US Government Promotes Tariff Policy to Encourage iPhone Manufacturing in the US, but Financial Times Reports that Due to the iPhone’s Complex Supply Chain Built Over Decades in Asia, Manufacturing in the US is an Unrealistic Dream in the Short Term
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The iPhone, the world’s most popular smartphone brand, and how to bring this consumer electronics product back to domestic manufacturing in the United States, has been one of the major policy directions promoted by the Trump administration in recent years. On the 1st of April, US Secretary of Commerce, Howard Lutnick, shouted, “Do you remember the millions of people who turned small screws to assemble iPhones? That scene will come to America.”
According to the Financial Times, experts believe that achieving the scene in Trump’s dream may be as difficult as reaching the sky. The final outcome could be similar to the Motorola plant in the US in 2013, which closed within a year due to high costs and poor sales. Experts even estimate that a fully assembled iPhone in the US could cost as much as $3,500 at its lowest-end price.
How to relocate Apple’s extremely complex and sophisticated global supply chain system that has been built around China for decades? In this regard, Andy Tsay, a professor at Santa Clara University’s Leavey School of Business, pointed out that companies are trapped by the Chinese supply chain. Even though in recent years some production lines have gradually moved to India:
“Initially, companies went to China because it was cheap, but they stayed there, whether it was good or bad. Now, they are trapped by China. The production lines in China are fast, flexible, and at world-class levels, so now (choosing China) is not just because of cheap labor costs.”
Breaking Down the iPhone: A Look into the Complex Global Supply Chain
Since the launch of the iPhone in 2007, around 2.8 billion units have been sold, bringing Apple over $1 trillion in revenue. Its exquisite design and the trade-offs in cost and craftsmanship have always amazed the industry. Every iPhone is like a precise puzzle, made up of approximately 2,700 different components, primarily supplied by 187 suppliers from 28 countries.
However, the proportion of components made in the US is less than 5%, mainly including the glass cover of the screen, laser sensors for Face ID, and chips including processors and 5G modems. The majority of other components and the final assembly are completed in China. The most expensive core components, such as advanced process chips, are produced in Taiwan, and other key components come from South Korea (memory) and Japan (capacitors).
The report also specifically mentions the production processes of three components, which demonstrate why moving manufacturing back to the US is almost impossible:
- Touchscreen Assembly: The glass cover is produced by the US company Corning at its factory in Kentucky, but the OLED display panel (which helps save power) and the multi-touch layer for touch interaction are mainly produced by South Korea’s Samsung and other companies. These parts are ultimately assembled in factories in China and then shipped to Foxconn and other assembly plants for final assembly.
- Metal Frame: The frame of the iPhone is mostly made from a single piece of aluminum or titanium alloy (for Pro models) that is cut and shaped by high-precision CNC machines. This process requires “huge” CNC machine equipment, which Apple’s Chinese suppliers spent years developing. If Apple wanted to bring iPhone production back to the US, they wouldn’t even be able to purchase enough CNC machines to match the scale of the Chinese ecosystem. This is a highly specialized skill that is nearly impossible to replicate outside of China.
- Micro Screws: There are as many as 74 micro screws inside the iPhone, made from different materials and with different heads (cross, flat, three-point, star-shaped, etc.), some of which are as small as 1 millimeter. The real challenge is the assembly process for screwing them in. Apple places great emphasis on environmental protection and recyclability, so glue cannot be used to secure the screws. For assembly plant Foxconn, hiring cheap labor to perform the repetitive task of screwing is more cost-effective than investing in automated robotic solutions.
Assembly and Profit Key: Foxconn
A report by research institution TechInsights pointed out that Apple ships over 230 million iPhones every year, which means 438 units are produced every minute. Through large-scale production and cost compression via partner factories, Apple makes about $400 profit on each iPhone 16 Pro (256GB), with a net profit margin of about 36%. TechInsights estimates that the final assembly and testing cost for each unit is only $10, the battery costs about $4, and the display and touchscreen cost about $38.
