Apple Eyes India for Factory Growth, but US-China Deal Poses a Threat

Los Angeles/May 19, 2025
NRIpress.club/Ramesh/A.Gary Singh

India’s ambition to position itself as a global manufacturing hub has hit a sudden roadblock following a new trade agreement between the United States and China. Just as India began gaining traction in attracting production lines away from China, Washington and Beijing finalized a deal in Switzerland that sharply lowered US tariffs on Chinese goods—from a steep 145% to just 30%. In contrast, Indian exports still face a 27% tariff, narrowing the competitive edge India recently enjoyed.

According to Ajay Srivastava, founder of the Global Trade Research Institute, the shift may halt or even reverse the flow of manufacturing investment toward India. “While basic assembly work might stay, the chances for India to climb up the value chain are in jeopardy,” he warned.

This abrupt shift comes after growing optimism in New Delhi, particularly when Apple hinted it would shift a large portion of its iPhone production—meant for the US market—from China to India. That optimism was quickly dampened, however, by remarks from former US President Donald Trump, who claimed he told Apple CEO Tim Cook not to expand in India due to its high tariff regime.

Before the new trade terms were revealed, experts such as Capital Economics’ Shilan Shah believed India had the potential to replace China in several export categories. In fact, nearly 40% of Indian exports to the US mirror products traditionally shipped from China.

Early indicators seemed promising: Indian manufacturing exports recently saw a 14-year high, and analysts at Nomura highlighted evidence that India was benefiting from the global supply chain pivot—particularly in mid-tech industries like electronics, textiles, and toys.

Still, analysts caution that this short-term boost may not last unless deeper reforms take place. While some argue that the broader geopolitical decoupling between the US and China will continue, India’s long-standing challenges in attracting investment remain. Structural hurdles—such as complex regulations, sluggish logistics, and high operational costs—have stifled India’s industrial growth for decades, keeping its manufacturing contribution to GDP stagnant around 15%.

Though the Modi government has introduced incentive schemes and begun signing trade deals—such as the recent one with the UK—its success in truly shifting global supply chains remains limited. Niti Aayog, the government’s own policy think tank, admits that India has struggled to compete with regional peers like Vietnam and Thailand, who offer simpler tax systems, more liberal trade agreements, and smoother ease of doing business.

India’s reliance on China for critical components, especially in electronics, remains another bottleneck. Srivastava points out that while India assembles iPhones, most of the profit and advanced manufacturing remains abroad. “Until components are made locally, India’s share in the global supply chain will stay minimal,” he said.

Moreover, the jobs being created by these assembly units are low-skilled and offer limited economic value. Unlike earlier models—such as Nokia’s integrated manufacturing hub in Chennai—current manufacturers import key parts and focus mainly on final assembly, often seeking tariff concessions rather than investing in local ecosystems.

Some worry that Chinese firms may use India as a backdoor to the US market. While Indian policymakers have suggested encouraging more Chinese businesses to establish export-focused units, critics say this risks further weakening India's domestic industrial base.

In the end, despite headline announcements from global giants like Apple, India’s path to becoming the “next China” in manufacturing remains uncertain. As Srivastava emphasized, “This isn’t a long-term fix. India must make deep structural reforms—cut costs, simplify regulations, and build strong supply networks—or it risks losing out again.”

News Source....Click Here