The companies that produce parts for computers are bracing for the effects of a new set of tariffs that the United States has imposed on Chinese goods. It’s very likely, experts and sources tell us, that we will see increased prices for components as well as pre-built desktops.
Under the direction of President Donald J. Trump, tariffs on roughly $200 billion of Chinese goods went into effect on Sept. 24 at a rate of 10 percent. On Jan. 1, 2019, that rate is scheduled to inflate to 25 percent.
How much will consumer prices rise? Well, that’s complicated. It depends on how the tariffs are applied. Patrick Moorhead, president and principal analyst at Moor Insights & Strategy told Tom’s Hardware..
“If the taxes remain levied on the final AIB [add-in board] and not just the China final-assembly value-add, then GPU prices will rise until that manufacturing can be moved,” he said. “I would expect AIB manufacturers, AMD and Nvidia to be lobbying to just get the final assembly taxed versus the entire bill of materials.”
Price Bulls and Bears
Even with the tariffs in effect, companies are still not certain what the results will be for their business or their pricing.
A source from one major manufacturer of components and computers, who spoke on condition of anonymity, told us that it will depend heavily on the product line, but that the company is considering hiking its prices. However, completed laptop computers and all-in-one desktops are not on the list.
Other desktops, the source told us, are likely to be affected, and that “we are evaluating if we will increase pricing on them.” On the component side, the source named motherboards and GPUs as likely to be subject to tariffs, though the vendor wants to get “within market pricing.”
Not everyone in the industry is fearful of changes in pricing or business practices. Drew Prarie of AMD’s corporate communications team suggests that the chip maker won’t see a massive effect on its business.
For starters, notebooks aren’t affected, and neither are game consoles. So chips in those products won’t be penalized. Additionally, on the CPU side, AMD controls its own supply chain. The biggest question mark is in GPUs because some partner cards are made in China.
“What makes [CPUs] different is it’s more of our supply chain than leveraging partner supply chains on the graphics side with the AIBs,” Prarie said. He declined to comment on those partners’ supply chains, citing a lack of knowledge.
Lobbying for Change
AMD, along with Intel, Nvidia, Qualcomm and other chip makers are members of the Semiconductor Industry Association, a lobbying group. The SIA didn’t respond to a request for comment by press time, but in July, the company highlighted a letter from U.S. members of Congress to the U.S. Trade Representative suggesting that the tariffs would harm consumers and businesses domestically.
“SIA agrees with the concerns raised in the letter and will continue to strongly make the case to the Administration that while combatting China’s problematic trade practices is the right goal, tariffs on semiconductors and related products are the wrong approach,” it wrote at the time.
The White House did not respond to a request for comment about potential increasing prices and how the U.S. tariffs affect global supply chains.
Getting Around the Tariffs
Several sources point out that there are several moving parts that complicate things further. For one, the tariffs apply to goods imported from China, but these companies may have warehouses full of goods already in the United States, possibly in anticipation of this type of event.
“Any material (such as AIBs) that arrives in a US port (includes airports)... gets the 10 percent tax applied to it. That tax will have to be passed on,” analyst Jon Peddie wrote in an email. He said that major vendors keep roughly 30-days worth of inventory in the U.S., so he predicts prices will rise in the middle or at the end of October.
However, OEMs can potentially use their supply chains to avoid the tariffs.For example, a company manufacturing a component in China to be sold in a pre-built system could send it to a manufacturer outside of the United States to be assembled and then shipping to America. It’s less clear if there’s a way for companies to do this with individual components, though.
Manufacturers could also move their supply chains outside of China, but that would be costly and take a lot of time. Still, recent reports suggest that companies have been planning these shifts for a long time.
But whether prices will increase, whether your favorite CPU or GPU vendor has enough supply in the United States, whether China’s counterattacks in the trade war make the U.S. back down or whether companies will get their manufacturing out of China are all open questions. So will this affect you directly? Possibly. Maybe. It’s complicated.
Welcome to the taxes everyone else in the world pays.
Unless Foxconn is making the PCBs, I doubt an increase will occur on the PC market... that's another story for Apple devices.
And in order to make that happen, we have to pay essentially a federal sales tax. On top of that, it's also hurting US exports to China. You're really cool with that?
There are lots of ways to promote more domestic manufacturing. Except in cases where underutilized capacity exists, tariffs usually aren't the best tool in the box.
Semiconductors are probably the main exception. Most of the chips we buy still aren't fabbed there. Also, HDD makers have legacy plants outside of China.
If the US customer pays for the tariffs, then USA is (still, if ever) being ripped off.
The main reason tariffs are being used is because it's the tool the President has. For historical reasons, congress had allowed the US President to levy tariffs of up to 25% for national defense purposes. As the saying goes: "when all you've got is a hammer, everything starts to look like a nail."
One alternative was to create a trading block which excluded China. This was known as the Trans-Pacific Partnership. Now, there are plenty of valid grievances against that particular treaty and negotiating process, but it was definitely less confrontational and would've created a trading block with even more leverage than the US, alone.
If this occurred two decades ago I would be in agreement. Tariffs should move the demand back to your country but the US simply can't manufacture this "stuff" so all its going to do is move manufacturing to some other country not China or the US. At the end of the day the American people are subsidising moving manufacturing to another country.
The bubble in China could pop with all that debt (think of a Japanese style "Lost Decade" crash in the early 90s), and the economy is already showing signs of slowing down. My guess is that China will counter via devaluing the Yuan. In fact, it was just reported a view days ago that China would not do such a thing - which tells me they'll probably do the opposite if they've got to underline that with a statement defensively. If they do in fact devalue the Yuan, that would counter the consumer effects of new imposed tariffs; either in whole or part. Meaning, not much of a price change for the US consumer.
So what's the really all about?? Again, purely a guess, but thinking about it this way. The massive trade imbalance is in fact funding all the HAMs (Hot Asian Money) to be purchasing real-estate in the West while money in the mainland is funding the Chinese military. That and China is looking to expand a Belt and Road initiative via an expanding empire. They're welcome to it like any other nation (empire building that is). But, (and they're always a "but") this is a recipe for regional Pacific conflict that would no doubt spark war between neighboring nations and God forbid, nuclear armed India!
So that all said, I'm not so sure this is purely out of America's interests directly as it is indirectly via preventing major military conflicts via neutering Chinese progress in their own endeavors. However as history has proven, a Trade War can lead to a hot war. So meaning, a total back-fire. And if that happens, you can forget about increase PC prices as that will be the least of your worries!