‘Way better to take 25% tariff hit…’: Apple's India Strategy

Apple is increasingly relying on India for iPhone production, with Indian suppliers shipping 2.9 million units to the US in April, a 76% year-on-year rise. This shift aligns with Apple's strategy to reduce reliance on China amid declining Chinese exports and US tariff threats. Despite challenges in scaling production to meet demand, Apple’s partners, including Foxconn and Tata Electronics, are investing heavily in Indian facilities. Balancing production across India, China, and the US is critical as Apple adapts to geopolitical and economic pressures.

Apple's commitment to diversifying its production network continues to show substantial results, with the company's India-based facilities delivering a record number of iPhones to the United States. Despite former US President Donald Trump’s insistence on relocating iPhone production back to American soil, Apple appears to be forging ahead with its strategic shift toward India.

According to Omdia, a market research firm, Apple suppliers in India shipped 2.9 million iPhones to the US in April, marking an impressive 76% growth compared to the same period last year. Preliminary estimates from Counterpoint Research align with these figures, suggesting that India is playing an increasingly pivotal role in meeting US demand for iPhones.

This growth comes amidst a significant decline in Chinese iPhone exports to the US. In April, exports from China dropped by 76%, down to just 900,000 units from 3.7 million a year prior. The trend highlights Apple’s broader strategy to reduce reliance on China as part of its global supply chain.

Seasonal Patterns and Strategic Shifts

Despite the strong year-on-year increase, April’s export figures showed a decline from March levels. Industry analysts attribute this to seasonal trends, as shipments typically slow down during the April-June period ahead of new model launches in September. Additionally, March saw a production surge as Apple raced to meet a US-imposed April 2 deadline for retaliatory tariffs targeting countries with trade surpluses, particularly China.

Experts believe Apple's shift toward India remains on an upward trajectory. The company’s increased reliance on Indian suppliers reflects its ambition to diversify production while navigating geopolitical pressures and tariff threats.

The Tariff Dilemma

Trump’s recent statement on Truth Social reiterated his demand for Apple to manufacture iPhones in the United States. He warned of a 25% tariff on imported devices if Apple fails to comply. While the directive aims to encourage domestic manufacturing, analysts agree that such a move would drastically increase iPhone prices.

Producing iPhones in the US would involve higher labor costs and logistical challenges, potentially pushing the price of Pro models beyond $3,000 per unit – a dramatic leap from the current $1,119 price tag. According to Ming-Chi Kuo, an Apple analyst at TF Securities, absorbing the tariff would be a more viable option for Apple than relocating production to the US.

Expansion in India

Apple’s focus on India is underscored by substantial investments from its manufacturing partners. Foxconn, one of Apple’s largest suppliers, has announced a £1.5 billion expansion of its Chennai operations. The company is also preparing to open a new facility in Karnataka, which will begin iPhone production in June.

Meanwhile, Tata Electronics, Apple’s second-largest supplier in India, is scaling up production at its Hosur plant to handle both enclosures and full iPhone assembly. Tata has also acquired a controlling stake in Pegatron’s Indian facility, further strengthening Apple’s supply chain in the region.

Challenges in Scaling Production

While Apple's investments in India are yielding results, scaling production to fully meet US demand remains a challenge. Omdia projects that by 2026, India will only be able to meet 80% of the US market’s quarterly demand of 20 million iPhones.

The primary hurdle is not technology but production volume. However, Omdia notes that India has made significant strides, particularly by manufacturing premium Pro and Pro Max variants. Workforce development and operational efficiency continue to improve, paving the way for higher output in the coming years.

Balancing Global Relationships

Apple’s strategy in India is part of a broader effort to balance its relationships across three critical markets – the US, China, and India. While India is emerging as a key production hub, China remains deeply entrenched in Apple’s supply chain, hosting over 200 key suppliers.

Shifting production entirely to the US would disrupt this tightly interwoven supply chain, a move analysts describe as impractical. As Sanyam Chaurasia of Canalys (now part of Omdia) explains, “China’s role in Apple’s ecosystem is irreplaceable in the short term, but India is steadily gaining prominence as a complementary production base.”

Apple’s decision to expand its production capabilities in India demonstrates a calculated approach to mitigating geopolitical risks and diversifying its supply chain. While the road ahead may present challenges, the company’s investments and strategic foresight are positioning India as a vital player in Apple’s global manufacturing network.

As the tech giant navigates the complexities of tariff threats and global demand, its ability to adapt and innovate remains at the heart of its success.