Strategic Move to Cushion Impact of US Tariffs by Rerouting Shipments

Apple plans to reroute a substantial portion of its India-made iPhones, initially destined for European countries, the UK, Turkey, Japan, and other regions, to the United States starting in the June quarter. This move is part of Apple’s strategy to mitigate the impact of increasing US tariffs, particularly the additional duties on products originating from China. Industry officials and analysts suggest that Apple’s accelerated push for local manufacturing in India is a crucial step in navigating the uncertain tariff landscape and reducing its dependency on Chinese production.

Highlights:

• India-made iPhones rerouted to the US for the June quarter.

• Apple’s local manufacturing in India ramps up to offset tariff pressures.

• Strategic shift away from China in light of escalating US tariffs.

Apple’s Manufacturing and Exports in India

Accelerated Production and Supply Chain Adjustments for US Market

In 2024, Apple produced approximately 40-45 million iPhones in India, contributing to 18-20% of its global output. Of these, about 14-15 million iPhones were exported to the US, marking a significant share of India’s production. Apple’s manufacturing partners, including Foxconn and Tata Electronics, are expanding production facilities in India to support this growing demand. Foxconn’s new $2.8 billion plant in Bengaluru and Tata Electronics’ new facility in Hosur are key components of Apple’s strategy to boost its manufacturing footprint in India.

Highlights:

• 40-45 million iPhones made in India in 2024, accounting for 18-20% of Apple’s global production.

• Foxconn and Tata Electronics expanding manufacturing facilities in India.

• Strategic shift to increase US-bound exports from India.

Manufacturing Cost Considerations: India vs. China

Apple Faces Slight Cost Disadvantage but Mitigates through Local Sourcing

While Apple’s shift to India represents a strategic win for the country, analysts have pointed out that manufacturing costs in India remain slightly higher than in China. A report by J.P. Morgan indicated that the Bill of Materials (BOM) for iPhones in India is about 2% higher compared to China, with India’s supplier margins being slightly more expensive. Despite these higher costs, India has made significant progress in narrowing the manufacturing cost gap over the past few years. However, China’s established supply chain ecosystem still provides a natural advantage.

Highlights:

• Manufacturing costs in India are 2% higher than China.

• India narrows cost gap over recent years but still faces challenges.

• China’s supply chain ecosystem remains an advantage for manufacturers.

Apple CEO Tim Cook Highlights Shift to India

Majority of iPhones in US to Be Made in India by June

Tim Cook, Apple’s CEO, confirmed during an earnings call that most of the iPhones sold in the US in the June quarter will be sourced from India, reflecting the significant shift in the company’s supply chain. While Apple expects its overall exposure to tariffs to rise in the June quarter, the company is actively optimizing its supply chain to mitigate the financial impact. Apple’s move to localize production in India has been seen as a strategic response to the US-China trade tensions, with the potential to lower exposure to tariffs imposed on Chinese-made goods.

Highlights:

• Most iPhones in the US will be made in India in the June quarter.

• Apple actively optimizes supply chain to mitigate tariff impact.

• Shift in production is a response to US-China trade tensions.

Future Outlook and Expansion Plans for Indian Manufacturing

Apple Eyes Further Shifts to India for US Production

Apple’s longer-term strategy includes expanding the proportion of iPhones made in India to meet the growing demand in the US. According to reports, Apple plans to shift the production of over 60 million iPhones annually to India by 2026 to cover all of the US demand. The US currently imposes a 26% reciprocal tariff on products made in India, significantly lower than the 145% tariff on Chinese goods. Furthermore, a bilateral trade agreement between India and the US, currently under negotiation, could provide additional benefits to Apple’s operations in India, potentially reducing costs further.

Highlights:

• Apple plans to shift 60 million iPhones annually to India by 2026 to meet US demand.

• 26% reciprocal tariff on India-made goods is significantly lower than China’s 145%.

• Bilateral trade agreement between India and the US could reduce manufacturing costs.