Apple plans to order more than 19 billion chips from U.S. suppliers this year, part of a major shakeup of its global supply chain that includes reducing its reliance on China and expanding India’s role in iPhone production.
Apple CEO Tim Cook said the company is betting big on TSMC, which plans to build six chip factories in Arizona. He confirmed that the company plans to make most of its U.S.-bound iPhones in India and scale back production in China as the White House threatens to impose punitive tariffs on its Asian rival. India was mentioned almost as often as China on Apple’s earnings call, as it becomes a major part of its global strategy.
Mr. Cook, however, did not answer a question about the possible impact of tariffs on consumer electronics imports on Apple’s business. According to him, “it is very difficult to predict what will happen after June.” The company assumes that current tariff rates and policies will remain unchanged and that the global macroeconomic outlook will not worsen, said Kevan Parekh, Apple’s chief financial officer. Apple’s quarterly report did not allay investors’ fears about the company’s main problems: tariff-related costs and slowing economic growth in China, where sales were lower than expected, and Apple’s shares fell 4.2%.
Apple’s year-over-year sales growth in Greater China. Image source: bloomberg.com
Apple has accelerated its expansion in India, whose economy is growing in line with the global market. In the long term, the country is likely to be a more favorable political partner for the United States than China, where Apple sales continue to decline. Already, 20% of iPhones are made in India, and by the end of next year, the company plans to ship most of its smartphones to the United States. US President Donald Trump wants Apple to start manufacturing in the United States, but that is unlikely to be possible on a large scale in the foreseeable future. For now, Cook has promised to increase purchases of chips and other components from American suppliers.
This year, the company will receive tens of millions of advanced processors from TSMC’s new plant in Arizona, which has already begun producing chips for budget iPads and Apple Watches. Apple and TSMC have announced hundreds of billions of dollars in investments in American enterprises to support the White House’s desire to deploy advanced manufacturing in the country. The company, its CEO recalled, also buys glass for iPhone screens in the US, likely referring to Corning products. Over the next four years, the company will invest $500 billion in the US, including in the production of servers for artificial intelligence systems in Texas.