Apple makes $100 billion genius move to skirt huge problem | Official Website of Louis Velazquez, entrepreneur, finance guy and tech innovator

Apple CEO Tim Cook has a lot on his plate. Despite having the most loyal fan base of just about any brand on earth, customers have hesitated to upgrade their existing iPhones, putting significant pressure on the company to develop more compelling features.

The ongoing trade war with China has made matters even more difficult, as it has put Apple in the crosshairs here and abroad over iPhone manufacturing.

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Amid the US-China tit-for-tat, Apple has faced restrictions on iPhone use in China for alleged security risks. It has drawn friendly fire in the US from President Trump, who has lambasted the company for making its iPhones overseas rather than in America.

Those headwinds are stiff, but perhaps Tim Cook’s latest decision to double down on its commitment to the US will take him out of the White House’s line of fire.

Apple CEO Tim Cook plans to invest another $100 billion in US manufacturing.

JOSH EDELSON/Getty Images

Apple’s CEO to commit $100 billion to US manufacturing

Apple’s Tim Cook and President Trump are expected to announce on August 6 that Apple (AAPL) will make a fresh $100 billion investment into its US footprint.

The move is a significant addition to the company’s previous $500 billion over four-year commitment, announced in February.

That commitment included promises for a new server facility in Houston, Texas, a bump in funding for its Advanced Manufacturing Fund, which helps support domestic semiconductor manufacturing, and a Detroit-based manufacturing academy to provide free classes on project management and manufacturing processes.

Apple projected its previous deal would create 20,000 new high-tech jobs in research and development, semiconductor engineering, and software engineering.

The additional $100 billion is reportedly aimed at bolstering Apple’s US supply chain and helping it avoid costly tariffs on components imported from overseas.

Tariffs are a major problem for Apple given overseas manufacturing

Apple’s reliance on China for iPhone manufacturing has declined since President Trump first placed tariffs on China in 2018.

However, Apple continues to manufacture iPhones overseas, including in India. Reportedly, Apple suppliers Foxconn and Tata Electronics airlifted about $2 billion worth of iPhones, roughly 1.5 million devices, from India in March and April to avoid President Trump’s newly imposed import taxes.

Negotiations are underway on a trade deal with India, but currently, tariffs on imports from India total 25%.

An additional 25% tariff was signed via executive order on August 6, tied to India importing Russian oil. If unchanged, that tariff will kick in on August 27. Smartphones, computers, and laptops are temporarily exempted, but tariffs are expected.

It’s not a stretch to think that India’s evolving tariff situation may be one reason behind Apple’s latest investment.

Tariffs on Vietnam are 20%, impacting iPads, Apple Watches, and AirPods, and there is no exemption.

“In terms of the country of origin, it’s the same as I referenced last quarter. There hasn’t been a change to that, which is the vast majority of the iPhone sold in the U.S. or the majority, I should say, have a country of origin of India,” said Cook on Apple’s June quarter earnings conference call. “The vast majority of the products, other products, the Mac and the iPad and the Watch have a country of origin of Vietnam that are sold in the United States.”

Undeniably, tariffs have been a major speedbump for Apple, shaving big money off the company’s bottom line.

“For the June quarter, we incurred approximately $800 million of tariff-related costs,” said Cook on Apple’s recent earnings conference call, “For the September quarter, assuming the current global tariff rates, policies and applications do not change for the balance of the quarter and no new tariffs are added, we estimate the impact to add about $1.1 billion to our costs.”

The big problem Apple faces isn’t tariffs… It’s AI

The tariff headache isn’t just because it hamstrings money that could go to innovation. It’s also a distraction from the company’s central problem: the belief that it’s falling behind regarding artificial intelligence.

Rivals have plowed big money into chatbots like Google’s Gemini, Anthropic’s Claude, Perplexity, and OpenAI’s ChatGPT. Those services are shifting how consumers interact with information, and new AI apps will likely impact how consumers entertain themselves.

So far, Apple Intelligence has underwhelmed the largest, prompting calls for Apple to make a splash via M&A. Reports have swirled that Perplexity may be on Apple’s radar to accelerate its AI roadmap.

If Apple can crack the AI nut, it may finally uncork the long-awaited upgrade cycle. According to TelemetryDeck, the most popular iPhone model is the 13, which was released in 2021, and represents 16% of active iPhones. The iPhone 16 Pro and Pro Max have a combined market share of just 20%.

If Apple can launch AI features compelling enough, new sales from upgrades could be worth billions, given Apple generated nearly $45 billion in iPhone revenue in the June quarter.