Trade frictions impact supply chains, analysts say Apple Inc. (AAPL.US) may be forced to completely adjust iPhone product strategy.

Amidst President Trump's continued imposition of tariffs on China, Apple Inc. (AAPL.US) may be forced to completely adjust its iPhone product strategy. Several Wall Street analysts have warned that the escalating trade tensions between the US and China could have a profound impact on Apple Inc.'s production costs and sales strategy. Morgan Stanley analyst Erik Woodring pointed out in a report released on Thursday that Apple Inc. could alleviate the burden of tariffs by cutting low-profit models and adjusting the iPhone product lineup. He wrote, "Targeted adjustments to the iPhone product structure could significantly mitigate the tariff headwinds." Rather than raising prices, Woodring suggested that Apple Inc. could consider discontinuing certain low-capacity entry-level storage versions instead of across-the-board price increases. Bank of America Corp analyst Wamsi Mohan proposed a more radical suggestion, suggesting that Apple Inc. could consider changing the iPhone's new product release cycle from annually to every two years. This would help extend the product development and production cycle, simplifying the supply chain pressure faced when dealing with high-cost manufacturing changes. With the Trump administration announcing last week imposing a 34% "equivalent tariff" on Chinese goods, then further increasing the total tax rate on Chinese tariffs to 145% this week, China quickly retaliated by raising tariffs on American goods to 125%. This tariff game has put pressure on many multinational companies that rely on Chinese manufacturing, with Apple Inc. being hit the hardest. Apple Inc. currently heavily relies on its Chinese manufacturing giant Foxconn, which produces the vast majority of iPhone devices. Wedbush analyst Daniel Ives estimates that if Apple Inc. were to move iPhone production back to the US, the price of each iPhone could reach as high as $3,500, compared to the current market price of around $1,000. This means that Apple Inc. either needs to pass the cost pressure on to consumers by significantly raising iPhone prices, or it must make significant changes to its product strategy. Despite rumors of potential strategies in the market, Apple Inc.'s stock price rose by 4.06% on Friday, closing at $198.15. As of now, Apple Inc. has not formally responded to whether it is considering streamlining the iPhone product line or changing the release cycle.