Apple’s announcement to ramp up iPhone production in India has sparked optimism, but questions linger about whether shifting manufacturing from China to India will be a profitable move for the tech giant. On May 1, alongside reporting better-than-expected profits for the first quarter of 2025, Apple warned that new U.S. tariffs are impacting its supply chain, potentially costing the company significantly.
Apple CEO Tim Cook noted that the tariff impact was “limited” earlier this year but estimated a $900 million burden in the second quarter due to these policies. With U.S. President Donald Trump’s recent tariffs imposing steep levies on Chinese imports (up to 145%), and China retaliating with increased duties on U.S. goods, Apple is navigating a complex trade landscape.
Can Apple Significantly Increase iPhone Production in India?
Cook expressed optimism, stating, “We expect the majority of iPhones sold in the U.S. will have India as their country of origin.” Apple has already been producing iPhones in India, with Foxconn and Tata operating three factories and planning two more. In 2024, India assembled 30–40 million iPhones, accounting for about 14% of Apple’s flagship devices. Foxconn aims to double production to 25–30 million units by the end of 2025, supported by new facilities like Tata’s plant in Hosur, Tamil Nadu.
The temporary exemption of smartphones, semiconductors, and computers from the harshest U.S. tariffs provides Apple some breathing room. However, independent tech analyst Rob Enderle points out that while fully assembled smartphones are exempt, many iPhone components are not, increasing costs as parts cross borders. “The more things cross borders, the more expensive the device becomes. In the end, it’s a costly proposition,” Enderle said.
Analysts like Le Xuan Chiew from Canalys believe Apple may shift U.S.-bound production to India to mitigate future tariff risks amid fluctuating trade policies. Data from Canalys indicates that India’s iPhone production surged toward the end of the first quarter, with Apple airlifting 600 tons of iPhones (approximately 1.5 million units) from India to the U.S. in March to build inventory and counter tariff impacts.
Challenges of Scaling Production in India
While India offers a strategic alternative, scaling production presents significant challenges:
Infrastructure and Logistics: India’s logistics costs are high, at 14% of GDP compared to China’s 8%, hampering export competitiveness. Land acquisition and bureaucratic delays, such as those affecting Foxconn’s Bengaluru plant, could push full-scale production to 2027.
Workforce and Expertise: India lacks the manufacturing expertise and scale of China, where Apple benefits from a vast, skilled labor pool. Training locals and establishing production processes take time.
Cost Implications: Moving production lines to India requires billions in investment, with potential increases in operational costs. Jacob Bourne from eMarketer warns that shifting to India raises questions about timelines, capacity constraints, and cost increases, which could erode margins or lead to higher consumer prices.
Geopolitical and Regulatory Risks: Apple must navigate India’s regulatory environment and comply with U.S. “rules of origin” regulations, which could complicate supply chain configurations.
Apple’s Broader Diversification Strategy
Cook outlined a multi-country production strategy to reduce risk, learning from past vulnerabilities of relying heavily on China. He revealed that most iPads, Macs, Apple Watches, and AirPods sold in the U.S. will be manufactured in Vietnam, while China will remain the primary production hub for non-U.S. markets. This diversification aligns with Apple’s long-term goal of supply chain resilience, as Cook emphasized, “Having everything in one location had too much risk.”
Kathleen Brooks, research director at XTB, noted, “The question for investors is who can replace China for Apple? It’s not an easy question and could pose a threat to Apple’s future plans.” India’s potential is significant, with its growing domestic market (8% smartphone market share, $8 billion in sales in 2024) and export incentives, but it cannot yet match China’s manufacturing ecosystem.
Profitability and Consumer Impact
Apple’s high profit margins, particularly from services ($96 billion in 2024), provide some cushion to absorb tariff costs in the short term. However, sustained tariffs could force Apple to choose between lower margins or passing costs to consumers. Analysts estimate that India’s 26% tariff (currently on hold) would add $150 to the production cost of an iPhone 16 Pro, compared to $300–$600 under China’s 54–104% tariffs. A U.S.-made iPhone could cost over $3,000, making domestic production unviable.
