Apple’s move to increase its production in India sparked a strong response from US president Donald Trump. He warned that iPhones being sold in the United States had to be manufactured domestically, or face high tariffs.
This warning is a significant step up in Trump’s strategy of global tariffs, as it targets one of the most valuable corporations on earth.
Trump wrote on Truth Social: “I’ve informed Tim Cook of Apple long ago that I expect that their iPhones sold in America, will be built and manufactured in America, not India or anywhere else.”
If that’s not true, Apple must pay a minimum of 25% in tariffs to the U.S.”
This is Trump’s very first trade threat directed at a specific company. It sets a precedent that could be used in the future to threaten other multi-nationals who heavily rely on production overseas.
Apple shares dropped more than 3 percent in premarket trade after this article, which impacted the broader sentiment.
Dow Jones Industrial Average Futures fell by 112 points or 0.3%. Nasdaq and S&P futures also declined by 0.4% each.
Source : Truth Social
Trump warns after Foxconn report on $1.5bn Indian plant
This statement follows reports that Apple’s main supplier Foxconn plans to invest $1.5 Billion in a component plant in Chennai, India. The move will further cement the position of India in Apple’s supply chain.
A Financial Times article states that the factory will be assembling iPhone display modules. These play an important role in touchscreen functionality and the visual quality of this device.
According to two Indian officials, the Oragadam Industrial Region in Tamil Nadu has been cleared by local authorities.
The investment is one of the biggest in the electronics sector and will create 14,000 new jobs.
Foxconn announced the investment in a London Stock Exchange filing this week. It noted that funds would be channeled through Yuzhan Technology India, its Indian subsidiary.
Apple currently manufactures 85% of iPhones in China. India accounts for approximately 15%.
Slowly, the company is increasing its Indian share of production. This was done to divert its supply away from China due to rising geopolitical risk and also to take advantage of India’s better trade relations with the United States.
Exacerbation of frustration
Trump’s threats follow a more measured comment he made on the issue last week.
Trump said that at an event held in Qatar, last week, he confronted Apple’s CEO Tim Cook over the growing Indian operations of the company, despite the pledge by the latter to invest $500 million in the United States.
Trump stated, “I had an issue with Tim Cook yesterday.” I told him, ‘Tim you are my friend.’ Your $500 billion is coming to India, yet you are building in India. “I don’t want to see you building in India.”
Apple, he said, was taking advantage of the preferential treatment it receives in the US to concentrate its production overseas. This is especially true in China.
He said, “You’ve been treated really well.” Now you have to do the building for us.
Apple US Manufacturing Costs: High.
Even though political pressure is mounting, it remains difficult to shift iPhone assembly from China to the United States.
Analysts estimate that moving production to India would result in a massive increase of labour costs. They go from $290 per worker per month to $2,900 per worker under US wage law.
The cost to assemble each device would go from $30 up to $390.
Apple could lose $450 per iPhone if it doesn’t raise its prices.
According to some estimates, the price of the device could be increased by nearly $3,000. This would represent a three-fold increase in price.
Apple has been using international production to combat this cost difference for many years.
India may offer lower costs, but bringing the manufacturing back to America would not be feasible without significant increases in retail prices and a drastic reduction of margins.
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