Apple to Shift Chip Sourcing to U.S. in $19 Billion Move

Bloomberg reports that Apple will purchase more than 19 billion chips in the US from this year to reduce its dependency on China and to shift manufacturing to the United States and India.

Tim Cook, Apple’s Chief Executive Officer, said during the much-anticipated earnings call on Thursday that Apple will rely on Taiwan Semiconductor Manufacturing Company more as it builds a half dozen factories in Arizona. Apple already uses TSMC processors in its lower-end iPads and Apple Watches.

Cook stated that Apple would begin to manufacture its devices in America at some point.

Cook said to analysts during the conference call, “We have a complicated supply chain. There’s always a risk in the supply chains. We learned a long time ago that having everything at one location was too risky. So, we’ve opened up other sources of supply over time.”

Apple reported a first-quarter profit that was above expectations on Thursday, but warned US tariffs would cost the company money and disrupt its supply chain. Apple’s (AAPL) shares were down by 3% on Friday morning.

Cook replied that it was “very difficult to predict” how tariffs would affect Apple’s business beyond June.

Cook stated that Apple estimates US tariffs will cost $900,000,000 in the current quarter, even though the impact was “limited” when they were first introduced this year.

Cook stated that he expects “a majority” of iPhones to be sold in the US, with India as their country. He also added that Apple products are exempt from Trump’s harshest reciprocal tariffs.

Cook stated, “We are unable to estimate the exact impact of tariffs as we do not know what future actions may be taken before the end of this quarter.”

We estimate that the cost increase will be $900 million if the global tariff rates and policies do not change in the next quarter.

In a tit-for-tat trade, the US imposed heavy tariffs on China. Beijing then retaliated by imposing its import restrictions on US goods.

The US has temporarily lifted tariffs on high-end technology goods, such as computers, smartphones, and semiconductors.

Rob Enderle, an independent tech analyst, says that although Trump’s tariffs are currently exempting finished smartphones, they do not include all the components used to make Apple products.

Enderle explains that the more components that cross borders, the higher the cost of the device.

He said that the tariff situation was an expensive mess.

Canalys Research Manager Le Xuan Chiew stated that Apple had built up its inventory before the tariffs went into effect.

Apple will likely shift production from the US to India to minimize future risks, he said.

According to Canalys, while iPhones made in mainland China still make up the majority of US shipments, they are also the most popular – production in India increased towards the end of the third quarter.

Cook announced that Vietnam will be the source of almost all iPads, Macs, Apple Watches, and AirPods sold in the US.

Diversifying Manufacturing

He insisted that Apple will continue to manufacture the majority of its products for export outside of the US.

Cook, an analyst, said: “We learned a long time ago that having everything at one location was too risky. So, we’ve, over time, with certain parts in the supply chain, opened up new supply sources.”

You could imagine that type of thing happening in the future.

Apple’s recent quarter revenue of $95.4 billion was driven by iPhone Sales, and the company reported a profit of $24.8 billion for the quarter.

Angelo Zino of CFRA Research, an equity analyst, said that Apple’s growth was strong in the Americas and Japan. He noted that part of this could be due to increased orders made ahead of US tariffs.

“China revenue decreased 3%, but there was hope for growth, as subsidies were in place to stimulate demand in this region.”

Apple shares fell by more than 3 percent after the market.

Jacob Bourne, an Emarketer analyst, said: “The real story lies in Tim Cook’s plan to navigate through these unprecedented trade challenges.”

Apple’s plan of shifting manufacturing to India “raises urgent questions about execution timelines, capacity limitations, as well as potentially unavoidable cost increases that could shrink margins or be passed on to consumers.”