Reduced Taxes to Boost Local Production
Up until now, specific iPhone components such as printed circuit board assemblies (PCBAs) and camera modules were subject to import taxes. By 2024, the Indian government had already lowered these taxes from 20% to 15%, a change that subtly enabled Apple to increase its profits by $35 to $50 million annually.
Now, the Finance Minister, Nirmala Sitharaman, has officially removed the taxes on several components, including USB cables (previously taxed at 2.5%). However, this policy does not extend to smartphones themselves, which are still subject to existing customs duties.
A Strategy to Counter Global Trade Tensions
This decision is part of a broader initiative to strengthen local industry and manufacturing and to attract companies looking to diversify their production due to global trade uncertainties (or those seeking to move their operations from China). Indeed, India is aiming to establish itself as a viable alternative to China, which may face new trade sanctions, particularly under a possible Trump administration in the U.S..
The goal is to encourage companies like Apple to shift more of their production to India, thereby reducing assembly costs locally. Already, Foxconn, a major contractor for Apple, has been manufacturing iPhones and chargers in India. By the end of 2024, there were also rumors that Apple might move its AirPods production to India to circumvent customs duties.
More than just benefiting Apple, this tax reform is part of a larger initiative: simplifying the complex Indian customs system. In January 2025, the government had already announced a $2.7 billion subsidy program to draw foreign investments. This policy of tax reduction and financial incentives is also aimed at competing with Vietnam, which has become a strategic hub for many tech firms. India hopes to capture a larger share of the production chain from major industry players.
Apple and India: A Growing Relationship
These measures are part of a broader context where Apple is gradually reducing its dependence on China. The company plans to manufacture 25% of its iPhones in India by 2028, a clear indication of the country’s rising prominence in the global supply chain.
By making it easier to assemble iPhones in India, the country not only provides a competitive advantage to foreign companies but also strengthens its local industry and promotes job creation in the tech sector. This strategy could transform the nation into a key player in global electronic manufacturing, especially given the ongoing U.S.-China tensions.