Why Apple is expanding iPhone production in India despite Trump’s objections
CHENNAI: Apple’s contract manufacturer for iPhone production, Hon Hai Precision Industry Company—better known as Foxconn—announced earlier this week that it is moving forward with a $1.5 billion display module plant in India. The announcement, made through an exchange filing at the London Stock Exchange, came just a few days after former US President Donald Trump publicly criticised Apple’s strategy to expand iPhone production outside the US. He later proposed a 25% tariff on iPhones manufactured abroad—a move that appears more transactional than practical.
Foxconn stated it will invest $1.49 billion in one of its Indian subsidiaries, Yuzhan Technologies (India) Pvt Ltd. The new facility is expected to be established in Tamil Nadu, where Foxconn already operates a large iPhone production unit.
Industry experts view this as a strategic move driven by sharp economic calculations. “Apple should continue scaling operations in India, leveraging government incentives and supply chain growth, while maintaining minimal production in the US for optics and political goodwill,” they say.
Here is a comparative analysis of India and the US in the context of Foxconn’s recent move:
The Strategy
India presents a cost-effective, incentive-driven, and geopolitically strategic environment for iPhone manufacturing. While US political figures such as Donald Trump express concerns over production moving offshore, the realities of cost, labor, and supply chain economics heavily favor India.
Foxconn's latest $1.5 billion investment in India underscores its intent to scale up operations there, especially given the absence of equivalent-scale investments in the US. Currently, India accounts for approximately 15% of Apple’s global iPhone production, while the US contributes only a small fraction.
Government Support
India offers substantial support through its Production Linked Incentive (PLI) scheme. In 2023–24, Foxconn received around ₹2,450 crore ( about $295 million) in subsidies. In contrast, the U.S. does not provide any comparable direct subsidies for iPhone manufacturing.
Political Signals
India’s political leadership is actively promoting the country as a global manufacturing and export hub, aligning well with Apple and Foxconn’s expansion strategies.
Cost Factor Comparison
Labor cost remains the most critical factor. In India, electronics factory workers earn about $2 per hour, compared to $20–$25 per hour in the US—a massive cost advantage.
Labor Regulation Flexibility
India offers relatively moderate labor regulations combined with incentives for manufacturers. In contrast, companies in the U.S. face stricter labor laws and higher risks of unionisation.
Workforce Availability
India’s young and expanding labor force gives it an edge in manufacturing. The US, in contrast, faces challenges due to an aging and expensive workforce, despite higher skill levels.
Considering labor costs are over 10 times higher in the US, India is significantly more attractive for labor-intensive assembly operations. Moreover, Apple suppliers in India benefit from PLI subsidies of up to ₹6,600 crore (~$790 million) over three years, compared to no similar targeted incentives in the US.
Additional incentives for component manufacturing in India—₹23,000 crore (~$2.75 billion)—are expected to further bolster companies like Foxconn. In the US, although there are general tax breaks, they are not as targeted or industry-specific.
Establishment Costs
The cost of establishing manufacturing facilities is also substantially lower in India. The per-labor establishment cost in India ranges from $5 to $8, compared to $50 to $60 in the US, according to industry estimates.
Export Subsidies
India supports export-oriented units through reduced duties and direct cash incentives via the PLI scheme. The US, by contrast, does not offer export-specific subsidies for iPhone production.
Infrastructure and Ecosystem
While the US has a mature component supplier base, it is not optimized for Apple’s iPhone supply chain. In India, especially in states like Tamil Nadu, the ecosystem is rapidly developing to meet such demands.
Logistics
India is making significant improvements in port infrastructure and offers low domestic transport costs, making it attractive for export-oriented production. In comparison, the US faces higher logistics costs, especially for international distribution.
Tariffs and Trade Policy
US tariffs on Chinese goods have accelerated Apple’s efforts to diversify its supply chain. While U.S.-based production may reduce some tariff risks, the cost is prohibitive. India offers a cost-effective alternative and a tariff-safe haven for US-bound iPhones amid current global trade tensions.
Other Strategic Considerations
Apple’s long-term goal of producing 25% or more of its iPhones in India is aimed at reducing its dependency on China. India’s relatively stable political environment and strong government support present a lower-risk alternative compared to the policy unpredictability in the US.
Conclusion
When comparing total establishment and manufacturing costs, India comes out significantly ahead. The estimated assembly cost per unit in India is around $15–$25, compared to $70–$85 in the US. This means producing iPhones in India can be three to five times cheaper than in the United States—a compelling economic rationale for Apple and Foxconn’s strategic shift.