Apple is counting on deepening its relationship with India to assist it counter the fast impression 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 value of China tariffs, in line with individuals accustomed to the matter.
Apple has been considered one of Wall Avenue’s greatest casualties of the US president’s tariff blitz — shedding 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 didn’t 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, in line with three Indian officers with information of the matter. One of many flights left on Wednesday, in line with one of many officers. Apple declined to remark.
Reserving India’s whole iPhone output for the US would permit it to cowl round 30mn of the 50mn-plus iPhones it ships to the US every year, in line with Financial institution of America analyst Wamsi Mohan.
“I do suppose they’ve carried out a few of that work to mitigate a few of the impression within the very close to time period, however it’s clearly not a sustainable sort of resolution for any prolonged time frame,” 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, however it nonetheless has about 80 per cent of its smartphone manufacturing in China, in line with 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 diminished.
Two Indian officers informed the FT that the US tech big was taking a look at additional funding into the nation. “Apple is unquestionably considering of doing extra in India,” stated one official.
MK Stalin, the chief minister of Tamil Nadu, India’s southernmost state which is dwelling to 4 of the nation’s 5 iPhone crops, on Wednesday met with Andy Priestley, an govt from key Apple provider Jabil, which final 12 months 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 enterprise 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 term and having to think about 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 12 months, probably with the brand new iPhone launch round September, and that they’re more likely to be launched globally, spreading the impression of the US tariffs throughout shoppers worldwide.
Apple may additionally apply pricing stress on its suppliers to go on a part of the impression from tariffs, they stated.
A extra intractable concern for Apple is tips on how to navigate Trump’s push for “made in America” iPhones. The administration has doubled down on the concept that 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’ve the labour, we’ve the workforce, we’ve the sources 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 value Apple “a number of billions” of {dollars} to shift even a portion of its iPhone provide chain to the US, in line with 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 can be a firm that has embedded itself in China and South east Asia for many years, now seemingly trying on the prospect of being pressured to alter the complete means by which they consider constructing and pricing an iPhone,” says Erik Woodring, analyst at Morgan Stanley.
The stress comes regardless of Apple pledging in February to rent 20,000 workers 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 the moment run its personal manufacturing amenities, however outsources them to Asia-based firms it has spent 20 years and billions of {dollars} nurturing with specialist gear, provides a further layer of complexity.
iPhone meeting is at the moment carried out in mainland China by firms reminiscent of 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 last step in an enormous chain of Apple suppliers, most of that are at the moment primarily based in Asia.
There are 387 particular person elements concerned in last meeting of an iPhone 16, in line with market analysis group TechInsights, which embody chips, circuit boards, batteries, wires, lenses, screens and steel and plastic elements.
Apple’s most up-to-date public provider record, which covers the 2023 fiscal 12 months, exhibits the 187 firms accountable for 98 per cent of the corporate’s direct spend that 12 months. Of those firms, 169 had a producing presence in mainland China and Taiwan.
Past China, the corporate faces stress all throughout its provide chain. Vietnam, a key MacBook exporter, has been hit with 46 per cent tariffs regardless of a suggestion from the nation’s authorities to slash levies on US items to zero.
Whereas assembling iPhones within the US is “technically” doable to do within the US, stated Financial institution of America’s Mohan, the query is “whether or not the elements which might be being sourced to make an iPhone are going to get tariffed,” he added. “If that’s the case, then it’s a large 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’s going to “stay reliant on Asian elements topic to tariffs.”
