Investment firm Morgan Stanley theorizes that Apple has long-term options to protect itsiPhone 17 Proprices from tariff hikes, including steering buyers to larger storage capacities, which have a greater profit margin.Even though Trump has now paused many tariffs, and even though it’sbecome possiblethat Apple will get an exemption, the company won’t be betting on that. Doubtlessly Apple will take any exemption it can get, but it also knows Trump changes his mind on a whim, so it will be looking to long game.That’s the opinion of analysts at Morgan Stanley, in a new note to investors seen byAppleInsider. They even see a route through the tariff turbulence that could see it able to keep its iPhone prices at the same level as before.Or at least, to effectively do that. Morgan Stanley wonders if Apple will repeat what it did to storage in the move from theiPhone 14 Pro Maxto theiPhone 15 Pro Max.Apple can benefit from its high storage pricesIn 2023, Apple started the iPhone 15 Pro Max at $1,199, but made a point of how it was doing so with 25GB. There was no longer a $1,099 model with 128GB, soGreg Joswiakcould announce that this matched "last year’s price with this level of storage."So the iPhone 15 Pro Max starting price was greater than the iPhone 14 Pro Max, but Apple could say it was the same price considering what storage you were getting.Morgan Stanley estimates that Apple’s gross margin on the highest end iPhone storage is 10-15 points higher than on the lowest. So if Apple can push users to the higher storage models, the thinking is that it has some insulation room to absorb tariff costs.The analysts think that could work if Apple produces the higher storage models in China, but also significantly ramps up other iPhone production in India. The company has already been said to be ultimately aiming atmaking 25%of all iPhones in India, and Morgan Stanley thinks it will accelerate that.Currently, the analysts estimate that India is now producing 30 million to 40 million iPhones annually. With around 12 million going to Indian buyers, that means between 18 million and 28 million to be shipped worldwide.Apple shipped 66 million iPhones to the US in the last 12 months, so India would have to dramatically increase its production. Morgan Stanley believes India might have the capacity to do so, but assumes it will take longer than six to twelve months.Then, of course, India and all countries have been facing tariffs and could do so again in either 90 days or at the drop of a hat. Even as Trump has finally admitted that “some” firms had been hit badly by the tariffs, he’s likely to reinstate them — just not as heavily as with China.Apple could use long upgrade cycles to its advantageAnother possibility, according to Morgan Stanley, is that Apple could make a benefit out of how long people hold on to their iPhones. Despite regular expectations of highsupercycle upgrades, replacement iPhone cyclesare lengthening.So, posits Morgan Stanley, Apple could extend itsApple CardiPhone installment plan from 24 months to 36. That might not appreciably dent the upgrade sales, but it would mean that monthly payments would be lower.Then, too, Apple in recent years has made a point of talking up carrier deals and trade-in values even during iPhone launch events.Morgan Stanley thinks that Apple could increase its efforts in this and leverage more financing plans. Or that it can work more with carriers to offer more attractive trade-in values.How this all plays outAll of this is supposition by Morgan Stanley, but it is based on how Apple has been expanding in India. And it is based on how Apple managed that iPhone 15 Pro Max price increase in 2023.Morgan Stanley offers that if India can make 40 million iPhones for the US in 202, then China would still have to make 25 million for US demand to be fulfilled. At a 125% tariff rate, those 25 million iPhones would cost Apple about $17 billion in tariffs.But the analysts maintain that if Apple only imports the highest-end storage models from China and leaves the rest to India, it could cut that tariff bill by more than half.Morgan Stanley isn’t saying that Apple will do all of this, or that it has inside information. It’s saying that it’s a plausible scenario, and one that Apple is likely to be considering.As yet, however, the investment company has not raised its Apple target price. That waslowered to $225immediately after the announcement of the tariffs, and is currently at $220.
Even though Trump has now paused many tariffs, and even though it’sbecome possiblethat Apple will get an exemption, the company won’t be betting on that. Doubtlessly Apple will take any exemption it can get, but it also knows Trump changes his mind on a whim, so it will be looking to long game.
That’s the opinion of analysts at Morgan Stanley, in a new note to investors seen byAppleInsider. They even see a route through the tariff turbulence that could see it able to keep its iPhone prices at the same level as before.
Or at least, to effectively do that. Morgan Stanley wonders if Apple will repeat what it did to storage in the move from theiPhone 14 Pro Maxto theiPhone 15 Pro Max.
Apple can benefit from its high storage prices
In 2023, Apple started the iPhone 15 Pro Max at $1,199, but made a point of how it was doing so with 25GB. There was no longer a $1,099 model with 128GB, soGreg Joswiakcould announce that this matched “last year’s price with this level of storage.”
So the iPhone 15 Pro Max starting price was greater than the iPhone 14 Pro Max, but Apple could say it was the same price considering what storage you were getting.
Morgan Stanley estimates that Apple’s gross margin on the highest end iPhone storage is 10-15 points higher than on the lowest. So if Apple can push users to the higher storage models, the thinking is that it has some insulation room to absorb tariff costs.
The analysts think that could work if Apple produces the higher storage models in China, but also significantly ramps up other iPhone production in India. The company has already been said to be ultimately aiming atmaking 25%of all iPhones in India, and Morgan Stanley thinks it will accelerate that.
Currently, the analysts estimate that India is now producing 30 million to 40 million iPhones annually. With around 12 million going to Indian buyers, that means between 18 million and 28 million to be shipped worldwide.
Apple shipped 66 million iPhones to the US in the last 12 months, so India would have to dramatically increase its production. Morgan Stanley believes India might have the capacity to do so, but assumes it will take longer than six to twelve months.
Then, of course, India and all countries have been facing tariffs and could do so again in either 90 days or at the drop of a hat. Even as Trump has finally admitted that “some” firms had been hit badly by the tariffs, he’s likely to reinstate them — just not as heavily as with China.
Apple could use long upgrade cycles to its advantage
Another possibility, according to Morgan Stanley, is that Apple could make a benefit out of how long people hold on to their iPhones. Despite regular expectations of highsupercycle upgrades, replacement iPhone cyclesare lengthening.
So, posits Morgan Stanley, Apple could extend itsApple CardiPhone installment plan from 24 months to 36. That might not appreciably dent the upgrade sales, but it would mean that monthly payments would be lower.
Then, too, Apple in recent years has made a point of talking up carrier deals and trade-in values even during iPhone launch events.
Morgan Stanley thinks that Apple could increase its efforts in this and leverage more financing plans. Or that it can work more with carriers to offer more attractive trade-in values.
How this all plays out
All of this is supposition by Morgan Stanley, but it is based on how Apple has been expanding in India. And it is based on how Apple managed that iPhone 15 Pro Max price increase in 2023.
Morgan Stanley offers that if India can make 40 million iPhones for the US in 202, then China would still have to make 25 million for US demand to be fulfilled. At a 125% tariff rate, those 25 million iPhones would cost Apple about $17 billion in tariffs.
But the analysts maintain that if Apple only imports the highest-end storage models from China and leaves the rest to India, it could cut that tariff bill by more than half.
Morgan Stanley isn’t saying that Apple will do all of this, or that it has inside information. It’s saying that it’s a plausible scenario, and one that Apple is likely to be considering.
As yet, however, the investment company has not raised its Apple target price. That waslowered to $225immediately after the announcement of the tariffs, and is currently at $220.