Tim Cook faces a tough balancing act between Washington and Beijing to protect Apple’s supply chain in China.Justin Sullivan/Getty Images
For years, Tim Cook has overseen the development of Apple’s supply chain in China.
The risk of tariffs on China from Donald Trump requires a complex balancing act from Cook.
Jamie MacEwan, an analyst, estimates that “almost half of Apple’s revenue is exposed to China.”
Tim Cook faces an unenviable task this year: keeping a tough-on-China president onside while continuing to lean on the country for Apple’s complex supply chain.
The Silicon Valley giant has spent years building a vast supply chain network in China under the leadership of Cook, who was first tasked by Steve Jobs in 1997 with devising a cost-cutting outsourcing plan when Apple was on the brink of bankruptcy.
From Jiangsu in the east to Sichuan in the west, Foxconn, Luxshare, Pegatron, and others have played pivotal roles in helping Apple generate over $1.8 trillion in net sales this decade alone by serving as the manufacturing conveyor belt for everything from iPhones to Macs.
However, Apple’s ability to maintain its most important manufacturing network could now depend on how effectively Cook negotiates with President-elect Donald Trump — while appeasing rival powers in Beijing, in whose hands Apple’s supply chain largely sits.
Trump has signaled a return to the trade war that defined his first term by threatening to slap new tariffs on China. Such a move risks adding new costs to Apple’s supply chain and could push it further from the country it has depended on to turn out iPhones for decades.
“It’s extremely complicated because of the depth of the dependence on Chinese manufacturing competence,” Kevin O’Marah, a supply chain expert and cofounder of research firm Zero100, told Business Insider.
What lies ahead for Cook then is a delicate balancing act: reckoning with Trump’s political gameplan while protecting the supply chain empire he has staked Apple’s fortunes on.
Donald Trump could slap new `tariffs on China in his second term.Anna Moneymaker/Getty Images
Cook seems acutely aware of the dilemma, which is why he’s been busy courting both sides.
Over three trips to China this year, the Apple CEO has met with top leaders like Chinese Premier Li Qiang, visited local suppliers, and attended an industry conference in Beijing. He has done all this while singing Trump’s praises.
In November, Cook congratulated Trump on his election victory with a post on X that said, “we look forward to engaging” to ensure the US continues its technology leadership. He turned up at Trump’s Mar-a-Lago resort a month later, but only after visiting China weeks earlier.
Jamie MacEwan, senior analyst at Enders Analysis, told BI that Cook’s ability to continue getting what it wants out of China will “take a huge amount of public diplomacy from Apple leadership” as they “navigate increasingly choppy geopolitical waters.”
Pulling off this diplomatic feat won’t come easy. Apple has wrapped up its vast fortune in a sprawling supply chain in China that will prove difficult to untangle in the near term. While Apple generated $66.9 billion of its $391 billion in net sales from the Greater China region in its last fiscal year, MacEwan estimates that “almost half of Apple’s revenue is exposed to China through direct sales and the supply chain,” making it tough to leave China behind.
Apple has, of course, slowly been making efforts to diversify its supply chain. In the six months to September, Apple shipped almost $6 billion worth of iPhones made in India, according to Bloomberg, up a third from the same period last year.
Earlier this month, meanwhile, it emerged Apple would begin producing AirPods from a new factory in India for the first time, starting this year, and overseen by a Foxconn unit. The number of vendors in Vietnam supplying Apple has steadily increased, too.
China is a vital market for Apple.VCG/Getty Images
Though Apple has been taking these steps, experts believe that China remains vital to Apple’s operations for a key reason: it’s not yet possible to replicate the scale of its operations in the country elsewhere.
O’Marah said that much of Apple’s success in China has come down to the “depth of the engineering in the supply chain” established by Cook.
The company has established a deep relationship with suppliers that involves the development of “millions and millions of identical pieces of machinery,” O’Marah said, which comprise a “very deep and very complex bill of materials and componentry.”
Simply getting up and leaving if new tariffs hit, then, is not an option. “India is picking up quite a bit of opportunity, but it’ll take them a decade to get there,” O’Marah said. “They don’t have the same amount of manufacturing expertise, and to transfer that in takes a lot of time.”
Dipanjan Chatterjee, a principal analyst at Forrester, agrees. He told BI that although “there is no way yet to tell how the proposed tariffs on China will play out,” boosting India’s manufacturing volume in the face of tough new taxes on China won’t be straightforward.
“The devil is in the details,” he said. “For example, India will have to be able to scale up rapidly to accommodate that kind of additional volume — not an easy task.”
How Apple will proceed remains to be seen. According to a Reuters report, China’s commerce minister Wang Wentao told Cook that Apple is “welcome to continue deepening its presence in the Chinese market.”
Cook’s growing closeness with Trump over the years may offer him some confidence. In 2019, when Trump planned a 10% tariff on Chinese imports, Cook successfully negotiated exemptions with the president and ensured Apple’s supply chain would stay safe.
O’Marah also notes that tariffs are based on political rather than economic logic, so an almost 40% tariff on US imports from China next year — like the one predicted in a poll of economists conducted by Reuters — could “pop up and disappear overnight.”
That said, the situation remains immensely complex for Cook.
MacEwan notes that Trump’s future tariffs remain a “real wild card.” A bad-case scenario would “increase the impetus for Apple to reshore more manufacturing out of China, but there is a limit” to what can be done. There is a risk that Beijing could retaliate too, he said.
“This isn’t like Walmart sourcing more goods from India,” MacEwan said. “Each iPhone is the result of a complex and highly integrated and optimized supply chain.”
Corinne Calderon is a news writer at Ris News-Digital. She loves to write about politics, health, business, parenting, and finance. In her spare time, she likes to read, watch movies and television shows, and spend time with her family.
