US tariffs: Smartphones, PCs may become expensive for customers, says S&P

Time of India

19 hours ago

NEW DELHI:
Smartphones
and
personal computers
(PCs) may become expensive as a result of manufacturers passing on the higher costs, arising from
US tariffs
, to end-consumers, S&P Global Ratings said.
'We expect PC and phone makers will pass on the higher cost to customers even if it leads to some demand destruction, especially for consumers who make up 45% of PC sales and most of smartphone sales,' the global credit ratings agency said in a research note, seen by
ETTelecom
.
It noted that smartphone makers, such as
Apple
and its key suppliers, and personal computer (PC) manufacturers heavily reliant on China, are the most vulnerable to the US tariffs.
'S&P Global Ratings believes the most vulnerable companies are those with the largest reliance on China's integrated technology production infrastructure and the U.S. as a major end market,' it said in the research note.
In particular, it said Apple and its key suppliers, including Hon Hai Precision Industry (Foxconn), may be the most disrupted due to reliance on China for production.
Apple, with a shipment share of over 60% in the US market as of Q4 2024, faces a risk given its significant reliance on production in China. iPhones account for nearly 50% of Apple's revenue, with the US representing approximately a third of its global smartphone shipments, said S&P.
The Cupertino-headquartered firm, however, has been shifting its production supply chain to India, which is expected to cover most of Apple's iPhone shipments to the US by 2026, the credit rating agency estimated. In turn, Korean
Samsung
's bulk of production happens in Vietnam and India.
'Vietnam and India account for the bulk of Samsung's production base. Smartphone production is labor intensive, favoring production in countries with low labor costs such as India and Vietnam. Tariffs on these countries pose further risk for the issuers with significant U.S. smartphone exposure such as Apple and Samsung and their suppliers,' said S&P in its research note.
Xiaomi
is the only outlier that does not have direct exposure to the US consumer market. Its chips, too, are fabricated in Taiwan, and are unlikely to be a target of the US export restrictions, and neither will be subject to China's tariff on US goods.
The Donald Trump administration has imposed a 10% baseline tariff on all countries, including India, with China also imposing reciprocal tariffs on the US. Notably, consumer electronics items, including smartphones and laptops, remain exempt from tariffs.
However, Trump has threatened to impose a 25% tariff on all smartphone brands, particularly targeting Apple iPhones and Samsung handsets made outside the US, unless they are manufactured in America, the US media reported recently.
Apple's vendors nearly doubled exports of iPhones from India in March–a majority to the US–to ₹20,000 crore, from ₹11,000 crore a year ago, ET reported in its April 7, 2025, edition.
Recently, the International Data Corporation (IDC) projected that global smartphone shipments may grow by just 0.6% year-on-year to 1.24 billion units in 2025, down from the 2.3% year-on-year shipment growth it forecasted in February.
'Since April 2nd, the smartphone industry has faced a whirlwind of uncertainty. While current exemptions on smartphones have offered temporary relief, the looming possibility of broader tariffs presents a serious risk,' Nabila Popal, senior research director with IDC, said in a report separately.
Popal added that despite complexities driven by geopolitical uncertainties and trade risks, India and Vietnam are expected to remain the key alternatives to China for smartphone production. 'However, additional tariffs of 20-30% on US-bound smartphones could post a serious downside risk to the current U.S. market outlook,' she had said.
Laptop, PC makers also at risk
Beyond smartphones, PC makers Dell, HP and Lenovo are also exposed to tariff risk.
S&P said this is due to high input costs, from which tariffs are calculated, and high reliance on China for manufacturing laptops. Desktops, by contrast, are assembled across Asia and Mexico.
The credit rating agency estimates the US PC sales contribute to about 15%-20% of the operating profit for each of Dell, HP and Lenovo. S&P noted that Dell's contract manufacturers have already shifted their production of US-bound PCs outside China, while HP is expected to do so by June-end.
It, however, cautioned that shifting PC assembly to the US would not meaningfully offset tariff risks, unless components like processors, memory modules and display panels sourced from Taiwan, South Korea and China are tariff-exempted by the US.