Tariff No Bar: Why India Makes Sense for Apple

When the US went to tariff war with China and both countries imposed rates that made trade impossible, Apple, which produces most of its iPhones in China, found a solution in shifting a large part of its assembly and manufacturing to India. But US President Donald Trump made his annoyance clear on May 23 when he said if the company didn’t manufacture all phones sold in the country within its borders he would impose a 25 per cent tariff. He categorically named India and said he didn’t want Apple to be manufacturing those phones here.

A report by Global Trade Research Initiative however states that even with a 25 per cent tariff, it would still be cheaper for Apple to make in India. This is because of the enormous difference in labour charges between the two countries. Apple would have to pay US$ 230 per month to its factory workers in India as against up to US$ 2900 per month in the US. That is around 13 times more. If it costs US$30 to produce an iPhone in India, the corresponding cost for the US is US$ 390. In addition, manufacturing in India brings in financial benefits from the government like the Product Linked Incentive scheme while also making it possible for them to target the Indian consumer market, which is growing unlike the saturation it is experiencing in other developed countries.

If Apple shifts its manufacturing to the US, then it will have to increase the prices of its phones steeply to maintain profit margins. This will come at the cost of decrease in sales and consumers moving to other phone brands. Apple already has a plan to put in US$ 5 billion to manufacture more in the US but that will take years to set up, and it still would not be feasible to do everything in the country itself.

 

Apple. iPhoneMake in IndiaNews BriefTrumpUS tariffsWeb Exclusive