• For years, Tim Cook has overseen the development of Apple's supply chain in China.
• The risk of tariffs on China from Donald Trump requires a complex balancing act from Cook.
• Jamie MacEwan, an analyst, estimates that "almost half of Apple's revenue is exposed to China."

Tim Cook faces an unenviable task this year: keeping a tough-on-China president onside while continuing to lean on the country for Apple's complex supply chain.

The Silicon Valley giant has spent years building a vast supply chain network in China under the leadership of Cook, who was first tasked by Steve Jobs in 1997 with devising a cost-cutting outsourcing plan when Apple was on the brink of bankruptcy.

From Jiangsu in the east to Sichuan in the west, Foxconn, Luxshare, Pegatron, and others have played pivotal roles in helping Apple generate over $1.8 trillion in net sales this decade alone by serving as the manufacturing conveyor belt for everything from iPhones to Macs.

However, Apple's ability to maintain its most important manufacturing network could now depend on how effectively Cook negotiates with President-elect Donald Trump — while appeasing rival powers in Beijing, in whose hands Apple's supply chain largely sits.

Trump has signaled a return to the trade war that defined his first term by threatening to slap new tariffs on China. Such a move risks adding new costs to Apple's supply chain and could push it further from the country it has depended on to turn out iPhones for decades.

"It's extremely complicated because of the depth of the dependence on Chinese manufacturing competence," Kevin O'Marah, a supply chain expert and cofounder of research firm Zero100, told Business Insider.

What lies ahead for Cook then is a delicate balancing act: reckoning with Trump's political gameplan while protecting the supply chain empire he has staked Apple's fortunes on.

A high-stakes balancing act

Cook seems acutely aware of the dilemma, which is why he's been busy courting both sides.

Over three trips to China this year, the Apple CEO has met with top leaders like Chinese Premier Li Qiang, visited local suppliers, and attended an industry conference in Beijing. He has done all this while singing Trump's praises.

In November, Cook congratulated Trump on his election victory with a post on X that said, "we look forward to engaging" to ensure the US continues its technology leadership. He turned up at Trump's Mar-a-Lago resort a month later, but only after visiting China weeks earlier.

Jamie MacEwan, senior analyst at Enders Analysis, told BI that Cook's ability to continue getting what it wants out of China will "take a huge amount of public diplomacy from Apple leadership" as they "navigate increasingly choppy geopolitical waters."

Pulling off this diplomatic feat won't come easy. Apple has wrapped up its vast fortune in a sprawling supply chain in China that will prove difficult to untangle in the near term. While Apple generated $66.9 billion of its $391 billion in net sales from the Greater China region in its last fiscal year, MacEwan estimates that "almost half of Apple's revenue is exposed to China through direct sales and the supply chain," making it tough to leave China behind.

Apple has, of course, slowly been making efforts to diversify its supply chain. In the six months to September, Apple shipped almost $6 billion worth of iPhones made in India, according to Bloomberg, up a third from the same period last year.

Earlier this month, meanwhile, it emerged Apple would begin producing AirPods from a new factory in India for the first time, starting this year, and overseen by a Foxconn unit. The number of vendors in Vietnam supplying Apple has steadily increased, too.

Easier said than done

Though Apple has been taking these steps, experts believe that China remains vital to Apple's operations for a key reason: it's not yet possible to replicate the scale of its operations in the country elsewhere.

O'Marah said that much of Apple's success in China has come down to the "depth of the engineering in the supply chain" established by Cook.

The company has established a deep relationship with suppliers that involves the development of "millions and millions of identical pieces of machinery," O'Marah said, which comprise a "very deep and very complex bill of materials and componentry."

Simply getting up and leaving if new tariffs hit, then, is not an option. "India is picking up quite a bit of opportunity, but it'll take them a decade to get there," O'Marah said. "They don't have the same amount of manufacturing expertise, and to transfer that in takes a lot of time."

Dipanjan Chatterjee, a principal analyst at Forrester, agrees. He told BI that although "there is no way yet to tell how the proposed tariffs on China will play out," boosting India's manufacturing volume in the face of tough new taxes on China won't be straightforward.

"The devil is in the details," he said. "For example, India will have to be able to scale up rapidly to accommodate that kind of additional volume — not an easy task."

How Apple will proceed remains to be seen. According to a Reuters report, China's commerce minister Wang Wentao told Cook that Apple is "welcome to continue deepening its presence in the Chinese market."

