Apple's Bold Move: India to Become a Global iPhone Manufacturing Hub

Apple is set to produce iPhones worth $40 billion annually in India by FY26, meeting 80% of US demand and fulfilling local needs. This shift, driven by favorable US tariff policies, positions India as a cost-effective alternative to China. Apple plans to double exports to $32–$35 billion while ramping up domestic production. Challenges include machinery relocation, policy reforms, and tariff negotiations. If successful, this move could transform India into a global smartphone manufacturing hub, reshaping Apple’s supply chain strategy.

Apple Inc. is gearing up for a massive transformation in its manufacturing strategy, with the tech giant aiming to produce iPhones worth nearly $40 billion annually in India by the close of FY26. This ambitious move is set to not only meet 80% of iPhone demand in the US but also fully satisfy the growing domestic market in India, according to sources familiar with the developments.

Strategic Shifts Backed by US Tariff Policies

The decision comes in the wake of a broader strategic realignment influenced by the US administration's tariff policies. During a recent quarterly earnings call, Apple CEO Tim Cook revealed that a majority of iPhones sold in the US from the April-June period onward would be manufactured in India. This shift is largely attributed to the reciprocal trade tariffs imposed by the US, where iPhones imported from India currently attract zero duty, while those from China face a hefty 20% tariff. This disparity makes India a cost-efficient alternative for manufacturing, particularly for the lucrative US market.

Despite multiple queries, Apple has refrained from commenting on these developments. However, trade data underscores the significance of this move, with the US importing smartphones worth $60 billion annually on average over the past five years. iPhones alone account for two-thirds of this figure, valued at $38 billion to $41 billion annually since 2020.

Scaling Up Indian Manufacturing

To seize this opportunity, Apple plans to significantly ramp up its production capabilities in India. The company currently produces $22 billion worth of iPhones in the country, including $17.5 billion in exports. Meeting its $40 billion production target would require Apple to double its export figures to approximately $32 billion to $35 billion, while addressing domestic demand estimated at $5 billion to $8 billion annually.

The transition is expected to gain momentum by FY26, when India could fully cater to US iPhone demand. In practical terms, Apple will need to manufacture iPhones worth an average of $3.3 billion each month—a significant leap in production scale.

Industry Projections and Contributions

The Indian Cellular and Electronics Association (ICEA) forecasts that India will export $35 billion worth of smartphones by FY26, up from $25 billion last year. This projection was made before Tim Cook’s announcement, indicating strong alignment with Apple’s expansion plans.

Globally, iPhone sales remain Apple’s crown jewel, contributing 51% (or $201 billion) of its $391 billion revenue in FY24. Strong performance in the first half of the current fiscal year further underscores the centrality of iPhones to Apple’s business strategy.

Challenges on the Horizon

While the potential benefits of this shift are immense, the road ahead is not without hurdles.

Tariff Negotiations: Apple’s strategy hinges on the assumption that India will continue to enjoy more favorable trade terms compared to China. Analysts believe this is likely, given the US’s firm stance on China. Even if the US imposes a uniform 10% duty on Indian imports, it would still be half of China’s 20% rate.

Machinery Relocation: Scaling up production in India will require transferring equipment from China and importing new machinery to manufacture next-generation products like the iPhone 17. Any resistance from China in exporting these critical tools could disrupt timelines.

Policy Reforms: Rapid expansion will demand substantial government support. The NITI Aayog, India’s policy think tank, has stressed the need for revised tax laws to facilitate global value chains and attract long-term investments in manufacturing.

A Transformative Opportunity

Apple’s shift to India represents a significant milestone in the global smartphone manufacturing landscape. If executed successfully, it could position India as a key player in the global supply chain, reduce reliance on China, and strengthen Apple’s foothold in both the US and Indian markets.

As the pieces of this complex puzzle fall into place, Apple’s strategy will not only redefine its own operations but could also catalyze broader economic and technological advancements in India.