Apple moves iPhone production to India amid US-China trade war

Move marks major adjustment for world's most valuable company

Workers inspect motherboards at the Foxconn plant in Shenzhen, China. The company manufactures iPhones in the country. AFP

Apple's plans to move iPhone production from China and to India comes as the company begins to feel the effects of the tariff row between the US and Beijing.

The world's most valuable company on Thursday reported 5 per cent growth in net profit and revenue for its fiscal second quarter, rising to nearly $24.8 billion and $95.4 billion, respectively, beating estimates. But it also warned of a $900 million hit in its next three fiscal months due to the trade war caused by tariffs announced by US President Donald Trump.

The financial hit is a "clear sign that Mr Trump's tariff turmoil is hitting the iPhone maker hard", said Josh Gilbert, a market analyst at brokerage eToro.

"For Apple investors, patience may be beginning to wear thin," he said. "After a tumultuous 2024, many were hoping 2025 would provide more optimism, but Trump’s tariffs may have squandered that expectation."

The US hit China with tariffs of up to 145 per cent. Beijing hit back with up to 125 per cent in levies.

While iPhones are, for now, exempt from US tariffs, the components used for their production are not. Apple chief executive Tim Cook made it clear the company's cost-hit projections are based on the assumption the situation will not change, indicating it could get higher or lower, depending on whether the US-China trade war escalates or diffuses.

The potential hit is not massive – barely 0.03 per cent of Apple's market capitalisation of $3.2 trillion – but it highlights the effects the trade uncertainty is having on companies.

The National unboxes the iPhone 16e, Apple's most affordable new iPhone

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How important is China to Apple's logistics?

About nine out of every 10 iPhones are made in China, which also comprises 80 per cent of Apple's entire production capacity, data from New York-based research firm Evercore ISI shows.

That highlights the country's key role in Apple's supply and logistical chains, with most products and boxes coming with the "Designed by Apple in California, Assembled in China" tag.

Cheaper labour has also been a key part of China's appeal. That has attracted several American companies, which have made a variety of products, from Levi's jeans and Major League Baseball equipment, to Harley Davidsons and General Motors vehicles, in China.

Make it in India (and Vietnam)

Mr Cook confirmed that the majority of iPhones to be sold in the US market in the coming months will come from India, significantly boosting its presence in the market, where it has been for about eight years.

Apple began manufacturing iPhones in India in 2017 with the original iPhone SE (now the 16e). Production accelerated further when the company announced in 2022 that it would make iPhone 14 models in the country.

The announcement is also a boost for India. Apple's shift reinforces Prime Minister Narendra Modi's Make in India programme, with the company having opened its first stores in the country in 2023.

Apple will also shift production of its other hardware to Vietnam, including for iPads and Apple Watches, Mr Cook added. Vietnam already manufactures about a 20 per cent of iPads and 90 per cent of wearables, according to Evercore ISI.

Other countries and territories in which Apple has production interests include Malaysia, which has factories for Macs, as well as Japan, South Korea, Taiwan and the US, where the company gets components.

In February, Apple announced it will invest more than $500 billion into an artificial intelligence-focused facility in Texas.