Cook's growing closeness with Trump over the years may offer him some confidence. In 2019, when Trump planned a 10% tariff on Chinese imports, Cook successfully negotiated exemptions with the president and ensured Apple's supply chain would stay safe.

O'Marah also notes that tariffs are based on political rather than economic logic, so an almost 40% tariff on US imports from China next year — like the one predicted in a poll of economists conducted by Reuters — could "pop up and disappear overnight."

That said, the situation remains immensely complex for Cook.

MacEwan notes that Trump's future tariffs remain a "real wild card." A bad-case scenario would "increase the impetus for Apple to reshore more manufacturing out of China, but there is a limit" to what can be done. There is a risk that Beijing could retaliate too, he said.

"This isn't like Walmart sourcing more goods from India," MacEwan said. "Each iPhone is the result of a complex and highly integrated and optimized supply chain."

• SolidIntel CEO advises clients on derisking supply chains amid tariff concerns.
• China's dominance in rare earth minerals poses risks to tech supply chains.
• Friend-shoring and nearshoring are strategies to enhance national security and tech resilience.

Megan Reiss has been very busy since the election. The CEO and founder of SolidIntel, a D.C.-based supply chain advisory firm, has been fielding calls from current and prospective clients looking to understand what Trump's second term could mean for their manufacturing, supply, raw materials, foundry, and businesses across sectors.

SolidIntel's clients also want to know how to derisk their operations as talk of tariffs sends markets into a volatile turn.

"People concerned about tariffs are very interested in moving their supply chains out of China as quickly as possible because they see it as the potential for everything to get really expensive, really quickly," Reiss told Business Insider.

The rare earth minerals and raw materials underpinning the AI boom and its countless clusters of chips may soon be in the spotlight because of where they're produced. Though President-elect Trump's Monday post named Mexico and Canada, all eyes are on China.

"Our technology is dependent on these rare earth minerals. China has a lot of opportunity to turn off the spigot," Reiss said.

Friend shoring to allies

Friend shoring, or moving supply chain, manufacturing, and operations to non-adversarial countries to have continuity, is one step to derisking tech's supply chain.

The potential for export controls and sanctions are also top of mind for SolidIntel's rare earth mineral clients. These raw materials serve as the building blocks for wafters, and semiconductors that power advanced AI chips. The vast majority of these minerals are commercially mined in China or quarries owned by Chinese companies.

In 2023, the U.S. imported more than 95% of rare earth compounds and minerals from China, Malaysia, Estonia, and Japan, according to the U.S. Department of the Interior.

Nearshoring and friend-shoring manufacturing and vital supply chains away from China are also important for national security and could bolster a sovereign tech sector. The near-term investment is difficult but ultimately more beneficial in the long term.

Since 2023, SolidIntel, which uses generative AI and machine learning to identify supply chain risks, has helped companies track how bad actors end up in supply chains and connects companies with compliant suppliers.

"The more these supply chains are not hung over our head, and we make national security choices that are in the best interest of the U.S., the less afraid we are that an adversary is going to try to kill our commercial sector, that's a good thing," Reiss said.

There are closer to home alternatives that could become more viable depending on the incoming administration's policies, how relations with China play out, and if Trump makes good on his tariffs talk.

"My fear is not that we will not find alternative sources because there are a lot of rare earth minerals, and they're not just in the U.S.; they're in friendly and allied countries. I'm worried about us doing it fast enough. It can take a decade or more to bring a mine online, and it can't take that long in this case," Reiss said.

Create redundancy in manufacturing

To derisk the supply chain, create redundancy. In other words, reducing parts of supply chains that are dependent on one country is a way to cut down on risks and diversify manufacturers' options.

"If I were a manufacturer and I had a couple of chokepoints in my supply, say two of three, difficult-to-source parts that are only produced in a couple of countries, you would ideally want to have production lines in multiple countries," Reiss said.

Though streamlining production to fewer or one country can be cheaper and more efficient, it only works until something goes wrong she said.

Regulation of the supply chain may increase, but tech companies and their suppliers could find solutions in data. "Technology cannot do it unto itself, because you can only rely on the data you can get to understand the whole length of the supply chain. It's about open-sourced intelligence and closed data sets, " Reiss said.

"It's not just 'is this a foreign manufacturer, it's 'what are the foreign ownership control and influence risks in partnering with a company or in having a certain investor," Reiss said. "There's a lot more to it that people are just starting to build out their understanding of."