Apple finds success producing and exporting current iPhone models made in India
Worried about what might happen to iPhone production and shipments if the U.S. and China end up in another trade war, Apple has been slowly expanding production of its most important device to other countries such as India and Vietnam. Back in 2018, then President Trump threatened to impose a 10% or 25% tariff on mobile phones built in China which includes the iPhone. To understand why Apple would want to move production out of China, we need to properly explain what a tariff is.
What exactly is a tariff?
A tariff is an import tax, nothing more and nothing less. A tariff imposed on any products imported from China is NOT paid by the Chinese. You want to know who pays the tariffs on Chinese imports into the U.S.? American companies do and if these companies want to recoup this amount, they raise prices on their products. So unlike what you might have heard, the bottom line is that if the U.S. imposes tariffs on products from, say, China, U.S. companies and consumers pay.
Foxconn's iPhone factory in India. | Image credit-PeopleMatters
This doesn't mean that China's economy isn't affected since demand for the product hit with the tariff would be expected to decline due to higher prices. However, since the iPhone is a U.S. company, the only negative impact on China that an iPhone tariff might have would be the loss of jobs if Apple decides to reduce production of the device in the country.
Tariffs on iPhone models imported from China would not be good for Apple or U.S. iPhone buyers. Apple would be forced to pay the tariff and it would be up to Tim Cook to decide whether to eat the import tax or pass it along to consumers by raising iPhone prices. During the height of the U.S.-China trade war, some Apple accessories like adapters, chargers, cables, and cords were subject to a 10% import tax. Consumers never knew because Apple never passed on the higher prices to consumers.
What Apple learned from this period of time was that it needed to find alternate places to make the iPhone outside of China. India is one such country since there are factories that can assemble the iPhone in the country, the supply chain is within reach, and Apple has turned out iPhone models in India since 2017. Additionally, the ability to source cheap and plentiful labor also makes India a possible replacement for China.
During the six-month period that ended in September 2024, iPhone exports from India soared 33% to nearly $6 billion year-over-year. The sources that provided Bloomberg with this information wished to remain anonymous since the data is private. At this pace, the value of iPhone units exported from India will top the $10 billion that was shipped during fiscal 2024.
The first iPhone built in India was the "budget" iPhone SE back in 2017
Besides Foxconn, which accounts for half of the iPhone units created and shipped out of India, Pegatron Corp., and Tata Electronics also assemble iPhone models in southern India. Smartphones have become India's top export to the U.S. with $2.88 billion in smartphones delivered to the U.S. from India during the first five months of this year. Five years ago, before Apple increased its Indian iPhone production, smartphone exports to the U.S. totaled a much smaller $5.2 million.
In 2019, Apple built and sold the four-year-old iPhone 6s in India. | Image credit-unknown
Apple started production of the iPhone in India with its "budget" iPhone SE model; this was done to take advantage of the lack of a $100 import tax placed on products built in India. Even though the country is the world's second-largest smartphone market after China, it is a developing market, and not everyone can afford an iPhone. So Apple started production of the iPhone SE in India to offer an iPhone model that could compete price-wise with the top brands in the country including value-for-money firm Xiaomi.
Once Apple realized that it had to start reducing iPhone production in China, the tech giant started building iPhone models for export in India. This year, some iPhone 16 Pro and iPhone 16 Pro Max models were assembled in India for the first time. Apple has come a long way in India. Consider that in 2019 it built and advertised the four-year-old iPhone 6s in India calling it "The incredible" iPhone 6s.
Eventually, there could be a day when Apple produces more iPhone units for export in India than China. But that day still remains well in the future.
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