Trump's threat of 25% tariff on smartphones has Samsung on edge

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Trump's threat of 25% tariff on smartphones has Samsung on edge

Published: 26 May. 2025, 17:14 Updated: 26 May. 2025, 17:39

LEE JAE-LIM
[email protected]

Audio report: written by reporters, read by AI

A view of a Samsung Electronics factory in Bac Ninh province, Vietnam, on April 3. [REUTERS/YONHAP]

[NEWS ANALYSIS]

Another tariff shock from U.S. President Donald Trump has jolted the smartphone industry, leaving Samsung Electronics on increasingly shaky ground. The Korean tech giant, which relies on overseas manufacturing for its handsets sold in the United States, faces growing exposure just as it leans heavily on its mobile business to offset a prolonged slump in semiconductors.

Trump’s floated 25 percent tariff on foreign-made phones, if it goes into effect by the end of June, could raise consumer prices sharply for new smartphones launching in the second half of this year — including Samsung’s upcoming foldables and Apple’s anticipated iPhone 17 series.

The prospect of higher sticker prices threatens to sap demand in a saturated market while simultaneously testing the pricing power and brand loyalty of the two dominant players.

Samsung, which holds 23 percent of the U.S. smartphone market behind Apple’s 57.6 percent, has pinned much of its near-term hopes on its Galaxy Z Fold 7 and Z Flip 7, due for unveiling at its July Galaxy Unpacked event in New York. With its chip division still struggling, the company’s mobile business was responsible for 64.3 percent of total operating profit in the first quarter, or 4.3 trillion won, fueled largely by strong sales of the Galaxy S25 series. The semiconductor division, by contrast, contributed just 16.4 percent, or 1.1 trillion won.

If tariffs are imposed, Samsung’s premium foldables would face immediate cost pressures for a company that makes more than half of its smartphones in Vietnam. The same goes for Apple, which manufactures roughly 90 percent of its iPhones in China. Both companies may be forced to pass some of the burden onto consumers, though their strategies could diverge due to differences in brand strength.

“Price hikes for Apple and Samsung smartphones are inevitable if tariff risks do materialize,” said Park Kang-ho, an analyst at Daishin Securities. “Some of the cost burden is likely to be passed on to component suppliers. Weak smartphone sales by Apple and Samsung may lead to a decline in revenue and profit for mobile component companies.”

Samsung stands in a more precarious position. Unlike Apple, whose loyal user base has long tolerated rising prices on premium models, Samsung’s sales in the U.S. mainly stem from mid- and low-tier models like the Galaxy A series. According to Eugene Securities, Samsung shipped 60.6 million smartphones globally in the first quarter, up just 1 percent from a year ago — buoyed mostly by A-series volume. Apple followed with 54.7 million units, but logged an 11 percent year-on-year increase, driven in part by pre-emptive inventory pull-ins ahead of potential tariffs.

Foldable phones have long been viewed as Samsung’s ace in the hole, a category where Apple has yet to compete. But their premium price point makes them acutely vulnerable to any new tariffs.

U.S. President Donald Trump, right, and Apple CEO Tim Cook speak to the press during a tour of the Flextronics computer manufacturing facility where Apple's Mac Pros are assembled in Austin, Texas, on November 20, 2019. [AFP/YONHAP]

The broader focus, however, may ultimately fall on Apple — specifically, how it balances the trade-off between price hikes and market dominance in an increasingly AI-focused landscape.

“The company stands on tricky footing," said Kim Il-hyuk, an analyst at KB Securities. “Apple’s grip on the market is being tested — not just by tariff headwinds but also by AI momentum elsewhere.” He pointed to OpenAI’s recent acquisition of AI hardware startup io, co-founded by legendary Apple designer Jony Ive, as a potential game changer. “If Apple feels threatened by emerging AI-native devices, it may try to absorb the cost of tariffs to defend its brand appeal — especially since it still enjoys industry-leading margins.”

Either way, the next round of smartphone launches could come with more than just new features — they could also carry the weight of global trade tensions, price fluctuations and the first real test of consumer loyalty in a decade.

BY LEE JAE-LIM [[email protected]]