Despite potential trade tensions and tariff threats, Apple’s decision to manufacture iPhones in India remains a strategically sound move. A new report by the Global Trade Research Initiative (GTRI) reveals that even with a proposed 25% tariff imposed by the U.S., Made-in-India iPhones would still be significantly cheaper than producing them domestically in the United States.

Key Highlights

Trump suggests 25% tariff on iPhones made in India

GTRI report finds India still the cost-effective option

iPhone assembly in India costs just $30 per unit

U.S. labour costs are nearly 13 times higher than India

Apple’s profitability could drop drastically if production moves to U.S.

Global value chain remains the key to Apple’s production model

U.S. Tariff Threat and GTRI’s Cost Analysis

In light of recent remarks by former U.S. President Donald Trump, threatening to levy a 25% import tariff on iPhones manufactured in India, concerns were raised about the feasibility of Apple’s production strategy. However, the GTRI’s detailed analysis shows that India continues to offer a considerable cost advantage.

The report states that even with a 25% tariff, the combined cost of manufacturing and exporting iPhones from India to the U.S. is still significantly lower than producing them within the United States. This is primarily due to massive discrepancies in labor costs and production incentives offered by the Indian government.

Breakdown of iPhone’s Global Value Chain

The GTRI report dissects the global supply chain of a $1,000 iPhone and reveals how multiple countries contribute to its manufacturing:

Apple (USA): Retains $450 for software, design, and brand value

Qualcomm, Broadcom (USA): Contribute $80 through chip design

Taiwan: Adds $150 from chip manufacturing

South Korea: Contributes $90 via OLED screens and memory

Japan: Supplies $85 worth of camera components

Germany, Vietnam, Malaysia: Account for $45 through various smaller parts

India & China (Assembly): Earn just $30, less than 3% of the final retail price

This shows that while final assembly happens in India or China, most of the value addition still comes from high-tech inputs and IP owned by companies in the U.S., Japan, Taiwan, and South Korea.

Labour Costs Make the Difference

One of the strongest economic justifications for Apple’s manufacturing in India is labor cost. According to GTRI:

India: Assembly line workers earn about $230/month

USA (California): Workers could earn up to $2,900/month

Assembling one iPhone in India costs around $30, whereas the same in the U.S. could cost approximately $390. This 13-fold increase in labor cost makes India a highly competitive location, especially when combined with India’s Production-Linked Incentive (PLI) scheme that further reduces costs for Apple.

Impact on Apple’s Profit Margins

Apple’s current profit on each iPhone is estimated at around $450. If production were moved to the U.S., and labor and operational costs rose significantly, GTRI predicts Apple’s profit margin could drop to just $60 per iPhone unless prices are substantially increased. This could hurt Apple’s competitiveness and profitability in the long run.

Conclusion

The GTRI report underscores the importance of global value chains and how they enable companies like Apple to optimize efficiency and profitability. Even if geopolitical pressures and tariffs rise, the cost advantages of assembling iPhones in India—backed by low labor costs and government incentives—make it a resilient and economically smart option.

Trump’s tariff threats, while politically charged, are unlikely to disrupt Apple’s current manufacturing strategy unless broader trade policies shift significantly. For now, India continues to play a vital role in Apple’s global manufacturing ecosystem.

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