➡ Samsung now assembles its phones in Vietnam, India, and Brazil, not just China. Phone parts come from all over the world, including camera technologies from companies like Sony and Toshiba, and batteries likely from China. Tariffs, which are taxes on imported goods, can increase the cost of phones, but the impact is often lessened by factors like exchange rates and negotiations. Despite the complexity and potential cost increases, the global production of phones is seen as necessary for a sustainable strategy in manufacturing.

➡ Due to political changes, product prices may rise, including our phones made in China, where most phones are produced. Despite accusations of being untrustworthy, we’re a small company that relies on larger ones, like the factory that makes Amazon Kindles. We’re considering moving assembly to Europe and are developing our own phone, the Brax 3, free from privacy-invading features. It’s available for early bird pricing on Indiegogo.com, but prices may increase due to tariffs.

This last week has been a roller coaster of events with the trade war affecting our own product, and we’re still coasting up and down daily while our eyes are glued to cnbc. As some of you know, we are manufacturing our own phone model called Brax3, but this video is not about our product. However, this gives us direct visibility into the issues of the phone market and from this you may get insight on the deep impact of the US tariffs and how it will affect the price of phones. And I will also explain a little bit of the phone manufacturing process and answer the question if phone manufacturing can ever move to the US.

Just to give you the staggering numbers, 1.24 billion smartphones were shipped in 2024. Of this, the largest player was Apple with 232 million phones, followed by 223 million shipping from Samsung. Apple itself ships around 100 million of these phones to the US. I want you to understand that 99% of these phones were made in China in the past. I acknowledge that this seems obviously to be an unsustainable environment where one country appears to control all phone technology, although you will learn that it isn’t as simple as it looks. This video will stay away from the politics, but will discuss the workings of this industry in detail so you understand the implications of all these tariff moves.

If you’re interested in seeing how the phone industry works and how it will affect you, stay right there. Foreign as of the time of this video, it was announced that smartphones, semiconductors and computers would be exempt from the brunt of the China tariffs, which was at 125% while leaving around 20% in place. Apple was so concerned about the previous 145 total China tariff that it shipped 300 tons of iPhones quickly produced in India and flew them to the US in advance of the tariffs that accounted for approximately 1.5 million phones. Just to give you a sense of the economic impact, If Apple charges $800 per phone, then 100 million phones sold in the USA alone is worth $80 billion of revenue.

So if tariffs got fully implemented, then your $800 iPhone would have cost $1200 or so. I’ll explain the rough math of this later. And Apple is just half of the USA market. Others, including Samsung, Google, Pixels and smaller brands like Motorola, OnePlus and so on, would have a similar combined effect on the US economy and subject to a similar price increase. China’s Stranglehold on Phones Today it appears on the surface that China has a stranglehold on phone manufacturing and frankly, this has been due to decisions made by companies like Apple and Samsung who have created the monster, so to speak.

Basically from a zero phone industry back in 2007. What when phones like Nokia were built in Finland and BlackBerry’s were built in Canada, the iPhone changed the landscape from here. IPhones were built in China by Foxconn. Foxconn is actually a Taiwanese company, but they set up their factories in Shenzhen, China. So this grew the Chinese industry related to smartphones and, and now today there are hundreds or even thousands of suppliers of parts used in every smartphone. And these suppliers all grew around Shenzhen. I used to watch this channel where this American lived in Shenzhen before COVID and then he made some viral videos of himself building an iPhone or modifying an iPhone based on parts he can buy from Shenzhen.

So I went up to this cell phone repair school up in Guangzhou called Jilon and I met with a head teacher named Wyman. As I told you earlier, my project is to try and build my own iPhone from parts that I am buying in the market. Do you think that is possible? Decent? Yep. Yeah. I have a board like this discord. You maybe buy four, say maybe just two is good. And if you take your time to put other IC on the discord, you may be on one, but the rate is very low. It’s not impossible, you know, it’s possible, but it’s very difficult.

