MC EXCLUSIVE Apple to divert India-made iPhones from Europe, UK, Asia to US in June quarter amid tariff pressures: Sources

Apple to divert India-made iPhones from Europe, UK, Asia to US in June quarter amid tariff pressures: Sources

Apple plans to reroute a significant portion of India-made iPhones—previously bound for European countries, the UK, Turkey, and Japan—to the US in the June quarter. Apple is accelerating local manufacturing to cushion the impact of rising US tariffs, according to industry officials and analysts.

“Sourcing from India is one of their steps to navigate the uncertainties related to tariffs and expand it, and not to keep it in one location,” Tarun Pathak, Research Director at Counterpoint, told Moneycontrol.

“Tim Cook also highlighted during the call, which means the US will have a lot of iPhones that have the country of origin as India rather than China. This means there will be a cut down on some of the iPhones that were going to Europe, besides production scale-up in India to cater to the needs in the U.S,” Pathak said.

Apple manufactured approximately 40–45 million iPhones in India in 2024, accounting for 18–20% of its global output. Of this, around 14–15 million were exported to the U.S., 13 million to other international markets, and about 12 million were sole in the Indian market.

According to industry officials, Apple has been shipping India-made iPhones to countries like the Netherlands, Italy, the Czech Republic, Japan, Turkey, the UK, and the UAE. “Apple will likely reroute India-made iPhones meant for these markets to the US for the June quarter by tweaking the models,” a source said.

“Apple might be preparing for the worst. Although we don’t see the 145% tariff being levied, Apple would prepare for that. And that involves shifting most of the US-bound iPhones to India and diverting to other countries from China,” said Abhilash Kumar, analyst at TechInsights.

Pathak noted that Apple has managed the ongoing uncertainty well by building inventory ahead of the tariff rollout. “We have already seen the ramp-up of production. The whole development is a huge advantage to India regarding localisation as Apple builds a full manufacturing ecosystem here,” he added.

Queries sent to Apple didn’t elicit any response.

Apple’s partners are already expanding the capacities of their Indian factories and setting up new units.

Tata Electronics’ new iPhone factory in Hosur has begun operations and is assembling older-generation iPhones. Foxconn’s new Bengaluru facility, the second-largest facility outside China, is being set up with an investment of $2.8 billion, will soon start operations for iPhone production. It will play a key role in ramping up exports from India.

While the shift is a strategic win for India, analysts caution that manufacturing costs in India remain slightly higher than in China. “There is still a disability of 5–6% when manufacturing in India compared to China,” a source said.

Pathak added that India has narrowed this gap. India has reduced these disabilities by 3–4% in the last two to three years compared with China.

"But there are definitely some disabilities because China has the natural advantage of an ecosystem that is very close to many supply chain companies. But India is also not very far off,” he said. "As for the US, it is hard to predict due to variables like labour costs, reassembly expenses, and state-wise differences in wages and workforce availability."

A J.P Morgan analysis found that while component and assembly costs for iPhones are identical at $510 in India and China, higher supplier margins in India (8% vs. 6%) raise the Bill of Materials (BOM) to $554 versus $543 in China, resulting in a 2% higher retail price ($1,008 vs. $986). In contrast, producing an iPhone in the U.S. is 30% more expensive, with component and assembly costs totaling $636 due to a 20% hike in component prices and double the assembly cost; combined with a 10% supplier margin, the BOM rises to $707, pushing the final retail price to $1,285.

Apple CEO Tim Cook said the company expects the majority of iPhones sold in the U.S. during the June quarter to be sourced from India. Almost all iPads, MacBooks, Apple Watches, and AirPods sold in the U.S. will be made in Vietnam.

“The existing tariffs that apply to Apple today are based on the product's country of origin... we do expect the majority of iPhones sold in the U.S. will have India as their country of origin and Vietnam to be the country of origin for almost all iPad, Mac, Apple Watch, and AirPods products sold in the U.S. China would continue to be the country of origin for the vast majority of total product sales outside the U.S.,” Cook said during the company’s earnings call on Friday.

Looking ahead, Cook said the outlook remains uncertain. “It’s very difficult to predict beyond June,” he said, indicating that the tariff situation remains fluid.

Cook also revealed that over half of the iPhones sold in the U.S. in the March quarter were sourced from India—a significant shift in Apple’s supply chain.

According to S&P Global Market Intelligence, 98% of Apple’s iPhone exports from India in March were destined for the U.S., totaling about 3.1 million units—a sharp rise from February’s 84%. Most of the March production was handled by Foxconn.

Apple said it managed to limit the impact of tariffs in the March quarter by optimizing its supply chain and building ahead of demand. However, if current tariff rates remain unchanged, it expects a $900 million cost increase in the June quarter.

The company said most of its tariff exposure relates to the 20% U.S. tariff on Chinese goods announced in February and an additional 125% tariff on after-sales products and accessories from China—bringing the effective tariff on some items to 145%.

The Financial Times reported on April 26 that Apple aims to shift the production of over 60 million iPhones annually, covering all U.S. demand, to Indian factories by the end of 2026.

India currently faces a lower 26% reciprocal tariff from the U.S., compared to China’s 145%. A bilateral trade agreement between New Delhi and Washington is also in the works and could be signed later this year.