The ongoing tariff war between the United States and China is significantly affecting the technology sector, with companies like Apple (AAPL) feeling the brunt of the impact. According to a recent report by BOCI, approximately 9.95% of U.S. exports to China in 2024 consisted of integrated circuits and semiconductor equipment, while a staggering 41.45% of China’s exports to the U.S. were mechanical and electronic products. This imbalance highlights the critical role that technology plays in the trade relationship between the two nations.
Apple, a major player in the tech industry, has seen its stock price drop by 6.79%, reflecting investor concerns over its supply chain vulnerabilities. The company’s manufacturing operations are heavily concentrated in Asia, particularly in China. If the U.S. imposes a 54% tariff on iPhones produced in China, the demand for these devices in the U.S. could be severely hampered. This potential scenario raises alarms for Apple, as it relies on a steady flow of iPhone sales to maintain its market position and profitability.
In contrast, the tariffs imposed by China are expected to have a more manageable effect on the tech industry. BOCI notes that prior stringent U.S. export restrictions on Chinese semiconductors and AI-related high-tech products have better prepared China’s supply chain for the current challenges. Many U.S. products are not manufactured domestically, making them largely immune to Chinese tariffs. As a result, China’s domestic semiconductor supply chain is anticipated to benefit from the ongoing trade tensions.
The smartphone industry as a whole is feeling the pressure, with an average cumulative performance decline of 20.54% year-to-date and a 25.1% drop over the past month. Among the companies affected is Xiaomi (01810.HK), which has seen its stock price retreat by 20.59% following a recent USD 5.5 billion share placement and an incident involving an intelligent driving-related car accident. However, BOCI predicts that the ongoing tariff war will have minimal impact on Xiaomi’s operations.
Xiaomi’s revenue exposure to the U.S. market is estimated to be less than 1% of its total revenue, which significantly mitigates the risks associated with the tariff war. While the company does rely on U.S.-designed components such as system-on-chips (SoCs), intelligent driving chips, storage chips, RF front-ends, and power integrated circuits, most of these components are produced outside the U.S. and are therefore unaffected by Chinese tariffs.
Given the current landscape, BOCI views any further price declines in the tech sector as potential buying opportunities. The broker considers Xiaomi to have the strongest structural growth prospects while facing limited negative impacts from the tariff war. As a result, Xiaomi has been designated as the broker’s top pick within the sector.
As the tariff war continues to evolve, the tech industry will need to navigate these challenges carefully. Companies like Apple must adapt to the changing landscape, while others like Xiaomi may find opportunities for growth amidst the turmoil. Investors will be closely monitoring developments in the trade relationship between the U.S. and China, as the outcomes will undoubtedly shape the future of the technology sector.
