US-China relations, which began to improve, are deteriorating in the wake of the House Speaker Nancy Pelosi A visit to Taiwan, which China calls its territory.
Reference to a recently published white paper by Xi Jinping Administration, loop ventures co-founder Gene Munster He said he saw the pressure building.
China “will not tolerate foreign interference in Taiwan,” the Asian nation reportedly said in the white paper.
Apple’s China Commitment: About 75-80% of Apple’s product sales and 60-62% of total sales are “Made in China,” Munster said in a note. In addition, 18% of the company’s annual sales come from Greater China.
“Compared to other big tech companies, I think Apple has the largest exposure to China,” says the venture capitalist.
About Apple’s March Quarter Earnings Conference Call, CEO Tim cook The company praised the supply chain, saying it is a “fast-moving” supply chain with short cycle times.
“There’s a very small distance between the manufacture and packaging of a chip and a product that leaves the factory,” he reportedly said.
Once the China-COVID headwinds ease, Munster expects the pace of the Apple-China flywheel to pick up, leading to earnings gains.
Read the second quarter portfolio changes at Bridgewater Associates, driven by Ray Dalio
Efforts to diversify the supply chain are underway: Apple is in the process of reducing its dependence on China, Munster said. Though it may take years, eventually the company will be successful in manufacturing and building a strong user base outside of China, he said.
The fund manager said Cook has decades of experience managing geopolitical challenges, allowing him to understand the seriousness of the current situation and the need to de-risk the sector.
With Cook likely to retire between 2026 and 2028, he has time to position the supply chain for the next decade, Munster said.
Apple’s diversification efforts: Munster believes Apple is serious about diversifying its supply chain. As current measures in this direction he named:
- Apple announced nearly $350 billion for growth and job creation in the US for 2018.
- About a year later, the company announced plans to build two $1 billion campuses in Austin, Texas and at Research Triangle Park in North Carolina.
- In April 2021, the tech giant announced it would increase its original $350 billion investment by $80 billion and an additional 20,000 jobs, bringing the total investment to $430 billion over five years.
“After the current investment commitment expires in 2026, I expect the company to invest about $17 billion per year in the U.S. at a similar incremental pace,” Munster said.
According to data from Benzinga Pro, Apple closed Friday’s session up 2.14% at $172.10.