So today the economy of Shenzhen is focused on smartphone electronics. And if you understand the volume of business, and that’s 1.2 billion phones a year, you can understand the effect on the economy here. That’s over 100 to 200 billion on the local economy based on smartphones alone. And because of the economies of scale and lower labor costs compared to Europe and North America, no one else could compete in making phones. Plus you had a labor pool that became very skilled at assembling smartphones which had become specialized over the years. You can see what Tim Cook thinks about this pool of labor in this video.

There’s a confusion about China and let me at least give you my opinion. The popular conception is that companies come to China because of low labor cost. I’m not sure what part of China they go to, but the truth is China stopped being the low labor cost country many years ago. The reason is because of the skill, the quantity of skill in one location and the type of skill it is like the products we do require really advanced tooling and the precision that you have to have in tooling and working with the materials that we do are state of the Art and the tooling skill is very deep here.

You know, in the US you could have a meeting of tooling engineers and I’m not sure we could fill the room. In China, you could fill multiple football fields. It’s that vocational expertise is very deep. Very, very deep here. Technologies of a Phone now here’s the interesting fact about the smartphone. The intellectual property involved with making a smartphone is actually mostly embedded in the U.S. taiwan and South Korea, with the innovations mostly emanating from the US the phone calling module or the baseband modem is driven primarily by patents controlled by Qualcomm, a US company, and MediaTek, a Taiwan company.

The then you have the smart part of the phone which runs iOS or Android, and that is driven by technologies of Apple and Google, which of course are US Companies. All phones use ARM processors, which is the technology of ARM holdings, which is based in the uk. There are the companies that make the supporting technologies like WI Fi, Bluetooth and GPS, for example, which for example is the intellectual property of Broadcom, another US company. So if all the technologies were actually invented and owned by mostly US companies and Taiwan, what happened here? How is it that we perceive that China is the center of the universe when it comes to phones? Fabless Chip Makers Now I will introduce you to a definition of technology companies called Fabless chip makers.

And this includes many companies you know well. Apple, Qualcomm, Broadcom, Mediatek, Nvidia. Now, Nvidia does not make parts for smartphones, but their inclusion here is significant as Apple and Nvidia alone make up the top two biggest corporations in the world based on market cap. And they are both Fabless chip makers, meaning they design the chips but they do not fabricate them. Broadcom SoCs or system on a chip is a universal feature of every phone providing WI fi, GPS and Bluetooth. Yet Broadcom is also Fabless. The very secretive technologies of the baseband modems from Mediatek and Qualcomm, which are in every single phone, are surprisingly fabless.

All they do is design the chips, all they deal with is intellectual property and they get paid a license. ARM is in itself a fabulous chip maker since use of their processor technology requires a royalty payment to arm, which by the way is owned by the Japanese company Softbank. Chip Fabrication when it comes to the really high end chip fabrication, like the current upper end of chip making, that is called 4 nanometer technologies, these are really limited to only a few players and phones which are heavily miniaturized need the smallest parts possible and the lowest power draws in The US the main manufacturer of these high end semiconductors would be intel, which focuses on computers and not phones and they do not deal with the ARM architecture in the phones.

But even intel has outsourced its latest chips to TSMC or Taiwan Semiconductor Corporation. TMC is the major player that builds most of the world’s smartphone chips and most of the computer CPUs as well. Another huge player is Samsung. Samsung for example is known for being the fabricator of the Qualcomm Snapdragon motherboards used in Samsung phones and many other models. So if you hear the reference to Snapdragon you know it is Qualcomm intellectual property but manufactured in in chip factories in South Korea. Samsung is of course also known as a big player in memory chips and NVME storage, so they are one of the biggest sources of that as well as Taiwan.

Thus in the smartphone world, the phone motherboards which contain the CPUs of Apple, Qualcomm and Mediatek memory modules and NVME storage are mostly manufactured in Taiwan and and South Korea, not China. Recently TSMC opened a factory in Arizona I’m sure in response to tariffs. So now some iPhone motherboards can be made in the usa. I don’t know how quickly they can ramp up to produce the 100 million needed for the US market annually. Samsung of course makes its own custom Android phones and it is capable of producing much of the high end chips in house. However, the actual assembly was in the past in China.

