Apple escapes Trump's 100% tariff on chips
Apple will source some of its chips from one of Samsung's U.S. fabs in Texas.
President Donald Trump, standing alongside Apple CEO Tim Cook in the Oval Office yesterday, announced a whopping 100% tariff on chips imported into the U.S. Some companies are getting an exemption because they have invested in the United States. For example, Apple is exempted, and while in the presence of the president, Cook confirmed that Apple will spend the additional $100 billion that Trump said yesterday it would to improve the tech giant's domestic manufacturing.
Apple's huge investment in the U.S. helps keep the tech giant from getting hit by Trump's chip tariffs
The president added that companies that announce their intentions to invest in domestic manufacturing will be exempted from paying the chip tariff. However, there will be a separate import tax placed on devices that contain semiconductors, such as smartphones, automobiles, and tablets that are shipped into the U.S. Chip manufacturers that have made huge investments in the U.S. appear to be exempted as well. Taiwan’s National Development Council Minister, Liu Chin-ching, said today that TSMC will be exempted from the 100% tariff on chips.
Cook was alongside Trump when he announced the new chip tariffs. | Image credit-Apple
Yeo Han-koo, South Korea's Trade Minister, stated that chips imported into the U.S.made by Samsung Electronics and SK Hynix also will not be hit by the 100% U.S. chips tariff. Both of those firms have announced plans to invest in the U.S. Interestingly, Trump said that Cook was not told in advance of the announcement in the Oval Office about his plan to impose a 100% chip tariff. The president did say that Apple's investments should be seen by other companies as an example of how they can avoid getting hit by the import tax on chips.
Apple plans on investing some of the $100 billion it pledged to spend on a new U.S. manufacturing program that will include a Kentucky-based factory run by Corning to produce glass for future iPhone models. Corning has been a glass supplier for the iPhone since the very first model was released in 2007.
Apple had previously said it would spend $500 billion to improve its domestic manufacturing facilities. Some of that money will be spent on a new factory in Houston to build servers, a Michigan-based supplier academy, and additional facilities for suppliers in the States.
Apple is still not ready to make the iPhone in the U.S.
None of these investments results in Apple building the iPhone in the U.S., which is exactly what Trump wants. However, the president seemed to be happy with Apple's promises. The president said this about Tim Cook: "Look, he’s not making this kind of an investment anywhere in the world, not even close. He’s coming back. I mean, Apple’s coming back to America." Currently, most of the new iPhone models sold in the U.S. are assembled in India. However, Trump recently doubled the tariffs on imports from that country to 50% from the previous 25%.
Even if Apple wanted to produce the iPhone in the U.S., it would take years to build the factories needed to have the device assembled in the United States. Apple would have to train workers willing to take low-paying assembly jobs. The hardest and most important task of all would be assembling a supply chain close to the U.S. that would be able to deliver the supplies Apple needs to build the iPhone in the U.S. in the quantities and with the quality that Apple demands.
As part of its $600 billion investment in the U.S., Apple will work with Samsung's Austin fab on an innovative new way to manufacture chips that has never been used anywhere in the world. Apple says, "By bringing this technology to the U.S. first, this facility will supply chips that optimize power and performance of Apple products, including iPhone devices shipped all over the world." In addition, Apple plans on buying chips from Samsung produced from one of the latter's Texas fabs.
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