On the back of a visit to India by Vice President JD Vance, a new report says that Apple hopes to move production of all U.S.-bound iPhones to the country by the end of 2026. The move is in response to President Trump’s global trade war—China has been hit with the highest tariffs of over 100% on imports to the U.S., though he made an exemption for smartphones, which subjects them to lower tariffs of 20% for now.
India is subject to 26% “reciprocal” tariffs, though they are temporarily paused while the administration negotiates on a trade deal.
According to the Financial Times, the target of making 60 million smartphones in the country would require doubling Apple’s output in the country over the next two years. The company already started building iPhones in India back in 2017 as a means to diversify its supply chain away from one country, especially after China’s COVID-era lockdowns shut down factories. It mostly started with lower-end models in India, however, and China has remained central to Apple’s business as the country invested heavily in the country to build a world-class production line. Only roughly a fifth of global iPhones were built in India last year.
One crucial detail to keep in mind is that Apple is moving production to India, not the manufacturing of components: “iPhone assembly is the last step in the production process, bringing together hundreds of components for which Apple is still heavily reliant on Chinese suppliers.” In other words, all parts will come from China and Taiwan, and then they will be shipped to India to be clipped together like LEGOs. Apologies to Commerce Secretary Howard Lutnick, who dreamed of Americans screwing in the tiny screws on an iPhone. The “army of millions and millions of human beings screwing in little screws to make iPhones” is not coming to the U.S., at least not for now.
Tim Cook has said in past interviews that manufacturing in China was not just about lower cost, but also due to the tremendous manufacturing skill there. China has lost its price arbitrage over the years as wages have increased; some companies have slowly moved manufacturing to other locations like Vietnam. But the supply chain is so deeply embedded in China—from enclosures, packaging, small parts like foam, and even crucially, rare earth metals—that it is hard to entirely manufacture electronics anywhere else.
If tariffs on India remain in place, it will mean iPhones will be more expensive, and Americans will see little benefit. Customs and Border Patrol reports that early tariff revenue from President Trump’s policy have brought in far less than he anticipated. Companies at scale like Apple may be willing to move away from China, but manufacturing in the United States remains a pipe dream that would take many years to accomplish. And products made in the U.S. would not be competitive with foreign-built alternatives that are cheaper.
The United States excels at services, like designing chipsets and social networking platforms, and leaves the hard manufacturing work to other countries that are adept at those functions. Unfortunately, President Trump operates under a fallacy that each transaction has a winner and a loser. One iPhone imported from India is a loss for America in his mind. When in reality, Americans give cash to India, and India returns a product they want. Just because one country does not buy as much from the United States as it does from them does not mean America “loses.” Look no further than the decades of growth the U.S. economy has experienced to see that the trade system is functioning well.
On the margins, there are improvements to be made—the U.S. economy somewhat functions on cheap labor from abroad, and key products like computer chips perhaps should be manufactured domestically. Apple has committed $500 billion to invest in American manufacturing, though mostly focused on building out servers and data centers. But the recession the U.S. is being thrown into is an unforced error. Making iPhones domestically is just not possible today. And even if it does come back in some form, maybe believe manufacturing will be heavily automated; companies like Amazon continue to work apace at automating their warehouses. The result of reshoring will be an economy wrecked by inflation, and fewer jobs in manufacturing than many think.
Americans do not want to do these manual labor jobs anyway—you do not exactly see unemployed citizens rushing to take farm jobs. But hey, wrecking the economy may give them no choice.
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