This has changed this year 2025. From what I hear Samsung phones are now assembled in Vietnam, India and Brazil. Other Phone technologies the complications do not end here. Nowadays phones are being sold as super portable cameras and that means you need CMOS technologies to enable the camera capabilities. So just focusing on this as an example. Phone cameras are supplied by several companies like Sony, Toshiba and Sharp and by US owned On Semiconductor and the Chinese owned Omnivision. I would venture a guess here that Sony would be the premium phone camera choice as they are the current leaders in digital cameras.

Batteries are likely sourced from China. This had been a China specialty for a while now. Non intellectual property parts the vast majority of other parts on a phone are not tied to intellectual property secrets and are likely sourced locally in China from the thousands of suppliers who make the other parts. For example, think of the hundred billion screws needed for new phones or the billion touch screens or the multi million custom cases or the USB C ports or the antennas. Again all in billions. Think of the touch screen SIM card slots, South Dakota card slots circuit boards, buttons, gorilla glass bags, waterproof glue, and so on.

There are a lot of tiny parts and they have to be made in billions a year. And these parts are very specialized and often customized to particular phone models. So Chinese companies have become specialists in custom manufacturing of the form factor of a phone. So while the motherboards, cameras and screen size may be predetermined, the rest of the design of the form factor is something often done by local artisans in Shenzhen. Global Product Inasmuch as we assume that China is the center of the universe when it comes to phones, the reality of it is much more complex and thus this impacts the chances of moving production elsewhere.

The reality is that a phone is currently a global product and it impacts all the countries I mentioned. For example, I heard that Qualcomm makes $20 in royalty for every phone sold with their technology. So while companies like Qualcomm and Broadcom do not actually build anything, their intellectual property costs are baked into the input pricing and may be part of the wholesale price of phones as as they are subjected to tariffs. And I already mentioned ARM, which I presume makes $2 from every phone motherboard ever built, and that is likely baked into the price of the motherboard.

Who pays the tariff now, tariffs are definitely misunderstood as you may assume that if an iPhone costs you $800 then your final price post tariff becomes 1,960 based on the 145. But that’s not the case and lots of things actually happen in international trade. First, the tariff is based on the wholesale price. So let’s say Apple actually pays $200 per phone wholesale. Then the tariff at 145% would be $290 or 145% of the wholesale price. So the final cost would theoretically be $490. To maintain the same margins, the $800 phone would have to be priced at around $1,090, meaning the 290 is added back in at retail.

As we know now, the actual tariffs on phones will likely be 20% with the current exemption on smartphones and computers. So that would theoretically result in $40 tariff on a cost of $200, which would raise the cost of an $800 iPhone to $840. This is not good, but it is not a deal killer. Understand that the tariff is paid by the importer. If for example you purchase something direct from AliExpress, then I presume you would have to pay that 145% directly since you would be the importer. But since you’re buying phones from Apple or Google or Samsung usa, who operates as the importer or maybe even resellers like Best Buy or Target.

They will in fact be the ones to pay the tariff, which is based on their wholesale price. Next, depending on how the deal is negotiated, prices could be based on the current exchange rate between two currencies, in this case the Chinese Yuan and the US dollar. Since the Trump election, the yuan has gone down relative to the dollar. This then reduces the effects of tariffs even more. In the case of China, lowering value of their currency means their exports are cheaper and their imports become more expensive. The effect of this is to reduce the effect of the tariff.

Historically, economists see that a 20% tariff results in only a 10% rise in wholesale costs, assuming currencies are free to adj and this may just have a 5% effect in retail prices. Now I will tell you that as a manufacturer and importer, we negotiated prices in US dollars before all this happened. So in this case, the factory making our phones makes more of a profit short term with the currency price change. But next time they will not be so lucky. 145% is unsustainable, while 20% tariffs can be handled and with currency adjustments will end up to be less than that at wholesale.

This is not the same as talking about draconian 145% tariffs. That pretty much equates to a 45 increase in prices at retail. And even if currencies adjust to compensate, a 35% increase in price will cause consumers to rethink their choices. So the end result of the current 145% tariff on China, which of course could be more or less at the time this video comes out, is that the instability in pricing will make companies move products out in the short term. The quick solution is called a re export and I hear that Chinese shipping companies are quickly dropping products in Vietnam where they then take on a Made in Vietnam label and move to the USA with a 10% tariff expectation.

