Wall Street analyst Dan Ives of Wedbush Securities has weighed in on the ongoing debate surrounding Apple's iPhone production, stating that manufacturing iPhones in the United States is "not feasible." Instead, Ives predicts that Apple CEO Tim Cook will likely ramp up iPhone production in India by as much as 60%. This strategic shift comes amid rising trade tensions and a push from some political figures to bring manufacturing back to the U.S.
Ives's assessment is rooted in the complexities of Apple's supply chain and the cost model associated with iPhone production. He estimates that if iPhones were manufactured in the U.S., the price could skyrocket to around $3,500 per device, making them commercially unviable. This increase would be due to higher labor costs, the need to build new plants, and the challenges of establishing a robust supply chain within the U.S.
Currently, the majority of iPhones are manufactured in China, with India emerging as a key alternative production hub. Apple has been working to diversify its supply chain away from China due to geopolitical risks and trade policies. In fiscal year 2024-2025, Apple assembled $22 billion worth of iPhones in India, a 60% increase from the previous year. This means that approximately 20% of the world's iPhones are now made in India, a figure that is expected to grow.
Several factors contribute to India's appeal as an iPhone manufacturing base. The Indian government has been promoting the country as a global hub for smartphone manufacturing, offering incentives such as the Production Linked Incentive (PLI) scheme. This scheme subsidizes manufacturers based on their incremental sales, making India an attractive location for companies like Apple. Apple's contract manufacturers, including Foxconn, Tata Electronics, and Pegatron, have received significant financial support through the PLI scheme.
Foxconn, Apple's primary manufacturing partner, is investing heavily in its India operations. The company recently announced a $1.5 billion investment in its India arm, which will be used to expand iPhone production in the country. Foxconn aims to manufacture 25-30 million iPhones at its Indian facilities in 2025, doubling its production from the previous year. Tata Group's electronics division is also playing a key role, having acquired Wistron's local business and now managing Pegatron Corp.'s India operations.
Despite these advantages, shifting iPhone production to India is not without its challenges. Manufacturing iPhones in India is estimated to be 5-8% more expensive than in China. Infrastructure issues, such as traffic and mobility, can also increase production costs. Furthermore, there are concerns about whether India's infrastructure can handle a significant surge in production.
The potential increase in iPhone production in India also comes amid pressure from some U.S. politicians, including former President Donald Trump, who have called on Apple to manufacture its products in the United States. Trump has stated that he told Apple CEO Tim Cook that he does not want the company to expand its manufacturing operations in India. However, Apple has reassured the Indian government that its investment plans in the country remain intact.
While manufacturing iPhones in the U.S. may not be feasible in the near term due to cost and logistical challenges, India is poised to become an increasingly important manufacturing hub for Apple. The company's expansion in India is driven by a desire to diversify its supply chain, take advantage of government incentives, and mitigate geopolitical risks. As Apple continues to navigate these challenges, India is likely to play a central role in the company's global production strategy.
