On April 25th, it was reported that the tariff policy of the Trump administration has made Apple's need to shift its manufacturing operations away from China more urgent than ever before. However, it turns out that shifting more production to its "suboptimal option" - India - is facing many challenges.
For many years, Apple has been committed to manufacturing more iphones in India in order to reduce its reliance on China. At present, approximately 80% of Apple's smartphones are still manufactured in China. However, the tensions between the Chinese government and India are hindering the realization of this strategic goal.
According to two people familiar with the matter, earlier this year, China refused to approve the export of key production equipment to India by one of Apple's Chinese equipment suppliers, which was originally planned for the upcoming trial production of the iPhone 17. Facing resistance, the supplier adopted a flexible strategy: setting up shell companies in Southeast Asia to purchase the necessary equipment and eventually transferring these devices to Foxconn's factory in India. Foxconn is the main iPhone contract manufacturer of Apple in China.
At present, Apple is more eager than ever to reduce its reliance on manufacturing in China. The Trump administration proposed earlier this month to impose import tariffs of up to 125% on products made in China. Although there are reports that there is still room for adjustment in the tariff policy, indicating that it has not been finalized yet.
By contrast, products made in India currently only need to pay a 10% tariff, although the White House announced this month that the rate will be raised to 27% in 90 days. U.S. and Indian officials expressed optimism this week about reaching a broad trade agreement between the two sides after Vice President JD Vance visited India.
Apple's plan to move some of its manufacturing operations out of China began to accelerate about five years ago, when the geopolitical situation between the United States and China tightened, and the control measures implemented by China during the pandemic severely disrupted the production chain.
Some of Apple's diversified layouts have a relatively small impact on China. For instance, Apple successfully persuaded some low-cost Chinese suppliers to build factories in Vietnam for assembling products with lower shipment volumes such as AirPods and Apple Watch. Insiders said that the Chinese government has not opposed this. Instead, it regards it as an opportunity to help Chinese enterprises "go global". Moreover, Vietnam has a population of only about 100 million, and its size itself limits Apple's ability to expand its manufacturing scale locally.
India is different. Several people involved in the production of iphones have pointed out that India, with a population of over 1.4 billion, is on par with China and has the potential to become a feasible alternative manufacturing base for Apple's most core and largest hardware product, the iPhone.
According to people familiar with Apple's supply chain in India, India currently assembles approximately 30 to 40 million iphones each year, accounting for one fifth of the global total production. Apple plans to increase iPhone production in India by approximately 10% this year and has set a long-term goal - to shift about 50% of global iPhone production away from China.
Sun Huili (phonetic), an associate professor at the Surrey Business School in the UK, pointed out: "Apple has played a key role in promoting China's technological progress, generating a huge spillover effect, driving the development of China's technology industry, and creating a large number of job opportunities." Therefore, China has a strong motivation to adopt a "lock-in strategy" to ensure that Apple is deeply integrated into its economic and industrial system.
If Apple successfully shifts its manufacturing focus to India, this could fundamentally shake the global consumer electronics supply chain. Over the past two decades, Apple has built a complete supplier network in China that serves smartphones and other electronic products, not only supporting Apple itself, but also serving many brands in China and around the world.
But this vision faces many challenges. Since 2020, China and India have imposed an increasing number of restrictions on cross-border business.
Several people familiar with the matter disclosed that Chinese employees of Apple and its suppliers have repeatedly encountered obstacles when applying for work visas to India, although the expertise of these engineers could have contributed to promoting the development of India's high-end manufacturing industry. Another person familiar with the matter said that the Indian government has also prevented key Chinese suppliers of Apple (such as Luxshare Precision Industry, which also assembles iphones for Apple) from investing in India.
According to sources related to Apple's supply chain in China, China is slowing down the process of Apple shifting iPhone production to India. This move stems from concerns over the loss of manufacturing jobs and the damage to the local economy. Insiders added that in some cases, local governments have met with Apple's supply chain partners and explicitly warned them not to cut production positions.
A spokesperson for Apple declined to comment.
Strict standards
Although Apple only started its manufacturing business in India in 2017 and is considered a "newcomer", the company has successfully promoted a number of policy adjustments, thereby creating a more favorable business environment in the local area. According to informed sources, this is largely attributed to the proactive response of the Indian government - long-standing protectionist policies have suppressed the development of the country's electronics manufacturing industry. The government is eager to turn India into a global manufacturing center for consumer electronics with the participation of Apple.
