Apple Watch, HomePod, and AirPods Will Be Subject to Tariffs


Aug. 14 2019, Updated 2:06 p.m. ET

Apple (AAPL) stock rose over 4.0% yesterday after the US Trade Representative delayed tariffs on several Chinese electronic products. However, as per an Apple Insider report published yesterday, Apple’s Wearables, Home and Accessories segment’s products won’t be exempt from the upcoming tariffs. These products include the Apple Watch, HomePod, and AirPods. They’ll be levied with a 10.0% tariff starting on September 1.

The report states, “Specifically, from a broader business segment perspective, the USTR is applying the tariffs to fitness trackers, smart speakers, Bluetooth headphones, smart watches, and similar devices. No vendors are spared, and Apple has no specific carve-out by the administration.”

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The Wearables and Accessories segment is growing fast

Revenue from Apple’s Wearables, Home and Accessories segment rose 48.0% YoY (year-over-year) in its third quarter of fiscal 2019, which ended in June. It rose from $3.73 billion in the previous year’s quarter.

The Apple Watch continues to gain market share in the global smartwatch segment. Its sales reportedly grew 44.0% YoY in the second quarter to 12 million units. AAPL dominates this market with a share of 46.4%. Apple sold around 5.7 million devices in the quarter.

Apple’s HomePod sales in the second quarter were far from impressive, rising less than 10.0% to 76 million units. The company slashed its HomePod price from $349 to $249 earlier this year. However, the cut hasn’t resulted in robust shipment growth. HomePod is competing with Amazon (AMZN) Echo and Google Home (GOOGL). While Amazon Echo leads the market with a share of 70%, Google Home and HomePod account for 25% and 5% of the smart speaker market, respectively.

AirPods are another device that’s gaining popularity among Apple customers. With prices starting at $159, they’re relatively cheap compared to its peers’ products. Noted AAPL analyst Ming-Chi Kuo estimated that Apple saw AirPod shipments of between 26 million and 28 million units in 2018. This number is set to increase to around 52 million in 2019, 75 million in 2020, and 100 million in 2021.

Apple’s Wearables, Home and Accessories segment remains important for it. This business has helped offset declines in Apple’s flagship products such as the iPhone. In the second quarter, Apple’s iPhone sales accounted for less than 50.0% of its sales for the first time ever.

The upcoming tariffs will result in shipment declines for Apple’s popular devices. Analysts will be closely watching to see how the new round of tariffs affects its sales going forward.


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