NEW DELHI: Even if the United States were to impose a 25 per cent tariff on iPhones manufactured in India, the total production cost will still be much lower, compared to manufacturing the devices in the US, according to a report by Global Trade Research Initiative (GTRI).
This comes amid a statement by US President Donald Trump threatening to impose 25 per cent tariffs on iPhones if Apple decides to make it in India. The GTRI report showed that manufacturing in India remains cost-effective, despite such duties.
The report breaks down the current value chain of a $1,000 iPhone, which involves contributions from over a dozen countries. Apple retains the largest share of the value, about $450 per device, through its brand, software and design.
It also added that the US component makers, such as Qualcomm and Broadcom, add $80, while Taiwan contributes $150 through chip manufacturing. South Korea adds $90 via OLED screens and memory chips, and Japan supplies components worth $85, mainly through camera systems. Germany, Vietnam and Malaysia account for another $45 through smaller parts.
GTRI stated that China and India, despite being major players of iPhone assembly, earn only around $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 US. In India, assembly workers earn approximately $230 per month, while in the US states like California, labour costs could soar to around $2,900 per month due to minimum wage laws, a 13-fold increase.
As a result, assembling an iPhone in India costs about $30, while the same process in the US would cost around $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 US, its profit per iPhone could fall drastically from $450 to just $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 US trade restrictions. (ANI)
