Donald Trump’s recent threats to impose tariffs of up to 100% on technology products imported from China have put Apple in a complex situation. The company, which assembles a large portion of its products in China, could face a drastic increase in costs, impacting the price of key devices like the iPhone 17, which is already shaping up to be the most expensive iPhone in Apple’s history.
In this Befree blog, we will analyze how these measures could affect Apple, the company’s track record in similar situations, the role of TSMC and its factories in Arizona, the incentives granted by the Biden administration, and the challenges the company faces in this context.
How Trump’s Tariffs Affect Apple
Trump’s tariff policies would impact not only the iPhone 17 but also other Apple products, such as the Apple Watch. Additionally, silicon chips imported from China would also be subject to a 100% tariff, directly affecting the production of Apple’s advanced processors.
For example, the A20 chip, expected to debut in the iPhone 18, would see a significant price increase. Currently, Apple’s processors cost approximately $50, but with the new tariffs, the price could rise to $85, increasing manufacturing costs and, consequently, the final retail price of the device.
Apple and Tariff Measures: A Historical Perspective
This is not the first time Apple has faced challenges due to U.S. government protectionist policies. During the Trump administration in 2019, Apple managed to secure tariff exemptions for several of its products by arguing that tariffs would negatively impact the national economy. The company has used similar strategies in the past, including direct negotiations and supply chain adjustments, to minimize the impact of such policies.
TSMC and Its Arizona Factories: A Key Factor
One of the critical factors in this crisis is Apple’s relationship with TSMC, its main chip supplier. TSMC has invested over $65 billion in constructing three factories in Arizona to strengthen domestic semiconductor production and reduce reliance on Asia.
The Biden administration has provided up to $6.6 billion in direct funding to TSMC under the CHIPS Act incentive program, with the expectation of generating more than 6,000 direct jobs and 20,000 indirect jobs. However, despite this investment, TSMC faces challenges such as strict local regulations, high costs, and labor shortages, complicating the construction and operation of these factories.
Furthermore, TSMC’s Arizona factories are focused on producing older-generation chips. They currently manufacture Apple’s A16 Bionic chip, introduced in the iPhone 14 Pro and now used in the iPhone 15 and 15 Plus. Due to U.S. regulatory standards, TSMC cannot quickly implement its most advanced processes in these facilities, limiting its ability to manufacture Apple’s most innovative chips domestically.
How Apple Is Responding to the New Tariffs
In response to this situation, Apple has adopted various strategies to mitigate the impact of the new tariffs:
- Production Diversification: Apple has expanded manufacturing to other regions, such as India and Vietnam, to reduce dependence on China and lessen the impact of tariffs.
- Investments in the U.S.: The company has invested in domestic production and collaborated with TSMC to establish factories in Arizona.
- Negotiations and Government Relations: Tim Cook has maintained a close relationship with the Trump administration in the past, which allowed Apple to secure tariff exemptions.
- Innovation and Efficiency: Apple continues to optimize its supply chain and explore alternatives to absorb costs without fully passing them on to consumers.
The proposed new tariff measures by Trump present a significant challenge for Apple, especially at a crucial time for the production of the iPhone 17 and future devices. However, Apple has demonstrated its ability to adapt to restrictive trade policies and continues to explore alternatives to minimize the impact. A combination of production strategies, U.S. investments, and political negotiations will be key to determining Apple’s future in this new tariff landscape.
