Apple is one of the most successful consumer electronics corporations in the world. The production of their flagship iPhone has been the pillar of their past and current success. As a result, it has been an economic focus because of its success and its popularity. As such, it comes under the influence of many economic factors, not only microeconomic factors but also macroeconomic factors. This paper will discuss some of these factors and the impact they have on Apple and the iPhone.
With the iPhone being more of a luxury good than a primary need, it is safe to assume that macroeconomic conditions within a country, including the United States, will affect supply and demand. Macroeconomics is “a variety of economy-wide phenomena is thoroughly examined such as inflation, price levels, rate of growth, national income, gross domestic product, and changes in unemployment” (Investopedia.com, 2012). Thus, higher-level economic forces will influence products such as the iPhone. Some of these higher-level economic forces include fiscal and monetary policies, particularly in the US, where Apple is headquartered.
Inflation is a critical macroeconomic factor that can influence the supply and demand of the iPhone. “From a supply-demand standpoint, it can be due to increased demand for a particular product, from an increase in a company’s cost of supplies, or from limited supplies, or even just due to fear that supplies might be limited at some point in the future. But the single most important determinant of inflation is the output gap, which is the balance between supply and demand in the economy” (Graham, 2018). In the US, inflation rates have fluctuated year to year. However, inflation lowered to below 1% in 2014 and 2015. However, it increased to 2.1 in 2016 and 2017. Higher inflation rates will “impact the cost of living,” meaning that there will be less disposable income for families and people to buy iPhones, lowering the overall demand of the product (Investopedia.com).
Gross Domestic Product is the second factor that will influence the iPhone in that an increase in GDP in the US means that citizens are making more money, thus have more purchasing power to buy iPhones. Also, in regards to GDP, the value of the dollar increases, and other currencies fall. With China, where Apple produces iPhones, “a falling yuan should mean lower production costs” (Worstall, 2016). GDP in the US has increased in recent years. However, that growth in the US has been prolonged. GDP growth was very low in 2016. Then it increased overall in 2017 and the beginning of 2018. As mentioned before, iPhone demand will increase because there will be more people in the US with enough disposable income to purchase it.
The third factor in macroeconomics in regards to the US that could affect the iPhone are geopolitical factors. These refer to “political or geographic events that may move the markets” (easymarkets.com). The US and China have a tenuous relationship with each other. There is also a dividing line between the two with North Korea. The current president has been suggesting tariffs on steel and other products from China. As a result, China recently instituted tariffs on US products. With the vast majority of iPhone production in China, any shift in politics by either the US or China towards each other could have huge impacts on the iPhone supply. For the last few years, trade has been good with China. However, the trade balance has been in favor of China and has been growing that way for a while now.
The trade deficient between the US and China is now in the hundreds of billions of dollars, in the sense that the US imports much more from China than exports to it. Trade deficits typically are “detrimental to a nation’s economic outlook by negatively impacting employment, growth, and devaluing its currency. The United States, as the world’s largest deficit nation, has consistently proven these theories wrong” (Investopedia.com). The US is the world’s largest economy, and the US dollar is the world’s reserve currency. This is believed to be the reason why the US hasn’t experienced adverse effects. However, any change in that could be catastrophic to the US and its economy. For the iPhone, this would signal a decrease in supply and demand. Supply would drop because demand in the US would drop because, in the case of economic ruin, no one would be able to afford an iPhone.