Apple’s Supply Chain Plans for the Worst Amid U.S.-China Trade War

The ongoing trade war between the U.S. and China is getting more unpredictable. But Apple’s supply chain in the region is already planning for the worst.

China’s manufacturing ecosystem is absolutely critical to Apple and other smartphone makers. Because of that, the escalating tensions between the U.S. and China could threaten Apple’s hardware business. President Donald Trump’s threat of tariffs on Chinese imports could, for example, essentially inflict a tax on Apple’s iPhones.

Foxconn, Apple’s primary assembly partner, says that it has enough capacity to produce all U.S.-bound iPhones outside of China if necessary.

At a Tuesday investor meeting in Taipei, Foxconn semiconductor chief Young Liu said that the company is ready to “fully support Apple if it needs to adjust its production.”

But Foxconn is ready to help Apple if the trade war intensifies. The company noted that 25 percent of its production capacity is already outside of China, and the manufacturing firm is continuing to make infrastructure investments in India for Apple’s business.

“We can help Apple respond to its needs in the U.S. market,” Liu said. “We have enough capacity to meet Apple’s demand.”

Liu added that Foxconn will react swiftly and make use of localized manufacturing if the trade war escalates. He also likened this preparation to its two-year-old plan to build out a manufacturing footprint in Wisconsin.

Of course, meeting the Cupertino tech giant’s demands wouldn’t be without its repercussions. Bloomberg notes that serving Apple’s requirements outside of China could lead to other OEM orders being delayed or sidelined, at least for a short period.

The company’s willingness to quickly respond to Apple’s needs makes sense. One of every four iPhones shipped is sold in the U.S., so that market makes up a huge portion of Foxconn’s business within China.

On the other hand, it’s not clear if Apple will ever be able to produce a major portion of its iPhones in India. Still, Foxconn is currently preparing to kick off mass production of the iPhone XR at a plant in Chennai and Wistron already produces older models at a facility in Bangalore.

Even if Apple’s iPhones are made outside of China, there’s very little chance that they’ll ever be made in the U.S. Put simply, the U.S. just doesn’t have the skilled labor or manufacturing infrastructure necessary to produce a consumer product on the level of the iPhone (at least at its current price).