain share at the low end, but I would expect prices to rise overall” in prepaid, he said.
In postpaid, Apple and Samsung are the top two smartphone vendors in the U.S. Samsung’s phone manufacturing is outside of China – mostly in Vietnam – and should not be affected by the new China-specific tariffs, Greengart said. Google’s Pixel phones are made in either China or Vietnam and he expects the U.S.-bound variants to switch to Vietnam manufacturing whenever possible.
“Most of Apple’s supply chain remains in China, but Apple was able to avoid tariffs with exemptions during the last Trump administration, and that could happen again now,” Greengart told Fierce. “Even if it doesn’t, carriers and distributors have been building up a bit of inventory in advance of Trump’s tariffs, so there will be a lag in terms of timing.”
Plus, “most phones sold in the U.S. are bought on installment plans from carriers with subsidies, trade-in discounts or both. That gives carriers plenty of levers to mask or spread out the pain of price increase for their valuable postpaid subscriber base,” he said.
Jeff Fieldhack, research director at Counterpoint Research, said the bulk of U.S. smartphone manufacturing is done in China, followed by India and Vietnam.
But he doesn’t expect the phone companies to absorb the losses. “This will be passed onto consumers,” he said. “I don’t see Apple taking much of a hit.”
True to form, Apple hasn’t said a lot. When asked during Apple’s January 30 earnings call about the potential tariff impact on consumer demand, CEO Tim Cook said they were monitoring the situation and didn’t have anything more to say about it, according to a Seeking Alpha transcript.
Installment plans cushion blow
IDC analysts were still evaluating the fast-moving situation early this week and didn’t have an official statement.
But IDC analyst Phil Solis noted that some smartphone vendors started moving production out of China, little by little, for various reasons, including supply chain disruptions from Covid, incentives from some countries to manufacture locally and more recently, anticipation of the tariffs.
His IDC colleague Nabila Popal said her personal opinion is that the impact on U.S. smartphone prices won’t be immediate due to stock in channel – and it may not translate into a straight 10% increase for consumers.
“A portion of the increase could be absorbed between the channel and the vendor as well before reaching the consumer. We simply don’t have clarity on that yet,” Popal said.
However, “given the majority of phones in the U.S. are bought on 36-month interest-free installment plans, it is likely this will cushion the consumer from feeling the brunt of the increase in prices, if any,” she concluded.