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R. Suryamurthy

While Apple’s reported strategic shift to source 100% of its US-bound iPhones from India by 2026 signals a potential surge in Indian exports, a deeper analytical perspective, informed by insights from GTRI, raises critical questions regarding the actual economic benefit to India due to persistently low local value addition.

The recent S&P Global Market Intelligence data reveals a significant acceleration in iPhone exports from India to the US, reaching 97.6% of total exports in March 2025, a 219% increase from the preceding three-month average of 81.9%. This surge, seemingly driven by preemptive tariff avoidance, positions India as a crucial manufacturing hub for Apple’s US market. However, the headline export figures mask a stark reality concerning the domestic economic impact.

GTRI’s analysis, exemplified by the breakdown of a $1,000 retail price iPhone, underscores this concern. Despite an export value of $500 from India, the actual value accrued within the Indian economy is estimated at a meagre $30, representing a mere 6% of the export value. The remaining 94% is attributed to component suppliers ($450) and Apple’s licensing and other fees ($450), with US retailers capturing the final $50. This stark disparity translates to an estimated 0.6% local value capture on the $5.6 billion worth of smartphones exported from India to the US. Accounting for Production Linked Incentive (PLI) schemes and other concessions further diminishes the real earnings for India, potentially nearing zero.

This pattern of low local value addition is not isolated to smartphone exports, as highlighted by GTRI’s analysis of other sectors like solar panels, diamonds, and petrochemicals, where India’s value addition reportedly remains below 10% of the export value. Consequently, while the anticipated increase in iPhone exports will undoubtedly contribute to India’s headline trade figures, the actual multiplier effect on the domestic economy, in terms of job creation, technological advancement, and indigenous industrial growth, appears significantly constrained.

Nomura’s analysis, while acknowledging the potential for supply chain shifts to India driven by geopolitical factors and trade policy, implicitly supports the need for a focus on value addition. Their emphasis on “earnest ease-of-doing-business reforms” and the current heavy reliance on imported components from China for assembly (71.3% of Q1 2025 component shipments) directly relates to India’s capacity to increase its value capture within the manufacturing process. The dependence on imported components inherently limits the domestic value generated from final assembly.

While Apple’s strategic pivot towards India for its US-bound iPhone production presents a significant opportunity for export growth, a critical analytical lens reveals a concerningly low level of local value addition. For India to truly capitalise on these supply chain shifts and translate export volumes into meaningful economic development, a concerted effort towards enhancing domestic component manufacturing capabilities, fostering technological innovation, and increasing the local content in exported goods is paramount. Without a strategic focus on value addition, India risks becoming primarily an assembly hub, capturing a disproportionately small share of the economic benefits associated with high-value exports.

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