Securing India's Apple pie: Will Trump's China tilt hit iPhone exports?

Apple Inc’s calculated gamble to strengthen iPhone production in India, with a substantial share being shipped to the United States, despite tariff uncertainties, has so far paid off.

 

In the first half of 2025-26 (FY26), the Cupertino-headquartered company exported $10 billion worth of iPhones from India — growing by a staggering 75 per cent over last year, and hitting a new milestone in exports.

 

Apple Inc vendors say if the momentum continues, then by the end of FY26, India could easily account for one-fourth of the world’s iPhone production by value. Exports could hit over $22 billion, and another $6 billion could come from domestic sales.

 

The heady growth of the first six months, they say, is because Apple Inc Chief Executive Officer Tim Cook carefully negotiated the tariff turmoil and made peace with US President Donald Trump, who had initially asked him to manufacture the phones in the US and not in India. Trump had even threatened to impose 100 per cent duty on the chips and semiconductors imported to make the phones.

 

Cook reacted quickly. Apple increased its earlier commitment to invest in the US by another $100 billion — notching it up to $600 billion — in various areas, including manufacturing servers. Trump then hinted that companies like Apple Inc would not face this punitive measure, and imports from India would continue at zero duty.

 

This is good news, considering that the US has imposed a 50 per cent duty on a range of commodities it imports from India as punishment for buying Russian oil.

 

All is not hunky-dory, though. A new challenge has emerged, one that could jeopardise India’s dream run of smartphone exports. It will test the Apple-India partnership — which has become a shining example of a manufacturing collaboration between the government and a global giant.

 

The challenge emerges from the October meeting between Trump and Chinese President Xi Jinping in Busan, South Korea. Following that meeting, the US government slashed by half — from 20 to 10 per cent — the punitive fentanyl duty imposed across all items exported from China to the US. If the thaw between the two countries continues, the view is that it is only a matter of time before the duty is brought down to zero. 

 

That’s not good for India since it might encourage Apple Inc to reassess its ambitious India growth strategy. In the current scenario, production value is expected to hit over $45 billion in the next two years, making India the country that caters to America’s entire iPhone demand. 

 

The advantage

 

India currently enjoys a duty advantage over China in mobile exports to the US. It exports at zero duty; China paid 20 per cent. But with the fentanyl duty on China, across commodities, halved, that advantage will be more than neutralised, given India’s higher cost of production, which is 12 per cent more than China’s.

 

This cost disability will worsen if the US duty on China is removed altogether.  

 

Apple and the Indian government have worked closely to push smartphone exports. Apple has been the dominant beneficiary of the Centre’s production-linked incentive (PLI) scheme, which is meant for every eligible mobile phone company.

 

Between FY23 and FY25, 75 per cent of the cumulative incentives of $1 billion disbursed under the scheme went to Apple’s three iPhone assemblers.

 

In return, Apple Inc assured the government that it would become a trailblazer in smartphone exports from India. In the first half of FY26, Apple accounted for 75 per cent of India’s total smartphone exports, up from just 24 per cent in FY22, the first year of the PLI scheme. In the same period, Apple’s exports grew over 25 times. 

 

Without Apple, India’s electronics exports would not have catapulted to become the second-largest commodity export, with the company alone contributing 44 per cent of total electronics exports.

 

Over and above

 

Apple has also exceeded its commitments under the PLI scheme. It had initially targeted shifting 10 per cent of its global iPhone production from China to India by FY26, but has already doubled that goal with six months still to go. The company has also surpassed its employment commitment, creating over 200,000 direct jobs across its two major assembly partners — Tata Electronics and Foxconn.

 

Crucially, Apple has demonstrated flexibility in adapting its India strategy to align with the government’s geopolitical realities. When border clashes between India and China erupted in Galwan, the government amended its foreign direct investment (FDI) policy to bar Chinese companies, even via joint ventures, from setting up manufacturing units in India. This move initially disrupted Apple’s plans to bring in 12-13 of its major Chinese component suppliers to localise production. The government’s goal had been to achieve 35-40 per cent value addition by FY26.

 

So, two years ago, Apple changed course. It began sourcing from Indian and non-Chinese component suppliers, starting with Tata Electronics, which first set up an enclosure plant, and later acquired Wistron and Pegatron’s assembly operations. A new ecosystem of around 50 component vendors — including 25-30 micro, small, and medium enterprises (MSMEs), many of them new entrants — has since emerged. The government, too, has shown flexibility: With localisation levels currently at around 15 per cent, it is no longer insisting on the 40 per cent target by the end of the PLI scheme.

 

The PLI question

 

The question now is: Can Apple Inc and the Indian government navigate the new US-China equation? 

 

A senior executive at one of Apple’s vendors says, “The ball is with the government, which is in dialogue with Apple. The US company will continue to hedge its bets and not put everything in one basket, in China.”

 

He adds that before iPhone assembly began in India, the cost disability gap between India and China was 17–19 per cent, with China enjoying a significant cost advantage. The PLI scheme helped reduce that gap to a more manageable 12 per cent. “But the incentive ends this financial year,” he says, cautioning, “If the PLI isn’t extended for a few more years, China will once again become far more competitive in manufacturing and exporting smartphones. India’s rapid expansion in production could stagnate, and the ambitious plan to shift more capacity from China to India will stall.”

 

There are other hurdles as well. Apple’s large-scale expansion could be constrained by rigid tax laws, tariff structures, and special economic zone (SEZ) regulations, all crucial for an export-driven business. A senior consultant working with global mobile manufacturers argues, “India’s tax policies must benchmark against those of China and Vietnam, rather than adopt a one-size-fits-all approach. Unless India reforms its tax and regulatory framework to match the efficiency of competing markets, Apple’s growth will be limited.”

 

Critics, however, counter that the PLI scheme was always meant as a one-time, five-year support to kickstart exports and help companies achieve global cost competitiveness. That objective, they argue, has been met, as is evident from the surge in mobile exports. Hence, there is little justification to continue offering subsidies, especially to a global giant with relatively low domestic value addition.

 

For now, the ball is firmly in the government’s court. Apple’s ability to persuade policymakers that it still needs support to compete with China will determine whether India continues its upward trajectory in smartphone manufacturing, or concedes the next phase of expansion to its rival. 

Apple in 4 years

 

• Largest blue-collar job creator: 200,000 direct jobs; over 72% women employees
• Largest blue-collar job creator for first-time job-seekers 
• Largest exporter: ₹1.5 trillion (FY25)
• Built India’s largest factories: Five
• Fastest growth in ecosystem: 45 new suppliers, 50% MSMEs
• Largest goods export to the US: $10.5 bn in FY25
• Largest skilling programme in private sector: 200,000 skilled in-house