Designed in US, Made in China: Why Apple is Stuck

Apple, the world’s most valuable company, has long prided itself on its sleek products designed in California. Yet, despite the iconic label proclaiming their American origins, the reality is that the vast majority of Apple devices – especially iPhones – are built thousands of miles away in China. This international supply chain, once heralded as a competitive advantage, now faces growing pressure as U.S.-China trade tensions escalate, forcing Apple to reconsider its manufacturing strategies.

Each year, Apple sells over 220 million iPhones, and approximately 90% of those are produced in China. From the high-quality screens to the intricate battery packs, China plays a pivotal role in the assembly of Apple’s flagship devices. However, recent tariffs imposed by former U.S. President Donald Trump on Chinese imports have cast a long shadow over Apple’s reliance on Chinese manufacturing. While smartphones, computers, and other electronics were exempted from the steep tariffs for a time, the relief was brief, as Trump hinted at additional taxes targeting the electronics supply chain.

Apple’s global supply chain, once seen as its strength, now faces its most significant test, with the ongoing U.S.-China tensions threatening to upend the company’s operational model. As tariffs climb, the question remains: which country is more dependent on the other – China or the U.S.?

From Lifeline to Vulnerability

Apple’s relationship with China dates back to the 1990s when the company began selling computers through third-party suppliers. But it wasn’t until the late 1990s, as Apple teetered on the brink of bankruptcy, that China offered a critical lifeline. The country’s economy was opening up to foreign investment, and Apple seized the opportunity, forming a partnership with Taiwanese manufacturer Foxconn to produce iPods, iMacs, and later, iPhones. By the time Apple officially entered China in 2001, the country was quickly becoming the world’s factory floor.

Apple’s bet on China proved to be lucrative. The company played a key role in nurturing local suppliers, turning relatively unknown Chinese companies into manufacturing giants. For instance, Beijing Jingdiao, which initially made acrylic cutters, transformed into a leading manufacturer of high-precision equipment used in mobile phone production, a testament to Apple’s influence.

The company’s success in China reached new heights with the opening of its first store in Beijing in 2008. Over the years, Apple’s presence grew rapidly, and China became home to Foxconn’s Zhengzhou plant – dubbed “iPhone City” – which remains one of the largest iPhone manufacturing sites in the world.

But as Apple thrived in China, the U.S. and China’s trade relationship became increasingly strained, especially under Trump’s administration. The introduction of heavy tariffs on Chinese imports sparked fears that Apple’s reliance on Chinese manufacturing could become a liability.

The Shifting Landscape of U.S.-China Tariffs

Under Trump, Apple managed to secure tariff exemptions, but these temporary reprieves have done little to mitigate the uncertainty caused by ongoing trade disputes. The Trump administration has made it clear that it views Apple’s continued reliance on Chinese manufacturing as problematic, with Commerce Secretary Howard Lutnick suggesting that the production of iPhones should return to the U.S.

Yet, experts argue that such a shift would be nearly impossible. Eli Friedman, a former advisor to Apple, calls the idea of relocating production to the U.S. “pure fantasy.” While Apple has explored diversifying its supply chain, particularly with new assembly hubs in Vietnam and India, the company’s core manufacturing base remains firmly entrenched in China. Despite efforts to mitigate risks, the transition away from China has been slow, with most production still taking place in the country.

This slow move towards diversification was prompted by challenges like the pandemic’s impact on manufacturing in China. Still, with China continuing to dominate the production of critical components like rare earth elements and advanced chips, Apple finds itself caught in the crossfire of geopolitical tensions.

A Delicate Balancing Act

China’s role in Apple’s success cannot be overstated. The country has not only provided cost-effective manufacturing but has also created millions of jobs and bolstered China’s status as a global manufacturing powerhouse. For the Chinese economy, Apple’s assembly lines are a key source of employment and technological advancement, cementing the nation’s position as a central player in the global supply chain.

But China is no longer just Apple’s manufacturing partner—it’s also its competitor. Companies like Huawei, Xiaomi, and Oppo have leveraged the same supply chain Apple cultivated, and last year, Apple lost its crown as China’s top smartphone seller to Huawei and Vivo. The Chinese government is increasingly investing in domestic tech manufacturing, positioning local brands to challenge Apple’s dominance. Moreover, China’s tightening grip on technology—such as limiting Bluetooth and Airdrop functionality in iPhones to comply with government censorship—has further complicated Apple’s operations in the region.

With U.S. tariffs continuing to threaten its profit margins, Apple faces tough decisions ahead. While the company has committed to a massive $500 billion investment in the U.S., it remains uncertain whether this will be enough to appease the Trump administration, especially as tensions with China continue to rise. The possibility of more tariffs looms large, which could further strain Apple’s already delicate balance between manufacturing in China and its obligations to the U.S. market.

A Path Forward

Despite the challenges, Apple’s strategic importance in the global supply chain remains undeniable. Jigar Dixit, a supply chain consultant, notes that while tariffs may pressure Apple operationally and politically, they won’t cripple the company’s ability to continue its business. The real concern is the mounting pressure on Apple’s ability to adapt to a rapidly changing geopolitical environment.

For now, Apple must navigate an increasingly complex web of competition, tariffs, and regulatory scrutiny from both the U.S. and China. As the company looks to the future, it will need to balance its deep ties to China with the realities of shifting international relations, all while trying to maintain its status as a global leader in technology innovation.

As the world’s two largest economies continue to clash, Apple’s story serves as a cautionary tale of how interconnected global markets can become – and how quickly those connections can turn from an asset to a liability.