A few years before Donald J. Trump entered politics, Apple and its partners built large factories all over China to assemble the iPhone. Trump first campaigned for the president by pledging his supporters to force Apple to make those products in the United States.
Almost ten years later, it had little change. Instead of bringing manufacturing into the home, Apple moved production from China to India, Vietnam and Thailand. Very little is made in the US, and an estimated 80% of iPhones are still made in China.
Despite years of pressure, Apple's business remains dependent on China, so the tech giant cannot work without it. Moved by the Trump administration, changing the risks of Apple's behavior that will damage the world's most valuable public transaction companies. And serious efforts to move Apple's production to the US would, if that were possible, make a titanic effort by both the company and the federal government.
Four days after President Trump announced taxes on China's 145% exports last month, Apple lost its $770 billion market capitalization. He recovered some of these losses after Trump gave Chinese appliance manufacturers a temporary reprieve.
On Thursday, Wall Street analysts hope to report Apple's 4% increase in the most recent quarter. This is because people were in a hurry to buy an iPhone before the tariffs began. This report provides Wall Street analysts with the opportunity to grill Apple CEO Tim Cook about future tariffs, price increases, and future risks in China and the United States.
An Apple spokesman refused to make company executives available in this article. The company said this year it will invest $500 billion in the US over the next four years and will begin manufacturing artificial intelligence servers in Houston in 2026.
“The scrutiny was justified because they are most at risk for the complete collapse of the US and China,” said David Yoffie, a professor at Harvard Business School who wrote a case study on Apple.
Gene Munster, managing partner at Deepwater Asset Management, which invests in emerging technology companies, estimates that a complete breakdown between the US and China will reduce Apple's value by more than half. Even if about a third of sales moves some production to other countries, about a third of that sales are tied to products made in China, leading to a $3.2 trillion company to a $1.6 trillion company. Also, if they lose sales to Chinese customers, as did rival Samsung after the conflict between South Korea and China, the value could drop to $1.2 trillion. Beijing has already discouraged the purchase of iPhones by government officials.
A significant drop in Apple's value will ripple through the stock market. The company accounts for about 6% of the S&P 500 index. This means that for every dollar invested in the fund, about six cents will be sent to Apple stocks. Investors, and most 401(k) owners, will see that the piles will be cut in half.
The roots of Chinese apples run deep. Decades ago, the company worked with Beijing to establish manufacturing in China without establishing a joint venture with Chinese companies that many US companies need. He then completed the technology to assemble devices cheaply in China, selling the product to the country's growing middle class. This combination earned over 80% of global smartphone profits, generating $67 billion in annual sales in China.
Over time, the company's ties with China have been strengthened. Today, not only does most iPhones in China make, but Chinese suppliers also assemble parts of devices made in India and manufacture components and air pods in Vietnam.
Apple's reliance on China has made the supply chain more like the Trump administration's Rorschach test. Apple has more power than any other e-company and achieves its management goals. It manufactures more smartphones than anyone else, spends more money on components than its rivals, and incredibly upsets the place where the supplier operates.
The Trump administration hopes Apple will begin the process. In an April TV interview, Commerce Chief of 2018 Howard Lutnick said, “A military of millions of people are screwing small screws to make iPhones — something like that will come to America.”
However, pressure on Apple to leave China can backfire. New tariffs could force Apple to raise the price of their iPhones or reduce the profits of their smartphones. Samsung phones made in Vietnam and not subject to Chinese tariffs could be cheaper in comparison. Apple could potentially reduce competition from home. It's a red line that Trump rarely wants to go through.
Apple has resisted manufacturing iPhones and other devices in the US as its operating team decided it was impossible, said two people familiar with the analysis that spoke about the anonymous status. Ten years ago, finding reliable workers procuring screws and assembling Mac computers in Texas was a bad experience.
In China, Apple's suppliers can attract 200,000 people. They work in factories that are overseen by thousands of engineers with years of manufacturing experience. Most live in dormitories near iPhone factories, with displays and other components moving down the assembly line longer than in the soccer field.
Wayne Lam, an analyst at market research firm TechInsights, says many employees and experienced engineers have discovered that it is impossible in most American cities. He said Apple needs to develop more automated processes using robots to compensate for the smaller population in the US.
Lamb estimates that if Apple sets up business in the US, it will need to charge $2,000 (currently starting at around $1,000) on the iPhone to maintain its current profits. Prices could drop to $1,500 in the future as the company reduced employee training costs and the costs of creating components.
“In the short term, it's not economically viable,” Lamb said. He added that relocating the production of devices from nearly 20 years ago would also make much of a sense, and could be confused by new gadgets caught up in consumers.
Apple has shown an willingness to move the supply chain when there is incentive. In 2017, we began the process of creating an iPhone in India. This is because Apple had high taxes on imports that would raise prices to the point where they couldn't claim slices of the world's fastest growing smartphone market.
Today, Apple sells around 20% of its IPHONE worldwide in India. It also creates several components, including metal frames. However, they rely on Chinese companies to assemble displays and other complex parts.
Matthew Moore, who spent nine years as Apple's manufacturing design manager, said India has another advantage in America: “engineer, engineer everywhere.”
Moore believes that in order to seduce Apple and electronics companies into the United States, the Trump administration needs to invest in education in science, technology, engineering and mathematics degrees. He also believes that the country should encourage loans to new manufacturing facilities, as well as housing with Fannie Mae and Freddie Mac.
Last month, Apple bought a temporary break. Cook, who personally donated $1 million to Trump's inauguration, lobbyed the Trump administration for the exemption he gave to iPhones and other electronic devices from a 145% tax on Chinese exports. But that is temporary. The administration says it plans to issue more targeted tariffs on high-tech products.
Without government investment, Apple and small manufacturers will continue to make things in China as they have excess equipment and engineers, Moore said.
“I don't think the ship sailed, but it's ridiculous to think they're going to make an iPhone here,” Moore said. “It'll take 10 years.”
