Concerns have been raised that the Trump administration's imposition of high tariffs on major smartphone production countries for Samsung Electronics and Apple will intensify manufacturers' pressure for price cuts from smartphone component suppliers. From the perspective of smartphone manufacturers, the cost burden is inevitably increasing due to the impact of tariffs, and there are limits to offsetting this burden solely through price increases.
According to industry sources on the 7th, there are worries that pressures for price cuts will intensify on Samsung Display, LG Display, Samsung Electro-Mechanics, and LG Innotek, which supply displays and camera modules to Samsung Electronics and Apple. Currently, the Samsung Galaxy series is equipped with display panels from Samsung Display, camera modules from Samsung Electro-Mechanics, and multilayer ceramic capacitors (MLCC). The Apple iPhone series includes display panels from both Samsung Display and LG Display, as well as camera modules from LG Innotek and MLCCs from Samsung Electro-Mechanics.
Nam Sang-wook, a researcher at the Korea Institute for Industrial Economics and Trade, noted, "The tariff imposition by Trump has been anticipated for a long time, but in the actual announcement, even the 'transshipment' that had been prepared as an alternative has been fully controlled," adding, "Smartphone corporations cannot avoid increasing cost burdens, as they cannot completely pass the tariff-related cost increases on to consumers, so they will strongly demand price cuts from component suppliers."
The Trump administration announced on the 2nd (local time) that it would impose a 10% universal tariff on all countries and establish differentiated tariffs by country for over 60 nations. According to the tariff rates published by the U.S. government, Vietnam has the highest rate at 46%, followed by Thailand at 36%, China at 34%, Indonesia at 32%, Taiwan at 32%, Switzerland at 31%, India at 26%, South Korea at 25%, Japan at 24%, and the European Union at 20%.
Typically, component suppliers deliver parts to the countries manufacturing finished goods smartphones. Companies supplying displays and camera modules to Samsung Electronics provide parts to smartphone manufacturing lines in Vietnam and India. Likewise, companies supplying parts to Apple send components to production facilities like Foxconn, assembling iPhones in China and Taiwan. Since there is no direct export structure to the U.S., it is expected that few component suppliers will directly face America's reciprocal tariffs.
The issue is that companies like Samsung Electronics and Apple, which assemble finished goods in countries where high tariffs are imposed and sell them to the U.S., cannot avoid tariffs. An industry source explained, "It does not seem that component suppliers will directly bear the tariffs, but the pathways to evade tariffs, such as transshipment, have been blocked."
For domestic component suppliers, who have a high dependency on sales to Samsung Electronics and Apple, a reality of price cuts for components would likely lead to a decline in profitability. The sales dependency of Samsung Electro-Mechanics on Samsung Electronics is 29%, while LG Display and LG Innotek have sales dependencies on Apple of 54% and 81%, respectively. It is understood that the sales proportion of Samsung Display related to Samsung Electronics and Apple exceeds 80%.
There are suggestions that Trump might exempt American corporations like Apple from tariffs. During the Trump administration in 2019, a 25% tariff was imposed on Chinese products, but Apple CEO Tim Cook managed to obtain tariff exemptions after meeting with President Trump. Researcher Nam explained, "Although there has been a case where Apple received a tariff exemption, the determination of the Trump administration to impose tariffs is stronger than ever, making it difficult to make unilateral judgments."