Apple, the global technology company, has a reputation for being risk-averse.
Yes, the company is innovative, but it is often not the first to market and tries to avoid political controversies. Today, Apple’s aversion to risk and rapid technological change is causing the company to be entwined in the global trade war between the United States and China. Because of this trade war, Apple is attempting to move most of its China-based manufacturing to India. Apple could have avoided this problem by shifting production from China in 2018 when President Donald Trump first started his trade confrontation with China. Rushing to India from China will prove to be challenging and expensive.
Recommended Stories
- Trump’s tariffs opened the door. Now Congress must end China’s trade privileges
- Don't bet on Trump to surrender on tariffs
- The world-shattering effects of the US-China AI race
By the end of 2026, Apple plans to manufacture most iPhones sold in the United States at factories in India. Apple is already holding discussions with contract manufacturers — companies that make the iPhones — and other products that carry the Apple name. Apple designs and creates the technology that makes Apple products so successful, but it is not a manufacturer. Apple designs and innovates. It captures the highest value in a product. This is what makes Apple so profitable and successful.
At this very moment, Apple is talking with Foxconn, a Taiwanese contract manufacturer, and Tata Electronics of India. The two companies will be the principal suppliers of Apple iPhones made in India.
However, the transition from China to India comes with many problems, not the least of which is that the government of China is making it difficult for Apple to relocate production. China already faces an unemployment crisis in its manufacturing sector. China does not want to lose the jobs provided by Apple. China will not allow Apple to move manufacturing equipment from China to India. Without explanation, China is delaying shipment of equipment to India. China will certainly find other ways to delay Apple’s transition from China to India. In addition, a likely consequence of the move is a further erosion in Apple’s revenues derived from China. The move from China to India will hurt Apple’s profits.
Although Indian Prime Minister Narendra Modi promotes India as a technology manufacturing destination, the country imposes tariffs on essential iPhone components. Manufacturing in India will be more expensive because it creates barriers to free trade. For iPhones, manufacturing costs will be as much as 10% higher than in China. India will also impose two taxes on iPhones manufactured in the country. The first is the Goods and Services Tax. This tax is a percentage added to the price of each iPhone. Moreover, India will levy a luxury tax on high-end iPhones.
India’s logistics infrastructure is not as robust and modern as China’s. Moving product from the factory to India’s ports will be another challenge. Finally, labor will be a constant headache in India. In China, workers work 12-hour shifts. In India, workers demand eight-hour days, and labor unions are strong. Working with unions can be a source of frustration for businesses.
WILL TRUMP LET PUTIN PLAY HIM WITH THREE-DAY CEASEFIRE BLUFF?
On Thursday, Apple will release its March quarter financial results. Analysts will be eager to question Apple management about how the company’s margins will be affected by the move from China to India and about Apple’s plans to raise prices for iPhones because of the higher costs associated with the move to India.
You can be certain that, ultimately, the consumer will pay the price for this trade war.
James Rogan is a former U.S. foreign service officer who has worked in finance and law for 30 years. He writes a daily note on the markets, politics, and society. He can be reached at [email protected].