Why headphones and speakers could be trade war casualties

U.S. one-dollar and five-dollar currency notes; taken September 2018.

Makers of audio products, including speakers and headphones, are likely to lose across the board if the U.S. proposal to impose 25 percent tariffs on another US$200 billion of Chinese imports proceeds, Nomura said in a note on Monday.

“Although we have no further details on the tariff list at the moment and we do not know if it will really execute or not or when/how, we can assume the worst case that all the audio products, including headphones and speakers, are included,” Nomura said.

“In our view this would be negative for the entire audio product value chain,” it added. “The negative impact is across the board, and no one
would benefit from that.”

The Trump administration reportedly could impose its proposed 25 percent tariff on US$200 billion of Chinese imports in the coming days. Since those reports emerged, U.S. President Trump has also threatened to impose tariffs on all imports from China, with the mainland set to swiftly retaliate.

Nomura noted that nearly all major headphone and speaker products are made in China, which would put them all on the tariff list if they want to ship to the U.S.

“Apparently China is the most important production site for every audio maker, except for Foster,” which has major audio capacity in Vietnam, Nomura said. “Even if those audio makers have plants outside China, it would cost more in money and time to transfer production to other places.”

The investment bank added that overall sentiment on the sector is “bad,” and it advised waiting on the sidelines in the near-term and waiting for more details as there’s limited visibility over the trade war.

But it noted that on fundamentals, it still likes Merry, Luxshare and Primax in the audio space.

Separately, among Singapore-listed stocks with exposure to the audio industry, shares of Hi-P International were down 5.26 percent at S$0.90 at 15:48 SGT, while shares of Creative Technology were off 1.72 percent at S$5.70.

Key audio brands and their production sites, from Nomura research.


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