Thoughts on the Market

How Much More Could Your Smartphone Cost?

12 snips
Apr 17, 2025
Erik Woodring, Head of the U.S. IT Hardware team at Morgan Stanley, dives into the complex world of tariffs and their effect on tech hardware. He discusses how recent trade policies have led to panic buying of smartphones, despite confusion over exemptions. Erik explains the 'China plus one' strategy, highlighting its role in mitigating tariff impacts. He also delves into the challenges of relocating production to the U.S. and the long-term solutions companies are considering to navigate the uncertain tech market landscape.
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INSIGHT

China+1 Strategy Explained

  • The China+1 strategy diversifies production to countries like Vietnam and India to reduce tariff risks.
  • However, these countries are still vulnerable to tariffs under recent U.S. trade policy changes.
INSIGHT

Tariff Impact on Device Costs

  • Tariffs raised tech device costs by about 5% on average, with some devices seeing increases up to 20-30%.
  • The total tariff cost to companies fell from $50 billion to $7 billion due to exemptions and adjustments.
INSIGHT

Smartphone Price Increase Example

  • A $1000 smartphone’s import cost rises by $50 due to tariffs, increasing the retail price similarly.
  • Enterprise hardware like AI servers will see larger dollar increases despite similar percentage cost hikes.
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