Building the iPhone in the U.S. Would Raise Costs by Less Than 17.9%—I Said This in 2016, and It Still Holds
As the title of this article notes, in my 2016 article, "iPhone Production In The U.S. - Actually Straightforward And Not Expensive," I analyzed the feasibility of Apple (AAPL)manufacturing iPhones domestically to circumvent potential tariffs proposed by then-President-elect Donald Trump. I argued that producing iPhones in the U.S. was both feasible and cost-effective, considering factors such as labor costs, supply chain logistics, and infrastructure. I argued that:
· Apple is considering the production of iPhones in the U.S. to avoid a 45% tariff that was campaign rhetoric from President-Elect Donald Trump.
· Production in the U.S. is estimated to increase the cost of an iPhone by 20%, less than the 45% tariff that could be imposed on imported iPhones from China.
Following yesterday’s comments from the White House suggesting that Apple could begin building iPhones in the United States, Bank of America called the idea “technically possible,” but emphasized the steep costs. During the 2018 trade war, Apple received an exemption from tariffs on iPhones assembled in China. That exemption no longer applies. With new tariffs in place and rising political pressure, the question of U.S.-based iPhone production is back in the spotlight.
Apple Shares soared 15% on Wednesday, after President Trump said he would pause most tariffs for 90 days, its best day since 1998, only to pull back today, so the specter of China sanctions, which haven’t been resolved, remains in play.
BofA analyst Wamsi Mohan estimates that U.S. labor alone could increase iPhone costs by 25%, and if Apple had to pay tariffs on imported sub-assemblies, total costs could rise by more than 90%. In 2016, I published an article titled “iPhone Production in the U.S. – Actually Straightforward and Not Expensive,” where I projected a 20% cost increase if final assembly moved stateside. That number is now proving to be highly accurate—even as wages and inflation have risen over the past decade.
Apple’s Global Diversification Strategy
Apple has gradually expanded manufacturing beyond China in recent years, shifting portions of iPhone, iPad, Mac, and wearable production to India, Vietnam, and Brazil. However, recent tariffs under President Trump are hitting all three of those countries, making diversification more expensive and complex.
Table 1 shows Apple's current geographic spread of manufacturing. While efforts to move away from China are underway, a majority of production still remains there—especially for iPhones and MacBooks. India and Vietnam are seeing growth, particularly for AirPods and Apple Watch, but the strategic shift remains incomplete. The newly imposed tariffs on these alternative markets further complicate Apple’s ability to reduce reliance on China.
What Can Realistically Be Sourced in the U.S.?
A detailed examination of the iPhone 16 Pro Max’s bill of materials reveals which components Apple could theoretically produce in the U.S., and where it would remain dependent on overseas suppliers. Labor, assembly, and aluminum enclosures can be localized, but most core components—such as chips, displays, batteries, and camera modules—must still be imported.
Table 2 contrasts the current BOM with a U.S.-sourced version