Investors should not assume that nothing will happen this time around the risks of the high-tech sector resulting from the US trade war with China.
It shows that the supply chain is likely to be changing dramatically. Decoupling from China has a major impact on technology companies, especially hardware sellers. Suitable Case: Apple aapl According to the company, it recently announced plans to move production of most iPhones for sale in the US to India by the end of 2026. Bloomberg.
The risks of tariffs are widespread, but there are high-tech industries that prove to be stable amid a dramatic shakeup.
These are one of the takeaways of a recently published report. A guidebook for technical investment during customs.
High-risk hardware: Smartphones, personal computers, servers
Of the hardware sellers we cover, approximately 60% of the smartphone and PC supply is subject to Chinese tariffs. Most shipments come from freight from Mexico and Taiwan, and the servers think they are not too confused.
Some hardware industries, such as PCs and smartphones, have been reclassified under the semiconductor exemption, but the Trump administration may be preparing professional tariffs on these items soon.
Especially Motorola MSI Despite being a hardware vendor, it is one of the few bright spots that minimize China’s exposure (both in the supply chain for assembly and the final material invoice).
Here’s what we see as tariff risks in the hardware industry:
• Smartphones: We estimate that one of the most difficult hit supply chains is for smartphones. Under our reporting, this will primarily affect Apple. This means that most of its iPhones are assembled in China. It is estimated that about 80% of imported smartphones came from China in 2024.
• Personal Computers: We estimate that PC supply chains will also be significantly affected. Only 60% of imported PCs come from China, and Vietnam is the second largest source of PC imports. PC supply chains have a little less PC technology and a new base in Vietnam, so I think it’s a little easier to move around than the iPhone’s PC supply chain.
• Server: The server is estimated to be more insulated than most people expect. Mexico is the dominant import hub of servers, followed by Taiwan.
The software and cybersecurity industry can be less risky, but it’s not without exception
All investors should seriously consider what prices and what risks they take, and consider software and low-risk areas that they believe are cybersecurity.
• Cybersecurity: We believe cybersecurity is set up to benefit from a long-term, structural increase in spending, and we recommend looking for opportunities here during a tariff-driven sale. Among the cybersecurity names, I prefer the Palo Alto Network breadMorningstar’s economic moat is widely appreciated.
•Software: Among the software names, we prefer Adobe with a wide range of Moat ratings. adbe and Microsoft msft It shows that there is less risk of tariff destruction. Also calls synopsys overview of Exploratory Data Analysis Player SNP And Cadence CDNS As a more stable pick within the semiconductor industry. They are software providers and are used by engineers, so the revenue stream is usually more stable. One risk highlighted in both is the low teenage revenue exposure to China.
Software is directly exempt from customs duties. However, there is still risk that comes from weaker economic conditions.
Shopify shop With the removal of tax-free treatments, you could be most at risk from customs issues. A key part of the total commodity value may come from retailers selling to the US market that imports products from China and Hong Kong. We estimate that approximately 55% of the total product value is likely based on sales to the US.
alphabet googl and meta Meta They could face headwinds driven by reduced advertising spending by China-based companies, particularly Shein and Temu. We’re already looking at data indicating that this is happening. A 75% decline in spending by China-based companies could potentially reduce revenues of $2 billion in meta and $1 billion in Google. This decline has already been explained, and it has priced the current stock valuation.
Technology Sector Uncertainty: Why Markets Remain Unstable
We try not to predict the psychology of short-term markets, but we believe investors need to seriously consider medium-term costs, which will dramatically shift the current global supply chain. There will be a relief rally as positive news comes up about the “dealer.” We also see additional measures such as tax reductions and other reinvestment mechanisms specifically aimed at promoting domestic investment.
However, they believe investors should not be fooled by the optimism of myopia at this stage. If the Trump administration is about to dramatically change its supply chain, there is still a long way to go.
Actions being carried out even if the supply chain does not change substantially It could still cause a recession today.
Investors need a new playbook to outline the new risks they are dealing with, as some companies are hit more than others.
This article was edited by Marissa Monson.
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