The adverse impact of taxation on tech firms is being observed: S&P

The adverse impact of taxation on tech firms is being observed

As stated by Papua New Guinea-based Oil Search, if Washington increases tax on China-made consumer electronics, where firms have easy accessibility to supply chains, the profitability of Taiwan’s large-scale technology firms would be massively affected.

According to the analysis by Raymond Hsu (許智清), if the US charges 25% tax on Chinese electronics, the earnings of the 50 major local technology firms would decrease by 30%

By this month a 15% tariff has been declared by US President Donald Trump on Chinese goods, which includes smart speakers, smartwatches, etc. by 15 Dec the tax will also be imposed on notebook computers and smartphones.

As a reaction, China has also increased tax on some US products.

Hsu mentioned, this trade conflict might go further as it is improbable to be settled in the near future, the demand for consumer electronics, vehicles and semiconductors might diminish gradually and decrease margins. The high-end smartphones, especially Apple Inc’s iPhones are not being sold now as much as before.

According to S&P’s foresight, the iPhone sales would further fall by 20% this year, thus resulting in adverse circumstances for the Taiwanese companies in Apple’s supply chain, Hsu said. He further added, the release of a new iPhone model might be a successful strategy to regain fan’s attention but this will not be as successful as it was before, because of little development features.

The Chinese and South Korean brands get extra advantage by using organic LED display and 5G technologies. Although, the Taiwanese firms involved in assembling iPhones are not linked to these brands.

The companies that provide inputs for the iPhone’s production such as memory chips, consumer electronics, and electronics components would be immensely affected by the margin’s downfall.