If Apple CEO Tim Cook decides to move his manufacturing unit from India to the US, Apple will suffer more losses than in India. This claim has been made by Ajay Srivastava, founder of the Global Trade Research Initiative. According to the GTRI report, the country may lose some low-wage jobs due to Apple's manufacturing moving out of India, but if we look at the overall loss, there is not much loss.
According to GTRI, currently Apple earns US $ 30 on every iPhone, most of which is returned to Apple in the form of subsidy under the Production Linked Subsidy (PLI) scheme. Also, India is reducing tariffs on key smartphone components at the request of big companies like Apple, which is hurting the domestic industry, which is engaged in creating a local manufacturing ecosystem. In such a situation, even if Apple leaves, we do not expect any major loss.
India gets less than $30 for every $1,000 iPhone.
India's share of every iPhone sold in the US for about $1,000 is less than $30. Yet, in trade data, the entire $7 billion export value adds up to the US trade deficit," says Ajay Srivastava, founder of GTRI. If Apple moves its manufacturing to the US, India can increase its focus on new-age technologies and move beyond shallow assembly lines of smartphones.
"If Apple's assembly moves out, India will be able to stop supporting shallow assembly lines and invest in deep manufacturing - like chips, displays, batteries, and beyond," Srivastava says. Each iPhone manufactured in India carries the imprint of a dozen countries through its software, design, and brand, which accounts for a large part of the value. A $1,000 iPhone manufactured in India costs about $450, with US component makers such as Qualcomm and Broadcom getting another $80.
Taiwan gets US$150 for chip manufacturing, South Korea contributes US$90 for OLED screens and memory chips and Japan US$85 for cameras. Other countries like Germany, Vietnam and Malaysia get US$45 for small parts of the iPhone.
India's share is less than 3 percent of the device cost.
India and China get only US$30 per device as manufacturers, which is less than 3 percent of the device cost. Manufacturing units give low returns in value, but they provide more employment. About 3 lakh employees work in these units in China and 60,000 in India. GTRI says this is the reason Trump wants Apple to move its manufacturing to the US.
Workers will have to pay 13 times more if phones are made in the US.
"This is the part of the supply chain that Trump wants to bring back to the US. Not because it is high-tech, but because it provides jobs," says Srivastava. Shifting assembly units from India would create entry-level jobs in the US, but production costs for Apple would increase manifold. Apple pays assembly workers an average of US$290 per month in India. Under US minimum wage laws, this would increase 13 times to US$2,900. The cost of assembling a device would increase from US$30 to US$390 per device.
Overall, Apple's profit per device would drop from US$450 to US$60 if the company did not increase the price of iPhones. This would affect US buyers. Why Apple CEO Tim Cook would make such a huge loss by making iPhones in the US is a big question, and the answer is still to be found. There are many more such questions that may be answered in the future. Like why Trump didn't ask Cook to shift manufacturing from China, which still makes 80 to 85 per cent of iPhones, with India contributing only 15 to 20 per cent.
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