Analyst: Apple Makes Smart Move To Keep Mac Pro Assembly In Austin

Apple Inc. AAPL is making a smart move in building its latest Mac Pro desktop computer in Texas as it seeks to mitigate the hit from Chinese tariffs on other products, including the iPhone.

The Analyst

Wedbush’s Daniel Ives maintained an Outperform rating and $245 price target on Apple.

The Thesis

Apple announced Monday it will build its redesigned Mac Pro in Austin after getting an exemption on key tariffs on circuit boards and graphics cards from U.S. trade officials. It will be the only major Apple computer product assembled in the U.S., but will avoid the possibility of more tariffs on goods imported from China that could come in December.

The iPhone is assembled in China, and the trade war is giving Apple headaches.

Ives said the best case scenario would be that Apple could move a small amount of iPhone production out of China, but it would likely take as much as three years to get just 20% of production out of the country. Apple has been looking at the possibility of moving as much as 7% of iPhone production to India or Vietnam, but even that small amount would likely take more than a year to move.

While it doesn’t help with iPhone-related tariffs, the move to keep Mac Pro assembly in the U.S., is still significant.

“In our opinion this is an example of smart and strategic balanced production from Apple and should be viewed as a move in good faith,” Ives wrote in a note.

Ives said the China trade war has resulted in a $20-$25 hit to Apple’s stock. But Mac Pro domestic assembly helps.

Price Action

Apple shares traded around $218.75 at publication time.

Related Links:

Better Than Feared: Apple Impresses Analysts With iPhone Sales, Return To Hope For China

Needham's Martin Talks Apple Services, Streaming Video Competition