Apple May Absorb Tariff to Avoid Costly U.S. iPhone Production

Respected Apple analyst Ming-Chi Kuo, known for his reliable insights into the company’s supply chain, recently posted on X (formerly Twitter) in response to renewed demands from former President Donald Trump for Apple to move iPhone production to the U.S. Trump threatened a 25% tariff on iPhones not manufactured domestically.

Apple Likely to Pay 25% Tariff Instead of Shifting iPhone Production from Asia to the United States

Kuo said it would be cheaper for Apple to eat the cost of a 25% tariff on the iPhone than to move its complicated production out of China and into the United States. The current production ecosystem that is based largely in Asia, specifically China and now increasingly India, is tremendous and highly refined.

That includes major partners, like Foxconn and Pegatron, the huge facilities and established logistic models of which are critical to Apple’s speed and volume. It would be hugely expensive and operationally fraught for the U.S. to reproduce the Korean system.

While the United States is still one of Apple’s top markets, its involvement in the physical production of iPhones is limited. Some pieces, like the glass from Corning, are made in the U.S., but the final assembly takes place nearly entirely abroad. To develop domestic assembly lines would require an investment of billions of dollars in infrastructure, skilled laborers, and supply chains, with no guarantee of competing on cost and speed the way the Chinese currently can.

Further into the horizon, Apple is said to be looking to move the bulk of its U.S. iPhone supply to Indian plants by 2026. The company plans to manufacture more than 60 million iPhones in India this year and next, according to Bloomberg. Foxconn is investing $1.5 billion to expand its manufacturing footprint there.

In a post on Truth Social, Trump doubled down on his demand that Apple manufacture iPhones in the United States and threatened tariffs if the company continued to produce devices overseas. This tariff would be gigantic and bring the retail price of iPhones at least 20% higher.

According to Wedbush Securities, moving iPhone production stateside could raise the per-unit cost to around $3,500. Given the estimated 120 million U.S. iPhone users and over 60 million annual shipments, even a 25% tariff would be less costly than replicating Apple’s Asia-based supply chain in America. Following Trump’s comments, Apple’s stock dropped 3% in pre-market trading.

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