Apple Shifts iPhone Production to India

New Delhi. Apple Inc. is relocating half of its iPhone production for the U.S. market to India, driven by escalating U.S. tariffs on Chinese goods and a need to diversify its supply chain. Apple CEO Tim Cook announced the move during a CNBC interview following the company’s quarterly earnings report, emphasizing India’s lower 10% tariff rate compared to the 145% imposed on Chinese imports. This shift marks a significant departure from Apple’s decades-long reliance on China, where it still manufactures the majority of products for non-U.S. markets.

Strategic Response to Trade Tariffs

U.S. and China Escalate Tariff War

The decision follows U.S. President Donald Trump’s April 2 announcement of reciprocal tariffs on over 100 countries, including a 145% levy on Chinese goods. China retaliated with 125% tariffs on U.S. products, intensifying the trade war. A temporary 90-day tariff pause on April 9 excluded China, prompting Apple to accelerate its diversification strategy. Cook noted that the March quarter saw a “limited” impact on Apple due to supply chain optimizations, but the fluid tariff situation clouds forecasts beyond June.

India and Vietnam Gain Strategic Importance

India’s favorable tariff structure and growing manufacturing ecosystem make it an attractive alternative. Vietnam is also emerging as a key hub, with Apple sourcing other products like AirPods and MacBooks for the U.S. market from there. According to a Financial Times report, Apple aims to shift all U.S.-sold iPhone assembly to India by 2026, a move that could reshape global tech manufacturing.

Economic and Operational Impacts

Cost Analysis of Indian vs Chinese Production

A JPMorgan analysis cited by India Dispatch reveals that iPhone production in India is cost-competitive despite a slight increase. iPhones assembled in China cost $938, while those made in India cost $1,008—a 2% rise. This is significantly lower than the 30% price hike projected for U.S.-based manufacturing. By leveraging India’s lower tariffs and labor costs, Apple expects to maintain stable iPhone prices for U.S. consumers.

Foxconn and Tata Drive Indian Expansion

However, scaling production in India presents challenges. Apple’s main supplier, Foxconn, and Indian conglomerate Tata Electronics are ramping up operations. Foxconn’s $2.6 billion Bengaluru facility, set to begin production imminently, will assemble the iPhone 16 and iPhone 16e, with a capacity of 300–500 units per hour. By 2027, it’s expected to employ 50,000 workers. Tata’s Hosur plant in Tamil Nadu has already started assembling older iPhone models, marking India’s growing role in Apple’s ecosystem.

Replicating China’s Scale Is Complex

The transition requires doubling Apple’s production output in India, a complex task given China’s established infrastructure. Apple spent two decades building a $3 trillion empire in China, and replicating that efficiency elsewhere is daunting. Recent emergency airlifts of iPhones from India to the U.S. highlight logistical hurdles, particularly for meeting peak demand.

Financial Performance

Revenue Growth Despite Market Volatility

Apple’s fiscal second quarter (January–March 2025) showed resilience, with revenue of $95.4 billion, up from $90.75 billion the previous year. iPhone revenue reached $46.84 billion, while Mac and iPad revenues were $7.95 billion and $6.4 billion, respectively. Cook projected low to mid-single-digit revenue growth for the June quarter but cautioned that long-term forecasts remain uncertain due to trade dynamics.

Market Value and Investor Sentiment

The tariff announcements triggered a $700 billion wipeout in Apple’s market value, underscoring investor concerns about supply chain disruptions. However, Apple’s proactive shift to India and Vietnam has bolstered confidence in its adaptability. Analysts note that India’s expanding role could stabilize Apple’s cost structure and mitigate tariff-related risks.

Broader Implications

Tech Industry Diversification Away from China

Apple’s pivot reflects a broader trend of tech giants diversifying away from China amid geopolitical tensions. Companies like Samsung and Google are also expanding in India, drawn by its market potential and policy support. For the U.S., Apple’s move could reduce reliance on Chinese imports, aligning with Trump’s “America First” trade policies. However, it risks straining U.S.-China relations further.

India's Rise as a Manufacturing Powerhouse

For India, Apple’s investment signals its rise as a manufacturing powerhouse. The economic ripple effects—job creation, skill development, and infrastructure growth—could position India as a cornerstone of global tech production. Yet, Apple’s success hinges on navigating logistical, technical, and geopolitical complexities in this high-stakes transition.

Conclusion: Apple’s Future Is Now Tied to India

As Cook navigates this seismic shift, Apple’s ability to balance cost, innovation, and market demands will shape its trajectory in a rapidly changing global landscape. For now, India is at the heart of Apple’s strategy to secure its future in the U.S. market.