Apple has elevated the variety of flights carrying consignments of iPhones from India to the US following Donald Trump’s tariff blitz, because the tech large grapples with one of many largest threats to its enterprise in years.
Within the days since Trump’s “liberation day” announcement, not less than 10 flights have taken off from Chennai Worldwide Airport, in accordance to three Indian officers with data of the matter.
Apple is counting on deepening its relationship with India to help it counter the speedy affect of the US President’s aggressive China tariffs, after it failed to get a last-minute exemption from Washington’s 104 per cent levy on the nation that got here into impact on Wednesday.
Two Indian officers advised the Monetary Occasions that the US tech large was additional funding into the nation. “Apple is unquestionably pondering of doing extra in India,” mentioned one official. Apple declined to remark.
Apple has been considered one of Wall Road’s largest casualties of the US president’s tariff blitz — dropping about $700bn in market worth since final week’s bulletins — highlighting the dilemma the group faces, having constructed its enterprise round superior manufacturing in China.
Reserving India’s complete iPhone output for the US would enable it to cowl some 30mn of the 50mn-plus iPhones it ships to the US every year, in accordance to Financial institution of America analyst Wamsi Mohan.
“I do assume they’ve carried out a few of that work to mitigate a few of the affect within the very close to time period, but it surely’s clearly not a sustainable sort of resolution for any prolonged time frame,” Mohan mentioned.
Apple has been quietly rising its enterprise in India, notably because the coronavirus pandemic wreaked havoc on its China provide chains, but it surely nonetheless has about 80 per cent of its smartphone manufacturing in China, in accordance to Counterpoint Analysis.
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On Wednesday, MK Stalin, the chief minister of Tamil Nadu, India’s southernmost state which is house to 4 of the nation’s 5 iPhone crops, met with Andy Priestley, an government from key Apple provider Jabil, which final yr introduced an memorandum of understanding with the state to develop its facility there.
US-based Jabil has not publicly spoken about supplying Apple in India. On X, Stalin mentioned the assembly involved “making new enterprise investments in Tamil Nadu”.
Whereas India has been focused by Trump with steep “reciprocal” tariffs of 27 per cent, the nation has sought to placate him by opening talks on a bilateral commerce settlement with the US that Indians hope might see the tariff burden diminished.
Furthermore, India is anticipated to be one of many beneficiaries of Trump’s announcement on Wednesday that he was pausing extra tariffs on a variety of nations that have been prepared to negotiate with the US. These nations will nonetheless be the topic of 10 per cent levies on their exports to America.
Apple’s shares rose sharply after Trump’s assertion on his Reality Social platform. The US president later held out the prospect of some particular person corporations being exempted from the affect of reciprocal tariffs, saying: “We’re going to check out it.”
Regardless of Apple leaning extra closely on India for now, it doesn’t have the provision chain within the nation to enhance manufacturing considerably — leaving it uncovered to substantial tariffs over the long term and having to take into account both elevating costs for its high-end electronics or discovering methods to swallow the additional prices.
A number of analysts mentioned they anticipated any worth hikes from Apple to come later within the yr, probably with the brand new iPhone launch anticipated in September, and that they have been probably to be launched globally, spreading the affect of the US tariffs throughout customers worldwide.
Apple might additionally apply pricing strain on its suppliers to move on a part of the affect from tariffs, they mentioned.
A extra intractable concern for Apple is how to navigate Trump’s push for “made in America” iPhones. The administration has doubled down on the concept that Apple can start manufacturing iPhones within the US, one thing specialists say wouldn’t solely be astronomically costly for the corporate but additionally impractical, given how deep its China ties run.
“Trump believes now we have the labour, now we have the workforce, now we have the sources to do it,” White Home press secretary Karoline Leavitt mentioned on Tuesday, echoing sentiments voiced by commerce secretary Howard Lutnick over the weekend.
It will most likely value Apple “a number of billions” of {dollars} to shift even a portion of its iPhone provide chain to the US, in accordance to estimates by Morgan Stanley analysts. Wedbush analyst Dan Ives estimated it could take Apple three years and $30bn to transfer simply 10 per cent of its provide chain from Asia to the US.
“This can be a firm that has embedded itself in China and south-east Asia for many years, now seemingly trying on the prospect of being compelled to change the whole method wherein they consider constructing and pricing an iPhone,” says Erik Woodring, analyst at Morgan Stanley.
The strain comes regardless of Apple pledging in February to rent 20,000 employees as a part of a $500bn US spending plan for the subsequent 4 years that features a new facility manufacturing servers for synthetic intelligence in Texas.
The truth that Apple doesn’t at the moment run its personal manufacturing services, however outsources them to Asia-based corporations it has spent 20 years and billions of {dollars} nurturing with specialist tools, provides an extra layer of complexity.
iPhone meeting is at the moment carried out in mainland China by corporations akin to Taiwan’s Foxconn and Pegatron and to a lesser extent in India, the place Tata is constructing capability as an Apple provider. It’s the ultimate step in an enormous chain of Apple suppliers, most of that are at the moment primarily based in Asia.
There are 387 particular person components concerned in ultimate meeting of an iPhone 16, in accordance to market analysis group TechInsights, which embrace chips, circuit boards, batteries, wires, lenses, screens and metallic and plastic components.
Apple’s most up-to-date public provider record, which covers the 2023 fiscal yr, reveals the 187 corporations accountable for 98 per cent of the corporate’s direct spend that yr. Of those corporations, 169 had a producing presence in mainland China and Taiwan.
Past China, the corporate faces strain all throughout its provide chain. Vietnam, a key MacBook exporter, has been hit with 46 per cent tariffs regardless of a proposal from the nation’s authorities to slash levies on US items to zero.
Whereas assembling iPhones within the US is “technically” attainable to do within the US, mentioned Financial institution of America’s Mohan, the query is “whether or not the parts which can be being sourced to make an iPhone are going to get tariffed,” he added. “In that case, then it’s a large headache.”
Following a name with executives at Luxshare, one other key Apple provider, Bernstein analysts mentioned it confirmed their view that transferring iPhone meeting to the US was “impractical” as it could “stay reliant on Asian parts topic to tariffs.”
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