17 February 2019
Apart from the new product lineup, Apple's Wednesday event will be watched for comments on potential tariff issues amid a US-China trade war. Photo: Reuters
Apart from the new product lineup, Apple's Wednesday event will be watched for comments on potential tariff issues amid a US-China trade war. Photo: Reuters

What to expect from the Apple event

After months of waiting, one of the most-anticipated events in the consumer tech industry is finally here. No prizes for guessing; we are, of course, talking about Apple’s new product curtain-raiser.

On Wednesday, top Apple executives will take the stage in an auditorium at the firm’s Cupertino, California headquarters to unveil the tech giant’s latest lineup of iPhones and other gadgets. 

Apple has, as usual, been tightlipped about lies in store, but analysts widely expect the firm to take the lid off three new smartphones, including one that will feature a 6.5-inch display, which will be the biggest ever iPhone.

Among other announcements, we could see an updated Apple Watch series and an enhanced version of the AirPod wireless earbuds. Also, there is the possibility of redesigned iPads, and potential launch schedule for the AirPower wireless charging pad, going by the market chatter. 

The products would be timed to capture the upcoming shopping season, with the firm hoping to reinvigorate sales growth after a slowdown in its major segment in the recent past. 

Prior to the event, reports have surfaced that the new phones, which will be a follow-up to the iPhone X, could bear the names iPhone Xs, iPhone Xs Max and iPhone Xc. Consumers will watch the features, design and availability of the new products, and also the more crucial aspect — pricing. 

For analysts and Apple stock investors, the key question is whether Apple will stick to its long-standing high-margin strategy and opt for even more premium pricing on its phones, or if it will compromise a bit, given the intense competition in the market and slowing industry sales.  

Also, investors would look for some hints from CEO Tim Cook as to how Apple intends to respond to tariff threats from the Donald Trump administration on China-made products amid an escalating trade war between Washington and Beijing.

Trump has suggested that American firms should shift their manufacturing to the US and out of China if they want to avoid tariffs on products imported from China.   

Last weekend, Trump warned in a tweet that “Apple prices may increase because of the massive Tariffs we may be imposing on China – but there is an easy solution where there would be ZERO tax, and indeed a tax incentive. Make your products in the United States instead of China. Start building new plants now.”

Trump has slapped US$50 billion worth of tariffs on Chinese goods, and is getting ready for duties on another US$200 billion of such goods.

Apple, in a filing with the US Trade Representative last week, said the proposed US$200 billion US tariffs on Chinese goods could affect some of its products, including the Apple watch and wireless headphones.

If Trump steps up his China trade war and pushes measures aimed at bringing US manufacturers back home, Apple could find itself under pressure to redraw some business strategies.

How the company meets the potential challenge will be of great interest to investors.

At the event on Wednesday, Cook may not respond directly to Trump’s weekend tweet, but it will be interesting to watch if he reveals any plan to build new plants outside China to avoid possible US import tariffs.

However, no one expects the firm to move its manufacturing to the US, given the huge difference in costs.  

Apple’s top contract maker, Foxconn Technology, had earlier announced plans to invest US$10 billion to build a factory in the US state of Wisconsin. However, the plant will be mainly for manufacture of LCD panels for display use.

It won’t be feasible for Foxconn to hire hundreds of thousands of workers for iPhone manufacturing in the US, like what it does in China, as the economics won’t justify it.

Labor costs and other expenses make mass-production of consumer gadgets like iPhones almost impossible in the US. If production is forced to move out of China, it will go to some other low-cost developing country, not any developed economy.

Apple has made it clear that any unreasonable demands on the firm will only harm consumers, in terms of the prices the people would need to pay for their gadgets.

According to a Bank of America Merrill Lynch analyst, Apple would need a 20 percent price increase to offset incremental labor costs if the iPhone, which is currently not impacted by tariffs, sees its final assembly moved to the US.

Drawing attention to the cost issue, Apple said on Friday that the proposed tariffs on China-made goods will affect prices of Apple Watch, AirPods, cables, chargers and other products.

During the Wednesday event, another area of investor focus will be Apple’s preparation for the 5G service.

5G will be available in many markets starting from next year. With some smartphone rivals indicating that they are making good progress on 5G compatible products, Apple may need to make its own moves.

The expected launch of an iPhone with 6.5-inch display suggests Apple aims to use the big screen to lure more users into its content services, which would help boost subscription revenues. There is speculation that Apple could launch a video subscription service to compete with offerings such as Amazon Prime and Netflix.

Among other things to keep an eye on is Apple’s new mobile operating system, iOS 12, which will be formally launched at the event. One of the most noteworthy features in the updated system will be the Screen Time feature, which will enable users to monitor and set limits on phone usage to curb online addition.

Cook may share with fans how Screen Time yielded good results in a trial since the iOS 12 beta launch in June, and that his firm takes the smartphone addiction issue seriously to ensure the well-being of the younger generation.

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EJ Insight writer

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