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First it was a gentle no, then a threat. The US president told Tim Cook, CEO of Apple not to invest in India because ‘it could look after itself,’ and advised him to manufacture iPhone within the US. When it didn’t work – and Cook assured India that he would standby his commitment to invest – enraged Donald Trump said that if Apple did invest in India, the US government will slap a tax of 25% of the cost on each manufactured iPhone.

We may recall that in 2023, the former US President Biden and Prime Minister Modi signed a MoU on Semiconductor Supply Chain and Innovation Partnership to coordinate joint semiconductor incentive programs. This was meant to promote commercial opportunities, research, talent, and skill development. US IT giant Micron Technology, Inc., promised to invest up to $825 million to build a new semiconductor assembly and test facility in India with support from the Indian government. The combined investment was valued at $2.75 billion. Apple’s entry into India was part of this U.S.-India Comprehensive Global and Strategic Partnership programme, which aimed at a new level of trust and mutual understanding between the two countries. The new Republican President Trump is politically against such initiatives taken by the previous Democratic US government. Earlier Trump was unhappy when Elon Musk, in spite of being his good friends, pushed forward to manufacture Tesla’s electric cars in India. Musk’s effort was also a part of the earlier U.S.-India New and Emerging Renewable Energy Technologies Action Platform created by Biden- Modi agreement.

When it comes to business, the US corporate giants usually ignore the government dictum and go by their own trade rules. Trump is more a businessman than a seasoned politician. But after becoming the country’s president – and that too for the second time – he seems to go against his own businessman’s instincts. Elon Mask however, who stood firmly in favour of Trump in his fight for the Presidentship, follows his businessman’s reasons, ignores his friend’s ‘nay’ saying, and continues to negotiate with India to manufacture his electric Tesla cars. And Tim Cook will most probably do the same thing -because assembling iPhones in India, rather than in the US, makes strong business sense.

According to an estimate, in a $1000 iPhone, Apple makes a profit of $450. The manufacture of the phone happens in many countries – Taiwan makes the chip ($150), South Korea makes the OLED screen ($90), Japan supplies the camera ($85). An additional $125 cost comes from some other Apple components made in the US, Germany, Vietnam and Malaysia 

The earlier Apple phones were being assembled in China. Now this will shift to India. This is a global strategy called “China +1” which most American and European corporates have taken to pull out of China because of its growing economic power and consequent high-handedness. In this China +1 scheme, the greatest beneficiary is India and India is trying all out to grab the advantage. This assembly operation in India (earlier done in China) will cost a unit of iPhone $30, which if carried out in the US, as dictated by Trump, would be $ 390 because of the high labour cost in the Silicon Valley. If the 25% Trump tax is added to $30 cost of assembly in India, it would go up to $37.5. Still the Apple iPhone will cost ten times less than what it would if manufactured and assembled in the US.

Apple’s contract manufacturer Foxconn has already invested $2.50 billion in setting up its assembly line, near Bangalore. It will assemble 100,000 iphones by December 2025.

Foxconn had taken this decision long before because of first, the US-India Initiative on Critical and Emerging Technology (iCET) in 2023 which gives attractive incentives to USfirms investing in India. Second reason for Foxconn to move into India is the ‘China+1’ worldwide initiative. 

So Apple has every reason to come to India, initially for the assembling of the phone, in spite of Trump’s threats.