How much of the "600 billion dollar pie" drawn for Trump can Apple achieve? Wall Street: Anyway, the iPhone is profitable

Behind Cook's $600 billion investment commitment is a shrewd political strategy.

Wall Street Journal mentioned that on Wednesday, Trump and Cook announced together in the Oval Office that Apple would add an additional $100 billion investment on top of the $500 billion four-year spending plan announced in February.

This move aims to secure key tariff exemptions for Apple, covering various aspects such as local procurement, data center construction, R&D spending, and direct employment, with the new $100 billion investment focusing on the silicon chip sector.

This news has sparked a positive response on Wall Street, with analysts pointing out that Apple's biggest success in this move is that it can gain political goodwill without having to fundamentally reshape its existing supply chain.

Bank of America analyst Wamsi Mohan noted that if competitors face tariffs while the iPhone receives exemptions, Apple is likely to increase its smartphone market share in the U.S.

Despite the staggering investment amount, the details of the plan remain vague. Cook admitted that the "final assembly" of the iPhone will still take place overseas in the short term. Trump also acknowledged that establishing iPhone production lines in the U.S. is not a short-term prospect.

A Familiar Script: Avoiding Tariff Risks with Huge Investment Commitments

This is not the first time Apple has made a similar commitment to Trump.

In January 2018, during Trump's first term, Apple promised to invest $350 billion in U.S. manufacturing over five years, successfully avoiding product tariffs.

In November 2019, Trump and Cook toured Apple's supplier Flex's factory in Texas, which is responsible for producing the Mac Pro. Although the factory had been in operation since 2013, Trump still hailed it as the beginning of "a very powerful and important factory" and called it "a very special day."

This series of actions shows that publicly committing to support U.S. manufacturing has become a mature template for Apple to address political risks.

$600 Billion: What Has Been Promised and What Is Being Relied Upon?

Apple's $600 billion investment commitment is a massive combination covering a wide range of areas from component procurement to content production, but its realization heavily relies on existing investment plans from partners.

According to Apple's statement, the plan mixes local procurement, data center spending, R&D expenses, direct employment, and Apple TV+ content production in 20 states. The company explicitly stated that this total does not include stock buybacks or acquisitions. Specific projects include a $2.5 billion investment in glass manufacturer Corning and a multi-year agreement with laser supplier Coherent.

In the newly added $100 billion investment, the emphasis on the chip sector is particularly prominent. Cook stated that this will facilitate the production of 19 billion chips across 24 factories in 12 states this year.

However, the plan largely relies on investments that its suppliers have already announced. For example, TSMC's new factory in Arizona has already begun producing tens of millions of chips for Apple, and this factory plan was announced as early as the end of Trump's first term in 2020 Similarly, Apple also mentioned that it is collaborating with Samsung to develop a "world-first" chip manufacturing technology at its semiconductor factory in Austin.

In addition, the plan relies on the results of the Biden administration's CHIPS Act.

For example, as part of the "new partnership," GlobalFoundries' factory in Texas will supply wafers to TSMC and Texas Instruments, and the establishment of this factory received $406 million in government funding.

Wall Street Questions the Authenticity of the Numbers but is Optimistic about Profit Prospects

Analysts generally take a cautious or even skeptical attitude toward Apple's grand investment figures and "end-to-end" supply chain goals.

Jefferies analysts expressed doubts about the $600 billion claim, stating that "it's hard to understand how Apple could invest" such a massive amount and speculating whether it includes other expenditures such as acquisitions.

Gaurav Gupta, a semiconductor analyst at technology consulting firm Gartner, believes it is difficult to "take Apple's statement completely literally." He pointed out that "'end-to-end' is a very vague term," predicting that "the complete semiconductor supply chain will not move here in the next four years—it's impossible."

Despite doubts about the investment details, Wall Street generally believes that this strategy is a clear win for Apple's business and investors.

HSBC wrote in a report to clients that Apple's plan "supports a scenario in which the status quo is maintained, meaning Apple's profits will not be further harmed."

Gene Munster of asset management firm Deepwater Asset Management also noted:

"Apple will not assemble products in the U.S. This is a positive for (Apple) investors because it means profit margins will remain stable in the coming years."