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Even if the United States were to impose a 25 per cent tariff on iPhones manufactured in India, the total production cost would still be much lower if compared with manufacturing the devices in the U.S, according to a report by Global Trade Research Initiative (GTRI).
This comes amid a statement by U.S. President Donald Trump, threatening to impose 25 per cent tariffs on iPhones if Apple decides to make it in India. However, the GTRI report showed that manufacturing in India remains cost-effective, despite such duties. The report breaks down the current value chain of a USD 1,000 iPhone, which involves contributions from over a dozen countries. Apple retains the largest share of the value, about USD 450 per device, through its brand, software, and design. It also added that the U.S. component makers, such as Qualcomm and Broadcom, add USD 80, while Taiwan contributes USD 150 through chip manufacturing. South Korea adds USD 90 via OLED screens and memory chips, and Japan supplies components worth USD 85, mainly through camera systems. Germany, Vietnam, and Malaysia account for another USD 45 through smaller parts. GTRI stated that China and India, despite being major players of iPhone assembly, earn only around USD 30 per device. This is less than 3 per cent of the total retail price of an iPhone. The report argues that manufacturing iPhones in India is still economically viable even if a 25 per cent tariff is applied. This is mainly because of the sharp difference in labour costs between India and the U.S. In India, assembly workers earn approximately USD 230 per month, while in the U.S. states like California, labour costs could soar to around USD 2,900 per month due to minimum wage laws, a 13-fold increase. As a result, assembling an iPhone in India costs about USD 30, while the same process in the U.S. would cost around USD 390. In addition to this Apple gets the benefit of production-linked incentive (PLI) on iPhone manufacturing in India from government. If Apple were to shift production to the U.S., its profit per iPhone could fall drastically from USD 450 to just USD 60, unless retail prices are significantly increased. The GTRI report highlighted how global value chains and labour cost differences make India a competitive option for manufacturing, even in the face of potential U.S. trade restrictions. (ANI)
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