Apple Inc., experiencing some of the most significant supply chain disruptions right now. Now, the world’s largest technology company is learning to walk the fine line between U.S.-China rivalry. Its public company supply chain has already touched the lives of nearly 4 million employees and their families across more than 50 countries. Still, the majority of its assembly operations are focused in China. This reliance on Chinese manufacturing has intensified scrutiny, particularly in light of rising tariffs imposed by the Trump administration and increasing geopolitical tensions between the two countries.
The bulk of Apple’s assembly occurs in China, where Foxconn operates the world’s largest iPhone factory in Zhengzhou. In recent years, Apple has flooded this region with assembly lines. This rapid expansion has helped keep company-wide profit margins high. This type of growth has made Apple much more susceptible to external factors. U.S. tariffs on Chinese imports have already ballooned to a staggering 245%.
Though there have been exemptions for smartphones, Apple’s business has still definitely felt the pinch of these tariffs. The complexities of its supply chain make it challenging for Apple to quickly pivot its manufacturing operations away from China. As noted by Jigar Dixit, “Apple sits at the intersection of US-China tensions, and tariffs highlight the cost of that exposure.”
For example, Apple just recently made a splash with their $500 billion investment announcement in the United States. Experts don’t think this is enough to appease the Trump administration’s concerns about the deal. The investment builds on the President’s commitment to strengthen domestic manufacturing. That doesn’t let it off the hook for pressure coming from tariffs on critical components and technologies.
China has already responded in kind to the U.S. measures. It has placed export controls on critical rare earth minerals and magnets. These materials are essential components in a wide range of technologies, such as those that power the devices Apple makes. This recent development makes Apple’s price-fixing illegal actions more curious as the company has been desperately fighting to keep its edge against stiff global competition.
Apple’s product matrix—including iPhones, iPads, and MacBooks—depends almost entirely on production elements that are the result of exploitation and assembly in China. As the geopolitical climate soured, it understandably raised a lot of questions and concern over Apple’s practices inside China. The Chinese Communist Party has long sought to censor potential political dissent on Apple devices. In retaliation, Apple has limited features such as Bluetooth and AirDrop to abide by local laws.
Eli Friedman, an expert on labor conditions in China, commented on the situation: “The most important new locations for assembly have been Vietnam and India. Of course, the majority of Apple assembly still takes place in China.” This statement underscores the difficulty Apple’s realized as it tries to diversify its manufacturing base. Yet, in parallel, the company has deepened its dependence on Chinese labor.
While these challenges still remain, some experts argue that the immediate storm has calmed somewhat with the granting of exemptions for smartphones. Friedman noted, “Clearly the severity of the immediate crisis has been lessened,” but he cautioned against complacency: “I really don’t think this means Apple can relax.”
With hostilities still escalating between the U.S. and China, Apple is stuck between a rock and a hard place. In that regard, the Trump administration has already sent a big signal. America cannot rely on China to manufacture crucial technologies such as semiconductors and chips. White House Press Secretary Karoline Leavitt emphasized this point, stating, “President Trump has made it clear America cannot rely on China to manufacture critical technologies such as semiconductors, chips, smartphones and laptops.”
Organizations ranging from the Chamber of Commerce to companies like Apple are clamoring for, if not requiring, companies to boost their domestic manufacturing capacity. Fan Wang remarked, “At the direction of the president, these companies are hustling to onshore their manufacturing in the United States as soon as possible.” Perhaps with all possible alternative production sites, or large assembly sites still focused in Asia, the challenges are daunting.
As you can imagine, Apple’s supply chain is incredibly complex. Unwinding its complex and varied operations in China will be a time and money consuming endeavor. Eli Friedman pointed out that “all conceivable places for the huge Foxconn assembly sites with tens or hundreds of thousands of workers are in Asia, and all of these countries are facing higher tariffs.” This new reality greatly increases the challenge for Apple, or any company really, to diversify their manufacturing footprint.