US President Donald Trump’s renewed push for iPhones to be manufactured within the country poses a significant challenge for both consumers and Apple. Industry analysts anticipate that this shift, if implemented, could lead to increased costs for American buyers due to heightened tariffs and substantially higher production expenses.
Neil Shah, Vice President of Research at Counterpoint Research, expresses skepticism about the feasibility of relocating Apple’s manufacturing operations to the United States in the near or medium term. He notes that Apple’s extensive supply chain is deeply embedded in Asia, particularly in countries like China, India, and Vietnam. “It’s not just about Foxconn opening a factory in the USA; the entire supply chain would need to relocate closer to the USA,” Shah emphasizes, pointing out the intricacies involved. Even if Apple were to begin assembling devices stateside, production costs could surge by 10 to 20 percent, potentially negating the effects of a 25 percent tariff.
Apple’s Global Supply Chain: A Complex Ecosystem
Trump has made it clear that he expects iPhones sold in the US to be made domestically. “I have long informed Tim Cook of Apple that I expect their iPhones that will be sold in the United States to be manufactured and built in the United States, not India or anyplace else. If that is not the case, a tariff of at least 25 percent must be paid by Apple,” Trump stated on Truth Social, also expressing discontent over Apple’s increasing production efforts in India.
The complexity of iPhone production is illustrated by data from the Global Trade Research Initiative (GTRI). While Apple values its brand, design, and software at approximately $450 per unit of a $1,000 iPhone, other nations contribute considerable value as well. For instance, US companies like Qualcomm and Broadcom add around $80, Taiwan provides $150 for chip manufacturing, South Korea delivers $90 worth of OLED screens and memory chips, and Japan contributes about $85 primarily in camera systems. Other countries such as Germany, Vietnam, and Malaysia together account for an additional $45, while India’s contribution stands at $30 per device, most of which is neutralized by production-linked incentive payments.
One of the most significant hurdles for US-based production lies in labor costs. Assembly workers in India earn about $230 per month, whereas wages in states like California could drive monthly labor costs to nearly $2,900. This disparity would escalate assembly costs from around $30 to close to $390 per device. According to Ajay Srivastava, the GTRI Founder, without major price hikes, Apple’s profit per unit could plummet from $450 to approximately $60.
Srivastava asserts that should assembly transition away from India, the country would need to evolve from basic assembly to more sophisticated component manufacturing, encompassing displays, chips, and batteries. “The cost to Apple’s margins is real,” he acknowledges, but he also highlights potential benefits such as bolstered domestic employment, economic rebalancing, and enhanced supply chain resilience. Interestingly, India may also gain from this shift, positioning itself for deeper and more valuable manufacturing opportunities as the dust settles.
India’s Growing Role in Apple’s Manufacturing Plans
Shah adds that apart from China, India stands as Apple’s most promising manufacturing base. The competitive advantages it offers include a skilled, English-speaking workforce, a robust software ecosystem, supportive manufacturing policies like the Production-Linked Incentive (PLI) scheme, and a substantial domestic market. He suggests that US pressure on Apple may serve as a strategic maneuver to solidify negotiations, especially given India’s keen interest in attracting global giants like Apple to bolster its electronics manufacturing ambitions.
Apple CEO Tim Cook has indicated that a significant portion of iPhones sold in the US during the June quarter would be sourced from India. Meanwhile, China would still supply the majority of devices for other global markets. The iPhones produced in India are assembled at Foxconn’s facility in Tamil Nadu, while Tata Electronics, which operates Pegatron Corp’s Indian unit, plays a crucial role. Notably, both Foxconn and Tata are actively expanding their operations to increase production capacity.
By the financial year ending March 2025, Apple is expected to assemble 60 percent more iPhones in India, valued at around $22 billion. Furthermore, Foxconn has initiated production of Apple AirPods in Telangana for export markets. Significant sales data points to the trend; iPhone sales in the US reached 75.9 million units in 2024, while India exported 3.1 million units in just March, underscoring the urgent need for either expanded capacity or redirected domestic shipments.
Amid the uncertainties stemming from Trump’s tariff threats and the evolving policy landscape, Apple is carefully balancing its strategy with numerous factors at play. “Apple finds itself once again in the crosshairs of a belligerent ‘America First’ policy,” observes Prabhu Ram, Vice President at Cyber Media Research. This involves navigating the complexities of inflation, cost absorption, and ongoing tariff negotiations. While the tug-of-war over tariffs may persist, India’s role as a critical part of Apple’s global supply chain is poised to become even more prominent.
