Apple Faces $900M Tariff Hit as Production Shifts to India and Vietnam
▼ Summary
– Apple anticipates a $900 million increase in costs this quarter due to U.S. tariffs on Chinese imports, as revealed by CEO Tim Cook during the earnings call.
– The tariffs include a 20% IEEPA-related tariff and an additional 125% tariff on certain product categories, leading to a combined rate of at least 145%.
– To mitigate tariff impacts, Apple is shifting production from China to India and Vietnam, with most U.S.-sold iPhones expected to be made in India and other products in Vietnam.
– Apple aims to diversify its supply chain, planning to increase India’s contribution to global iPhone assembly from 10-15% to 25% by 2025, while Vietnam becomes a key manufacturing hub.
– Despite challenges, Apple reported strong financial results with a 5% revenue increase to $95.4 billion, but shares fell 2.8% due to tariff concerns, contributing to a significant market value loss.
Apple is bracing for a $900 million increase in costs this quarter due to U.S. tariffs on Chinese imports, CEO Tim Cook revealed during the company’s latest earnings call. To mitigate the impact, Apple is accelerating its shift in production from China to countries like India and Vietnam.
Tariffs Drive Up Costs
The $900 million estimate assumes no changes in current global tariff rates or the introduction of new tariffs. Cook emphasized that this figure is specific to the June quarter and cautioned against using it to predict future quarters, noting unique factors that benefit the current period.
The primary tariff burden stems from a 20% IEEPA-related tariff on Chinese imports to the U.S., along with an additional 125% tariff on certain product categories in China, such as AppleCare and accessories, resulting in a combined rate of at least 145%.
Diversifying the Supply Chain
In response to the tariffs, Apple is shifting its production strategy. For the June quarter, the majority of iPhones sold in the U.S. are expected to originate from India, while most iPads, Macs, Apple Watches, and AirPods will come from Vietnam. However, China will continue to be the primary source for products sold outside the U.S.
This move is part of Apple’s broader effort to diversify its supply chain amid geopolitical tensions and trade restrictions. India currently contributes 10-15% of global iPhone assembly, with plans to increase this to 25% by 2025. Vietnam has also become a significant manufacturing hub for Apple, particularly for products like the Apple Watch and iPad.
Financial Performance Amid Challenges
Despite the tariff-related challenges, Apple reported stronger-than-expected financial results for its fiscal second quarter of 2025. Revenue rose 5% year-over-year to $95.4 billion, and net income reached $24.78 billion ($1.65 per share), surpassing analyst expectations. iPhone sales increased 2% to $46.84 billion, driven by the mid-range iPhone 16e with its custom modem chip and AI capabilities. Mac and iPad sales also saw growth, while services revenue climbed 12% to $26.65 billion.
However, the market responded negatively to the tariff concerns, with Apple shares falling 2.8%, contributing to a 15% year-to-date decline and a $600 billion loss in market value. Meanwhile, Microsoft surpassed Apple in market capitalization, reaching $3.2 trillion.