In 2020, Apple and the Indian government jointly formulated a policy to reduce the cost pressure it faced in manufacturing iphones in India, especially the expenses brought about by importing components from places like China. The policy, named "Production-Linked Incentive Scheme" (PLI for short), offers subsidies of up to 6% for iphones manufactured locally by Apple in India.
However, even with the active support from the Indian authorities, the Chinese government still influences Apple's business deployment in India.
According to a former Apple employee who was involved in the production of AirPods, during Apple's expansion of AirPods production beyond China and Vietnam, the company's senior management instructed the team in 2023 to avoid Chinese manufacturers when evaluating Indian production partners to prevent tensions between China and India from affecting future production line operations. Ultimately, Apple chose Foxconn, which has been manufacturing iphones in India for six years.
In recent years, Apple has also established a cooperative relationship with the local Indian enterprise Tata Group to promote its production of iphones in India. This move not only enhances Apple's bargaining power over Foxconn, but also helps to further deepen its strategic relationship with the Indian government.
However, the challenges Tata is facing are not small. According to several Indian supply chain insiders, Wistron and Pegatron, which once set up factories in India to produce iphones, have successively sold all or most of their Indian factories due to difficulties in making profits. Tata now takes over these production lines and, to a large extent, relies on the experience of the original employees, attempting to meet Apple's consistently strict standards in terms of scale and quality.
Language barrier
Although Apple and its partners have established an efficient and mature iPhone production system in China, this process cannot be simply transplanted to India.
For instance, in China, iPhone production lines usually operate on two 12-hour shifts, while Indian labor regulations require factories to implement three 8-hour shift systems. This means that Apple's manufacturing partners in India need to recruit an additional one-third more workers than those in China to meet the demands of round-the-clock production lines.
In 2023, Apple and its suppliers successfully lobbied local governments in India to relax labor regulations and allow the adoption of a 12-hour shift system. However, in actual implementation, these adjustments were not truly carried out. Insiders disclosed that Apple's manufacturing partners have found that Indian workers are generally reluctant to accept extended working hours.
In the same year, Apple also attempted to establish a sub-component assembly line in India - a crucial step in the iPhone manufacturing process, involving the installation of metal brackets and screw holes for core components such as the front and rear glass panels, speakers, earpieces and the body. However, this attempt ultimately failed to achieve the established quality and cost targets. Two people familiar with the matter said that Apple thus decided to move the assembly process back to China.
At present, Apple's iPhone production in India is still mainly concentrated in the final assembly stage, that is, assembling and screwing together prefabricated components from other origins.
In addition, as the operating system interfaces and other functions of some manufacturing equipment are in Chinese, two supply chain insiders disclosed that Apple has begun to require its Chinese equipment suppliers to provide English versions of the system interfaces to alleviate this issue.
Equipment transportation predicament
However, one of the biggest challenges that Apple is currently facing in India is how to transport key manufacturing equipment from China to India.
Although Apple continues to advance its manufacturing plan in India, the process of delivering key equipment to India is becoming increasingly difficult.
Several people familiar with the matter pointed out that Chinese regulatory authorities are delaying or preventing the shipment of iPhone production equipment to India in an unexplained manner. Take Foxconn as an example. The approval period for its export of iPhone manufacturing equipment from Chinese factories to India has been extended from two weeks to four months, and some applications have been directly rejected.
According to informed sources, the equipment under key review includes: high-precision laser welding machines (used for welding metal parts to iPhone frames), air tightness test benches (for testing the waterproof performance of the equipment), and pickers (automated devices capable of identifying, grasping and transferring components), etc.
To deal with these problems, Apple is attempting to obtain the required devices through channels outside China. Two people familiar with the matter said that Apple has encouraged some Chinese device manufacturers to set up factories in Southeast Asia and hinted that cooperating with the factory setup would lead to more orders from Apple. However, this plan itself also has challenges. An employee of a certain equipment manufacturer pointed out that his company is facing a dual predicament of a shortage of technical personnel and insufficient supply of local components in Southeast Asia, making it difficult to implement the factory establishment plan.
In addition, Apple is also considering switching to devices manufactured by suppliers in Japan, South Korea and Taiwan, China, but their prices are generally higher than those of similar products in China. Insiders said that considering Apple's strict standards for the accuracy and performance of devices, at least one year of testing and certification is required before adopting these devices.
During this period, Apple's manufacturing partners in India had to adopt some technological downgrading plans. Insiders said that to deal with the delay in equipment delivery, some operations that should have been completed by automated equipment can now only be replaced by manual operations.
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