U.S. President Trump insists on domestic job creation, while Apple opts for manufacturing shift to India
Vice President JD Vance's visit to India has prompted a new report suggesting that Apple is planning to transition the production of all U.S.-bound iPhones to India by the end of 2026. The proposed change is largely in response to President Trump's global trade war, with China bearing over 100% tariffs on imports to the U.S., though smartphones have been granted a 20% tariff exemption. While India is subject to 26% reciprocal tariffs, these have been temporarily suspended as both nations continue negotiations on a trade agreement.
According to the Financial Times, reaching the target of producing 60 million smartphones annually in India would necessitate a doubling of Apple's output in the country over the subsequent two years. Apple commenced the manufacture of iPhones in India in 2017 as part of an effort to diversify its supply chain and reduce dependence on a single country, especially after China's COVID-19-induced factory shutdowns. Initially, the production was limited to lower-end models, and although China continues to be central to Apple's business due to significant investments in the country's advanced production facilities, only about 20% of global iPhones were manufactured in India last year.
It is essential to note that while production is being moved to India, the manufacturing of components will continue in China and Taiwan. The final assembly of iPhones in India will entail bringing together hundreds of components procured from Chinese and Taiwanese suppliers. Apologies to Commerce Secretary Howard Lutnick, who envisioned American artisans screwing the tiny screws on an iPhone—the dream of an "army of millions and millions of human beings screwing in little screws to make iPhones" materializing in the U.S., at least for now, remains unrealized.
In past interviews, Tim Cook has underscored that manufacturing in China was not solely about reducing costs but also due to the inimitable manufacturing skill present in China. While wages have increased in China over the years, eliminating its price arbitrage, China still retains a deeply ingrained supply chain for elements like enclosures, packaging, small components, foam, and rare earth metals, making it challenging to manufacture electronics elsewhere.
If tariffs on India remain in place, iPhones will become more expensive for Americans, offering little benefit. Preliminary tariff revenue from President Trump's trade policy has generated income far less than anticipated. While Apple may be willing to relocate its production away from China, domestic manufacturing in the United States remains a distant goal due to the complexities involved and the lack of competitiveness with overseas alternatives that are cost-effective.
The United States possesses a strength in services, such as designing chipsets and social networking platforms, and leaves manufacturing tasks to countries with greater expertise. Contrary to President Trump's beliefs, each transaction does not result in a winner and a loser. Trade continues to foster growth for the U.S. economy, with one iPhone imported from India not equating to a loss for America.
On the edges, improvements can be made to the U.S. economy, such as encouraging domestic production of key items like computer chips. Apple has committed $500 billion to investing in American manufacturing; however, the focus has been primarily on building out servers and data centers. The ongoing recession, however, is an own goal. The reality of manufacturing iPhones in the United States today is impossible, and even if it materializes in the future, it will likely be characterized by heavy automation, leading to an economy struggling with inflation and fewer manufacturing jobs than estimated. American workers have shown little enthusiasm for manual labor jobs, such as farm work. However, wrecking the economy may be their only option.
- A new report by Gizmodo suggests that Apple plans to transition the production of all U.S.-bound iPhones to India by the end of 2026, the move being a response to President Trump's global trade war and China's high tariffs.
- The General-News report claims that reaching the target of producing 60 million smartphones annually in India would necessitate a doubling of Apple's output in the country over the subsequent two years.
- In past tech interviews, Tim Cook has highlighted that manufacturing in China is not solely about reducing costs but also due to the unique manufacturing skill present in China, which makes it challenging to manufacture electronics elsewhere.
- Despite the United States' strength in services like designing chipsets and social networking platforms, the Finance sector reveals that domestic manufacturing in the United States for iPhones remains a distant goal due to the complexities involved and the lack of competitiveness with overseas alternatives.
