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Technology: US Tariff Updates and Implications for Tech Sector

Core Content Overview

This document analyzes the recent updates to US tariffs and their implications on the technology sector, particularly focusing on the impact on companies and the potential for bottom-fishing opportunities. It addresses several investor FAQs and provides insights into the valuation and exposure of various tech companies.

Main Points and Key Information

1. US Tariff Exemptions and Implications

• "20% US content rule" exemptions: The US has introduced a rule that allows for tariff exemptions if at least 20% of the product's customs value originates from the US. However, this rule refers to "Made in US" rather than "Made by US," meaning components made in the US are exempt, while those made by US companies outside the US are not.

  • iPhone/iPad: Not exempt due to being made by US companies but not in the US.
  • AI servers (manufactured in Mexico): Compliant with USMCA exemption.
  • PCs with Intel CPUs: Exempt as Intel is a US-origin component.

• China's 34% tariff on US imports: Effective from April 10, this tariff may impact US imports of products reliant on Chinese components, particularly the domestic PC supply chain (e.g., Lenovo), due to limited packaging capacity in Vietnam and Malaysia.

  • Smartphone and server supply chains: Less affected as components (Qualcomm SoC, Nvidia GPU) are manufactured in Taiwan.

• Vietnam's 0% tariff proposal: If accepted, companies with assembly capacity in Vietnam will benefit, including:

  • BYDE (iPad)
  • Luxshare (AirPods, watches)
  • FIT Hon Teng (AirPods, Belkin)

• De-minimis rule removal: Effective May 2, 2025, this means packages valued below $800 will no longer be duty-free. This will impact lower-value IoT and wearable products from Chinese manufacturers sold through US e-commerce channels.

2. Bottom-Fishing Opportunities

• Despite a sector-wide correction of 30-40% in the past week, the sector is still 15-20% above the historical valuation trough.
• The report suggests that investors may look for quality names to accumulate on further weakness, including:
  • Xiaomi
  • AAC Technologies
  • Sunny Optical
  • BYDE
  • Q-Tech

3. Company Feedback and Response

• Luxshare: Stated it aims to mitigate the impact of market fluctuations and geopolitical uncertainties with global facilities in Vietnam, Indonesia, Malaysia, Thailand, the US, Mexico, and Romania.
• Lens Tech: Has 9 overseas R&D and production centers, including those in Vietnam, Thailand, and Mexico, to meet global customer demand.

4. Sales Exposure by Region

• FIT Hon Teng: 83% of sales are overseas, with 46% in the US.
• Lenovo: 76% of sales are overseas, with 34% in the Americas and 25% in EMEA.
• BYD Electronics: 87% of sales are overseas, with 67% in international markets.
• TCL Electronics: 59% of sales are overseas, with 21% in North America.
• TK Group: 52% of sales are overseas, with 18% in the US.
• AAC Technologies: 50% of sales are overseas, with 43% in the Americas.
• Xiaomi: 45% of sales are overseas, with 55% in China.
• Sunny Optical: 33% of sales are overseas, with 67% in China.
• Cowell: 8% of sales are overseas, with 92% in HK & China.
• Intron Tech: 3% of sales are overseas, with 97% in China.

5. Global Production Bases

• AAC Technologies: China, Vietnam, Philippines, Singapore, Germany
• FIT Hon Teng: China, Vietnam, Taiwan, India, Mexico, Europe
• BYDE: China, India, Vietnam, Europe, Mexico
• Goertek: China, Vietnam
• Luxshare: China, Vietnam, Malaysia, Germany
• Lens Tech: China, Vietnam
• Sunny Optical: China, India, Vietnam
• Q-Tech: China, Taiwan, India

6. Valuation and Performance

• Xiaomi: FY25E P/E 21.4, FY26E P/E 17.5, Perf YTD 5.7%
• Sunny Optical: FY25E P/E 16.1, FY26E P/E 13.2, Perf YTD (19.5)%
• AAC Technologies: FY25E P/E 14.0, FY26E P/E 11.8, Perf YTD (12.0)%
• BYDE: FY25E P/E 9.8, FY26E P/E 7.9, Perf YTD (31.5)%
• Q-Tech: FY25E P/E 10.8, FY26E P/E 8.6, Perf YTD (10.8)%
• Lenovo: FY25E P/E 8.3, FY26E P/E 5.8, Perf YTD (24.8)%

Conclusion

The US tariff updates have significant implications for the technology sector, particularly for companies with high exposure to US markets and those reliant on Chinese components. The removal of the de-minimis rule and the 34% China tariff could impact lower-value products and domestic supply chains. Companies with global production bases, such as Luxshare and BYDE, may benefit from the 0% tariff proposal with Vietnam. Despite the sector's recent volatility, the report suggests that certain companies may present opportunities for accumulation due to their current valuations and potential for recovery.