India's technology and manufacturing sectors face potential disruption following a significant shift in the stance of the United States regarding Apple, a global tech giant. Recent comments by former US President Donald Trump have cast doubt on Apple's ongoing manufacturing and investment plans in India. If US pressure forces Apple to relocate its production, the consequences will extend beyond mere economic impacts.
Apple's Presence and Investment in India
Apple is rapidly expanding its iPhone manufacturing in India, largely facilitated by the Taiwanese company, Foxconn. This manufacturing process directly employs approximately 60,000 people, boosting employment opportunities within the country. Foxconn has invested approximately $1.5 billion in India to date and recently announced a further $1.49 billion investment to expand its Tamil Nadu plant. This signifies a growing trend of major companies viewing India as a new manufacturing hub, shifting away from China. This positions India as an increasingly vital player in global tech production, benefiting both the national economy and employment prospects.
Trump's Warning: 25% Tax on Indian-Made iPhones
Former President Donald Trump recently stated that if Apple manufactures iPhones in India instead of China, the US would impose a 25% import tariff. Trump argued for reshoring American manufacturing capabilities. Currently, the US imposes a 10% tax on iPhones manufactured in India and a 30% tax on those made in China, making India currently more advantageous for Apple. However, a 25% tariff would significantly reduce the profitability of manufacturing in India for Apple.
Balancing Production Between China and India
Currently, approximately 80% of iPhones sold globally are manufactured in China, while India's share is around 15%. Nevertheless, India has significantly boosted its manufacturing sector in recent years and successfully increased its participation in Apple's production. India annually exports approximately $6 billion worth of iPhones and other phones to the US, significantly contributing to the nation's economy. However, changes in US trade policy, such as increased tariffs on Indian-made phones, could reduce these exports, impacting both employment and investment. Therefore, strengthening its manufacturing capabilities and maintaining its position in the international market is crucial for India.
Impact on Companies Like Micron
Sources suggest that this US policy may not be limited to Apple. The US government may pressure chip manufacturers, such as Micron, to relocate production from India in the future. Micron previously manufactured in China but is now establishing a unit in India. Increased import tariffs on Indian-made chips would negatively impact India's semiconductor industry.
Potential Shift in US Company Mindset
The Indian government has invited numerous US companies to invest and manufacture in India over the past years. Partnerships between Indian and US companies have increased in sectors such as toys, leather, and electronics. However, if the US maintains its stringent stance, US companies may hesitate to invest or partner in these sectors. This could severely hamper initiatives like "Make in India."
Will Foreign Investment Halt for India?
This situation poses considerable concern for India, as the investment attracted by distancing itself from China may be diverted elsewhere. To maintain the confidence of major companies like Apple, the Indian government must implement clear policies and actively engage in international diplomacy.
Experts believe India needs to employ a diplomatic strategy, engaging in open dialogue with the US to maintain its role as a new hub for global manufacturing.
New Challenges for the Government
The Indian government has provided significant incentives and support to companies like Foxconn and Micron to encourage increased production and job creation. However, higher tariffs imposed by powerful nations like the US on goods manufactured in India pose a significant challenge. The government must therefore develop new strategies to address this situation. India must take decisive steps to protect its interests, ensuring sustained foreign investment and positive impacts on the national economy.
This clash in trade policies between the US and India could significantly impact India's technological trajectory. If Apple and other US companies relocate their manufacturing operations, India would not only face job losses but also a profound impact on foreign investment and global confidence.
