Business

IIE DIGITAL DESK : The former U.S. President Donald Trump reintroduces a 25% tariff on smartphones manufactured outside the United States, Apple faces a pivotal decision regarding its global manufacturing strategy. Despite the financial implications of these tariffs, Apple appears committed to expanding its manufacturing footprint in India, a move influenced by cost efficiencies, supply chain diversification, and strategic long-term planning. 

In May 2025, Trump announced a 25% tariff on smartphones produced outside the U.S., directly impacting companies like Apple that have shifted significant portions of their manufacturing to countries such as India and Vietnam . This policy aims to incentivize domestic production but poses challenges for companies reliant on global supply chains. 

Apple has been progressively increasing its manufacturing presence in India. In March 2025, 97.6% of iPhones exported from India were destined for the U.S., a significant rise from 81.9% in the preceding months . This shift is part of Apple's broader strategy to mitigate risks associated with over-reliance on Chinese manufacturing. 

India offers several advantages that make it an attractive manufacturing hub for Apple. Lower labor costs, supportive government policies like the Production-Linked Incentive (PLI) scheme, and a growing ecosystem of suppliers contribute to the country's appeal . Apple's partners, including Foxconn and Tata Electronics, have been expanding their operations in India, with new factories under construction to meet increasing demand .

Analysts estimate that the new tariffs could add approximately $8.5 billion in annual costs for Apple, potentially reducing its 2026 profits by about $7.85 billion, or 7% . Despite these figures, Apple seems to be absorbing the costs or adjusting its pricing strategies rather than reversing its manufacturing shift.

Apple's commitment to India is also evident in its plans to double iPhone production in the country to $30 billion, a move expected to create around 200,000 jobs . By 2028, Apple aims to produce 25% of all iPhones in India, up from the current 12-14% 

While challenges remain, such as developing a comprehensive local supply chain and scaling up production to meet global demand, India's role in Apple's manufacturing strategy is poised to grow. The country's expanding capabilities in areas like semiconductor fabrication and electronics component production further enhance its attractiveness as a manufacturing base .

Despite the imposition of new tariffs by the U.S., Apple's strategic investments and the supportive manufacturing environment in India suggest that the company will continue to deepen its presence in the country. This approach not only helps Apple mitigate geopolitical risks but also positions India as a central player in the global technology manufacturing landscape.