There have been escalating fears in recent days that iPhones could go up in price as a result of the huge tariffs imposed on China by President Trump. Most of Apple’s smartphones are manufactured in China, and some analysts have speculated that the additional levies could push up prices by more than 40 percent—which has led to some panic buying. But a new report offers hope that this might not happen.
A new investor note by analysts at Morgan Stanley (seen by AppleInsider) proposes a raft of measures by which Apple could weather the effects of the tariffs without raising prices, and while remaining profitable. As proposed elsewhere, Apple could ramp up production in India, which produces 30 to 40 million iPhones per year and faces far lower tariffs than China. Morgan Stanley then proposes Apple could push customers towards the more expensive models with more storage, which have a higher profit margin and are thus better equipped to absorb the effects of tariffs.
Neither of these are easy solutions, and both are strategies Apple has already attempted. It would be more a question of accelerating existing plans rather than starting entirely new ones. Apple has been working to diversify its supply chain for some time, partly in light of human-rights concerns over Chinese factories, but doing so is a slow process. (It also makes a few iPhones in Brazil to satisfy local demand; sources suggest that could also increase.)
On the storage upsell side, Apple did something similar in 2023 when it launched the iPhone 15 Pro Max at an entry-level price of $1,199 with 256GB of storage, compared to the iPhone 14 Pro Max’s starting at $1,099 with 128GB. It was thus the “same price” gigabyte for gigabyte while requiring customers to spend more as a minimum, thus increasing the iPhone’s average selling price. That’s a win for Apple—especially since storage margins are much higher than handset margins.
Whether Apple would raise minimum storage allocations or merely focus its marketing on pushing customers toward the 512GB and 1TB configurations is uncertain at this point. Morgan Stanley also acknowledges one other option, which does involve raising prices but would make this more palatable for customers by introducing longer-term finance options and talking up carrier deals at the iPhone 17 launch event.
These aren’t the only strategies, of course. Apple could just take the short-term hit to its profits, or appeal to the president for an exemption. If you’d like to read more about the company’s options, take a look at How Apple can handle Trump’s tariffs.