Will Made in India iPhones be More Expensive Than Ones Made in the US After Trump’s Potential 25% Tariff?

Manufacturing iPhones in India remains cost-effective, even with a potential 25% tariff imposed by the United States. According to a Global Trade Research Initiative (GTRI) report, production costs in India are significantly lower than in the U.S. This analysis follows U.S. President Donald Trump's threat to levy such tariffs if Apple manufactures iPhones in India.

Global Value Chain Contributions

The GTRI report details the value chain of a $1,000 (approximately Rs. 83,400) iPhone, highlighting contributions from over twelve countries. Apple retains the largest portion of this value, approximately $450 (around Rs. 37,550), through its brand, software, and design. U.S.-based component manufacturers like Qualcomm and Broadcom contribute $80 (roughly Rs. 6,700).

In addition to American contributions, Taiwan adds $150 (about Rs. 12,500) through chip manufacturing. South Korea's input includes OLED screens and memory chips worth $90 (approximately Rs. 7,500). Japan supplies components valued at $85 (around Rs. 7,100), primarily through camera systems.

Labour Cost Disparities

The report emphasises that labour cost differences between India and the U.S. make Indian manufacturing economically viable despite potential tariffs. In India, assembly workers earn around $230 (roughly Rs. 19,200) monthly. Conversely, in U.S. states like California, labour costs can reach $2,900 (about Rs. 2,41,850) monthly due to minimum wage laws.

Assembling an iPhone in India costs about $30 (approximately Rs. 2,500), while the same process in the U.S would be around $390 (roughly Rs. 32,526). This stark contrast highlights India's cost advantage in labour expenses.

Impact on Apple's Profit Margins

If Apple were to relocate production to the United States without increasing retail prices significantly, its profit per iPhone could plummet from $450 (around Rs. 37,550) to just $60 (roughly Rs. 5,000). Such a move would necessitate substantial price hikes to maintain profitability.

China and India play significant roles in assembling iPhones but earn only about $30 (around Rs. 2,500) per device each-less than 3% of an iPhone's total retail price.

Production Incentives in India

Apple benefits from India's production-linked incentive schemes for manufacturing iPhones locally. These incentives further enhance India's attractiveness as a manufacturing hub despite potential trade restrictions from the United States. The GTRI report underscores how global value chains and labour cost disparities position India as a competitive choice for iPhone manufacturing amid possible U.S trade barriers.

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