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Bank Of America: Apple Could Spearhead Domestic Production Push

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Bank Of America: Apple Could Spearhead Domestic Production Push

Assuming Sino-American relations continue to deteriorate, the need for American companies to control more of their supply chain could become increasingly important.

Is this the start of a GAMA — Get America Manufacturing Again — trend for companies like Apple Inc. (NASDAQ: AAPL)? Bank of America Merrill Lynch explored the theory.

The Analyst

Analyst Wamsi Mohan maintained a Neutral rating on Apple with an unchanged $220 price target.

Turning Away From China

Companies and governments are taking early steps in protecting and securing basic infrastructures by blocking out certain products and technologies from China, Mohan said in a Monday note.

Globalization has likely peaked, with the new trend being a Western/U.S.-centric supply chain and a rival Chinese/Eastern-centric supply chain, the analyst said.

The China-centric category appears at first glance to hold a cost advantage, but this isn't necessarily the case, he said.

American and Western governments can "level the playing field" with Chinese rivals through tax reform, changes in capital expenditure treatment, revised R&D tax credits, job and retraining tax credits, lower land acquisition expenses and higher tariffs, Mohan said.

Apple's Domestic Investments 

Apple is embracing the GAMA trend, including a $1-billion investment in Austin and plans for new facilities in Seattle, San Diego and Culver City. This comes in addition to recently announced expansion plans in Pittsburgh, New York and Boulder, Mohan said.

The iPhone maker is on track to create 20,000 new American jobs by 2023 in America, adding to its current workforce of 90,000.

Changes in government policy can have the result of companies like Apple bringing production to the U.S., the analyst said. This is especially true for companies that require a close geographic participation from all members of their supply chain, he said.

Price Action

Apple shares were down at $163.98 Monday afternoon.

Related Links:

What China's iPhone Ruling Means For Qualcomm And Apple

How The Sell-Side Sentiment On Apple Has Changed Since The Q4 Print

Photo courtesy of Apple.

Latest Ratings for AAPL

DateFirmActionFromTo
Apr 2021Morgan StanleyMaintainsOverweight
Mar 2021UBSUpgradesNeutralBuy
Mar 2021Evercore ISI GroupMaintainsOutperform

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