The key to this profitability is integrated electronic manufacturing services (EMS) companies like Foxconn, based in Taiwan, which not only assembles most of the iPhones sold worldwide but also has assembly lines for electronic products from other brands. The critical point is that Foxconn has massive facilities and various registered patents for adjusting production and reducing costs, enabling it to continually optimize and lower costs during production to meet customer needs.
For example, Zhengzhou’s “iPhone City” produces around 50% of the world’s iPhones. Morgan Stanley’s Erik Woodring pointed out that the establishment of this facility (after subsidies and tax reductions) cost $1.5 billion, not including operational costs. At its peak, the facility employed 350,000 workers.
Building a Supply Chain Around Foxconn
Although Foxconn cannot produce all the components, the geographic proximity of suppliers and manufacturers is critical to Apple’s productivity. Foxconn and its smaller partners, such as Pegatron and Luxshare Precision, are only responsible for integrating components produced by hundreds of other companies. Components like camera lenses, coatings, and various printed circuit boards and substrates connecting the iPhone’s parts are all made in China and Southeast Asia.
Wamsi Mohan from Bank of America also believes that this tight-knit electronic ecosystem is the reason why shifting assembly to the US would lead to “inefficiencies”:
“If everything isn’t made nearby, things will become complicated.”
Additionally, the iPhone’s processors are supplied by Taiwan’s TSMC, the largest chip manufacturer in the world. Even after TSMC sets up a factory in Arizona, it may still take several years before it can supply chips to the US market.
Another challenge is the rare earth elements used in the battery. “Lanthanum,” which extends battery life and enhances screen color, and “Dysprosium,” which is used in color screens and vibration features, are crucial for chips and batteries. The vast majority of these materials are mined and processed in China.
The US Geological Survey’s report shows that 70% of the rare earth compounds and metals imported to the US depend on China. If production were to shift to the US, it would require years or even decades of investment and industry capacity ramp-up, including automation equipment, tools, infrastructure, and workforce training. Moreover, the US may lack enough skilled workers in these industries, and labor costs could be several times higher.
Apple’s “Decoupling” from China: India and Vietnam Instead of the US
In the context of the recent trade war, Apple’s Tim Cook has been working to build resilience in its supply chain by finding alternative sources and channels for key components. As the US-China trade war escalates, Apple has chosen “three rabbit holes” in India, Vietnam, and Brazil to hedge against tariffs.
It is understood that Apple plans to shift all iPhone assembly for the US market to India as early as next year. India not only offers government support and lower costs than China, but also has English-speaking software engineers and a large domestic consumer market. Last year, about 16% of iPhones produced worldwide were assembled in India, and this proportion will rise to 20% this year.
However, fully shifting the supply chain to India is not easy. Initially, Indian factories only assembled semi-finished kits sent from China. Although the Indian government has tried to encourage higher levels of local production by imposing import tariffs on components like circuit boards, the vast majority of components still need to be imported from China, South Korea, Taiwan, and other regions.
Political Interference from China
China has political sensitivities and geopolitical games related to the shift of job opportunities to Indian factories. Personnel transfers between multinational companies, such as Chinese engineers and technicians who install or maintain machines for manufacturers like Foxconn, sometimes face visa delays. This means that during the process of relocating component suppliers and professional equipment, Apple may encounter obstacles from China.
As a result, some analysts believe that Brazil, being closer to the US than India, could become a more favorable choice for Apple. Brazil has a larger domestic market than Vietnam and is convenient for shipping products to Latin America, Canada, Western Europe, and the US.
Despite the strong calls for “Made in America,” the iPhone’s complexity and the highly optimized global supply chain surrounding Asia make relocating large-scale production lines to the US very unrealistic in the short term. Apple’s dual dependence on China as a key supply source and an increasingly important consumer market makes decoupling even more complicated. These complex issues cannot be solved by tariffs alone.
If Trump persists in the “Made in America” direction, it is expected that the market will still face much negative uncertainty in the short term due to the policy shifts, with continuous impacts on the market’s supply side and trade-related issues.
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