SAN FRANCISCO: Apple reported stronger-than-expected first-quarter earnings on Thursday but warned that ongoing U.S. tariffs are straining its supply chain and could cost the company up to $900 million this quarter.
CEO Tim Cook acknowledged during the earnings call that while the immediate tariff impact earlier in the year was minimal, it is now expected to substantially increase operating costs.
“Assuming no new tariffs are introduced and global trade policies remain unchanged for the rest of the quarter, we estimate an added cost of $900 million,” Cook stated.
In response to the geopolitical and economic pressures — especially the escalating trade tensions between the U.S. and China — Apple is accelerating its shift in manufacturing away from China. Cook revealed that a majority of iPhones sold in the U.S. will soon originate from India, while most iPads, Macs, Apple Watches, and AirPods will be produced in Vietnam.
Despite this pivot, China will continue to be the primary production hub for Apple products destined for markets outside the U.S.
“What we learned some time ago was that concentrating all manufacturing in one country carries significant risks,” said Cook. “We’ve gradually diversified parts of our supply chain and will continue to do so.”
Tariff Risks and Supply Chain Shifts
High-end electronics like smartphones and laptops were temporarily spared from the U.S. tariffs imposed during the trade standoff, but many individual components used in Apple devices were not. This fragmentation, experts say, adds substantial hidden costs.
“The more components cross borders, the more those costs stack up,” noted tech analyst Rob Enderle. “Ultimately, it’s a very expensive mess.”
To mitigate risks, Apple stockpiled inventory in anticipation of tariff hikes, according to Canalys research manager Le Xuan Chiew. He believes Apple is increasingly reliant on India for future U.S.-bound production to avoid exposure to further trade volatility.
Production in India has ramped up significantly in recent months, although China still manufactures the bulk of iPhones sold in the U.S. Canalys data shows a clear trend toward India becoming a major iPhone assembly hub.
Financial Performance and Regional Trends
For the quarter ending recently, Apple posted revenue of $95.4 billion and a net profit of $24.8 billion, with strong iPhone sales driving results. However, performance was mixed across regions.
“We saw strong growth in the Americas and Japan,” said Angelo Zino, an equity analyst at CFRA Research. He attributed part of this success to proactive ordering ahead of potential tariff changes.
In contrast, China revenue dipped by 3%, despite local subsidies aimed at stimulating demand. Apple shares fell over 3% in after-hours trading following the report.
Strategic and Economic Implications
Industry analysts say Apple’s move to shift production raises complex logistical and financial questions. Emarketer analyst Jacob Bourne emphasized that while the transition to India and Vietnam is essential for long-term resilience, it could introduce near-term challenges.
“Tim Cook’s strategy reflects a long-term solution to trade instability,” said Bourne. “But it also brings execution risks, capacity constraints, and potential cost hikes that could either squeeze margins or be passed on to consumers.”
Apple’s manufacturing strategy is undergoing a major transformation — one that could redefine the future of global electronics production amid a shifting geopolitical landscape.
