Apple is counting on deepening its relationship with India to assist it counter the rapid influence of Donald Trump’s aggressive China tariffs, because the iPhone maker grapples with one of many greatest threats to its enterprise in years.
The Cupertino-based tech big plans to ship extra of the iPhones it builds in India to the US as a short-term measure to keep away from the excessive price of China tariffs, based on folks accustomed to the matter.
Apple has been considered one of Wall Road’s greatest casualties of the US president’s tariff blitz — dropping round $700bn in market worth since final week’s bulletins — highlighting the dilemma the group now faces having constructed its enterprise round superior manufacturing in China and did not get a last-minute exemption from Washington’s 104 per cent levy on the nation.
Within the days since Trump’s “liberation day” announcement, at the least 10 flights took off from Chennai Worldwide Airport carrying consignments of iPhones to the US, based on three Indian officers with information of the matter. One of many flights left on Wednesday, based on one of many officers. Apple declined to remark.
Reserving India’s whole iPhone output for the US would enable it to cowl round 30mn of the 50mn-plus iPhones it ships to the US every year, based on Financial institution of America analyst Wamsi Mohan.
“I do think they have done some of that work to mitigate some of the impact in the very near term, but it’s obviously not a sustainable kind of solution for any extended period of time,” Mohan stated.
Apple has been quietly rising its enterprise in India, notably for the reason that coronavirus pandemic wreaked havoc on its China provide chains, but it surely nonetheless has about 80 per cent of its smartphone manufacturing in China, based on Counterpoint Analysis.
Whereas India has been focused with steep “reciprocal” tariffs of 27 per cent, the nation has sought to placate Trump by opening talks on a bilateral commerce settlement with the US that Indians hope may see the tariff burden decreased.
Two Indian officers instructed the FT that the US tech big was additional funding into the nation. “Apple is definitely thinking of doing more in India,” stated one official.
MK Stalin, the chief minister of Tamil Nadu, India’s southernmost state which is house to 4 of the nation’s 5 iPhone crops, on Wednesday met with Andy Priestley, an government from key Apple provider Jabil, which final yr introduced an memorandum of understanding with the state to increase its facility there.
US-based Jabil has not publicly spoken about supplying Apple in India. On X, Stalin stated the assembly involved “making new business investments in Tamil Nadu”.
However regardless of Apple leaning extra closely on India for now, it doesn’t have the provision chain within the nation to spice up manufacturing considerably — leaving it uncovered to substantial tariffs over the long run and having to contemplate both elevating costs for its high-end electronics or discovering methods to swallow the additional prices.
A number of analysts stated they anticipated any value hikes from Apple to come back later within the yr, probably with the brand new iPhone launch round September, and that they’re more likely to be launched globally, spreading the influence of the US tariffs throughout customers worldwide.
Apple may additionally apply pricing strain on its suppliers to move on a part of the influence from tariffs, they stated.
A extra intractable concern for Apple is navigate Trump’s push for “made in America” iPhones. The administration has doubled down on the concept Apple can start manufacturing iPhones within the US, one thing specialists say wouldn’t solely be astronomically costly for the corporate but in addition impractical, given how deep its China ties run.
“Trump believes we have the labour, we have the workforce, we have the resources to do it,” White Home press secretary Karoline Leavitt stated on Tuesday, echoing sentiments voiced by commerce secretary Howard Lutnick over the weekend.
It will seemingly price Apple “several billions” of {dollars} to shift even a portion of its iPhone provide chain to the US, based on estimates by Morgan Stanley analysts. Wedbush analyst Dan Ives estimated it could take Apple three years and $30bn to maneuver simply 10 per cent of its provide chain from Asia to the US.
“This is a company that has embedded itself in China and South east Asia for decades, now seemingly looking at the prospect of being forced to change the entire way in which they think about building and pricing an iPhone,” says Erik Woodring, analyst at Morgan Stanley.
The strain comes regardless of Apple pledging in February to rent 20,000 employees as a part of a $500bn US spending plan over the following 4 years, together with a brand new facility manufacturing servers for synthetic intelligence in Texas.
The truth that Apple doesn’t at present run its personal manufacturing services, however outsources them to Asia-based corporations it has spent twenty years and billions of {dollars} nurturing with specialist tools, provides an extra layer of complexity.
iPhone meeting is at present accomplished in mainland China by corporations similar to Taiwan’s Foxconn and Pegatron and to a lesser extent in India, the place Tata is constructing capability as an Apple provider. It’s the closing step in an enormous chain of Apple suppliers, most of that are at present primarily based in Asia.
There are 387 particular person elements concerned in closing meeting of an iPhone 16, based on market analysis group TechInsights, which embrace chips, circuit boards, batteries, wires, lenses, screens and steel and plastic elements.
Apple’s most up-to-date public provider checklist, which covers the 2023 fiscal yr, exhibits the 187 corporations answerable for 98 per cent of the corporate’s direct spend that yr. Of those corporations, 169 had a producing presence in mainland China and Taiwan.
Past China, the corporate faces strain all throughout its provide chain. Vietnam, a key MacBook exporter, has been hit with 46 per cent tariffs regardless of a proposal from the nation’s authorities to slash levies on US items to zero.
Whereas assembling iPhones within the US is “technically” attainable to do within the US, stated Financial institution of America’s Mohan, the query is “whether the components that are being sourced to make an iPhone are going to get tariffed,” he added. “If so, then it’s a massive headache.”
Following a name with executives at Luxshare, one other key Apple provider, Bernstein analysts stated it confirmed their view that shifting iPhone meeting to the US was “impractical” as it would “remain reliant on Asian components subject to tariffs.”