We ourselves plan on shifting the final assembly of our phones to the EU to avail ourselves of the 10% EU tariff, but we will likely skip that. Now with the 20% expected China tariff on smartphones at a tariff of 145% for other goods, I would expect this to translate to a total end to US China trade. For the short run, this will be a giant blow to China for sure. Can production move to the usa? Can phone production move to the us? Let’s talk about the pieces here. The biggest kick here are the very specific technologies and equipment to do advanced chips like 4 nanometer chips which are primarily only done in Taiwan and South Korea by TSMC and Samsung respectively.

So these have to be imported. Currently they are subject to tariffs, so input costs will increase. Which is interesting since I already mentioned that part of these input costs are royalties to US companies. Next we have the other technologies like phone cameras which largely come from Japan. So even if moved to the us, Many of these inputs have to be imported just like China imports them. So now there will be tariffs on the based on tariffs to South Korea, Taiwan and Japan. Then all the specialty parts like phone batteries, phone screens, phone cases, specialty screws, glue circuit board, etc.

That are now supplied by thousands of Chinese companies will now be subject to a 145% tariff. I’m sure a re export game will begin for a lot of that and you will have to buy from Elsewhere instead of AliExpress, maybe some future Brazilian version of Temu. Because these are specialized parts and are built with so much volume, remember billions, so much capital investment is required and these are currently provided by independent small companies in China. When a phone factory negotiates to manufacture a phone with someone like our company, they then have to cost in their parts from suppliers that are available to them.

Some they have to import, like the more high technology parts. It would take years for US companies to take the load of manufacturing all these and it is expected that these would cost more than if assembled in China. My guess is for the short term that companies like Apple will just play games to import the same small parts from China that skirt some of the tariffs. But I don’t know how this will be done without increasing costs. There will be some discounts too since some of the input costs are driven by imports based on royalties to the likes of Broadcom, Qualcomm and arm.

They could probably negotiate those to be a US to US transaction to skip the effects of tariff. The end goal I realized that having one country handle all of a particular product, particularly one that every adult uses, is not a sustainable strategy. So I don’t necessarily fight the need to end the globalist strategy in manufacturing. We already experience the effect of supply chain issues. When your supply chain is limited to a single country, an increased input cost that minimize the disruption of the supply chain is likely a fair trade in the long run. And as I said earlier, the parties that caused this are these big giant corporations themselves like Apple and Samsung that created China’s tech industry.

They caused this. But in the short term these are very disruptive changes. Politics aside, they have real impact in business decisions and unfortunately there is no choice but for you, the consumer to see some of this in your product prices. Some of you will accuse a small company like ours of being untrustworthy because we had our phones built in China. You will say this even when you already know that 99% of all phones like the ones you are using now were built in China. But we don’t control where technologies exist, we can only piggyback on the big players.

For example, our phones are being built in the same factory that builds Amazon Kindles. We can move parts of manufacturing elsewhere. Being a smaller company, we can likely move assembly to Europe where we have resources. So in the long run we can likely overcome this given some stability and time. Will you continue to buy iPhones, Samsung and Pixels in the future? Aside from increased privacy invasion? And they will be more expensive, maybe that’s good so you will use them less. I mentioned earlier that we ourselves are building our own phone, the Brax 3, which is ready to ship.

Assuming no short term surprises on the terrafront, we should begin shipping in May. If you want to take advantage of the current early bird pricing of $299 per phone, please visit the crowdfunding site Indiegogo.com this price will likely go up in the future because of the tariffs. The link will be in the description the Brax 3 phone is a community project involving other companies. The OS is being made by Eodeos currently and Ubuntu Touch later on. These are de googled oss so they are free from the privacy invading features of standard big tech phones. We have other products you can check out on BraxMe like our Brax Virtual Phone, BraxMail and Byte VPN.

Thank you for watching and see you next time.
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See more of Rob Braxman Tech on their Public Channel and the MPN Rob Braxman Tech channel.