Foxconn can build iPhones for U.S. outside China

Foxconn, which builds most of Apple’s iPhones and iPads in China, told Bloomberg it has the capacity to build enough iPhones outside of China to satisfy demand.

Making iPhones outside China could help Apple avoid additional taxes if President Donald Trump follows through with his threat to impose tariffs on another $300 billion worth of Chinese imports.

Apple’s new iPhones are expected to launch in September, and any increase in tariffs could mean more expensive iPhones. Consumers have shown they’re less willing to upgrade to pricier devices.

“Twenty-five percent of our production capacity is outside of China and we can help Apple respond to its needs in the U.S. market,” Foxconn executive Young Liu said, Bloomberg reported Tuesday. “We have enough capacity to meet Apple’s demand.”

Apple no longer discloses how many iPhones it sells each quarter, but in February 2018 Counterpoint Research said a record 22 million devices were sold during the fourth quarter of 2017, more than 40% of the 51.2 million units Apple sold during that quarter worldwide.

Foxconn was said to begin manufacturing some of its high-end iPhones in India this year, and according to Bloomberg, it has started “quality tests for the iPhone XR,” in the country. The iPhone XR is Apple’s more affordable version of the iPhone XS and iPhone XS Max, all three of which were launched last September.

In May, J.P. Morgan said Apple would need to increase the cost of the iPhone by 14% to offset the costs of the current tariffs, unless it absorbs the costs itself. Bank of America estimated a 20% increase if Apple chose to move manufacturing to the United States.

Apple CEO Tim Cook said last week that “the Chinese have not targeted Apple at all” in regards to tariffs on U.S. goods into China. Such tariffs could increase the cost of the iPhone to Chinese consumers, an increasingly important market for Apple.

Read more on Bloomberg.