Centre mulls maximising electronics earnings amid uncertainty over Apple exports

Such a move would reduce dependence on imports and help save foreign exchange for the country, these people added, particularly in light of the reciprocal tariffs announced last week by the US administration. Most components for making smartphones, including for Apple’s iPhone, are still imported.

One proposal has advised the ministry of electronics and information technology (Meity) to start with deploying warehouses with special import duty privileges to ensure that companies build inventories of electronics sub-components and raw materials. Such stockpiles would help India expedite electronics component engineering domestically, which in turn will increase the net value of electronics items made in the country.

The people cited above said that a framework to ramp-up local components manufacturing is expected in the coming weeks. Meity did not immediately respond to Mint’s request for a comment.

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“The current tariff environment remains uncertain globally, leading to unprecedented reactions from multiple nations to the US’s reciprocal tariffs,” the first person cited above said. “This marks a key moment in India’s electronics journey and increasing India’s value in the global electronics supply chain will be key to marking it as an important geography.”

Low value addition

As of last month, India exported $14.5 billion in electronics, of which nearly $9 billion was accounted for by smartphones, including $6 billion by Apple’s iPhones—which are assembled in India by Tata Electronics and Bharat Foxconn International Holdings groups.

However, India’s domestic value addition (contribution to GDP) from these exports is just 10-15%, as per industry and government executives. This leaves India with around $600 million in net earnings from iPhone exports.

According to industry estimates, iPhone exports to the US amount to $1 billion (of the $6 billion total), which will now be subjected to 26% in trade tariff. While India is relatively favourable compared to China or Vietnam for Apple to export its products from, Brazil and Thailand offer cheaper tax rates and, in turn, a shot for Apple to maintain its sales margin.

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Apple had not responded to Mint’s request for a comment on its India manufacturing expansion plans as of Monday.

Two industry analysts said Apple roughly exports 17-20 million iPhones from India, and until Trump’s tariffs were announced on 2 April, the company was expected to ramp up its India assembly efforts to 55-60 million by 2028.

Now that this expansion is potentially uncertain, India’s domestic value addition represents “a clear way to continue reaping the benefits of the global importance of the electronics industry,” the third person cited above added.

To be sure, domestic value addition refers to the total amount that is added to the gross domestic product (GDP) of a country from an industry. In India, an estimate by government-backed think-tank, Niti Aayog, published in July last year said, “in a business as usual environment, India’s electronics market could reach $278 billion by FY30″. In the same time span, India is targeting its overall electronics ecosystem, including sales revenue, to cross $500 billion.

Government and private industry sources peg India’s domestic value addition to be at 15% at the moment—which will give India approximately $40 billion in value added to the GDP in the next five years.

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In place of this, the three people that Mint spoke with said that with more local manufacturing, India can ramp-up its electronics ecosystem’s value addition to up to 30% during this period.

Rapid shift

“While this is expected to happen in the long run, the proposal to expedite domestic value addition is key for India to relatively insulate itself in the face of Trump’s tariffs right now, which affects India too,” the second person cited above said.

Industry veteran Ajai Chowdhry, co-founder of HCL and chairman of Epic Foundation, said that the current market conditions are important for India to ramp-up domestic value addition.

“While the components scheme has been announced, it’s important to note that more than reacting to the US-imposed tariffs, now is a crucial moment for increasing value addition in India’s electronics ecosystem. Ramping up local component sourcing rapidly will help India amplify what we can earn, and move upward from being a low-margin assembly nation to a higher-value stakeholder in the global electronics ecosystem,” he said.

Others, however, remain sceptical. Navkendar Singh, associate vice-president at IDC India, said that the key question currently “is because of the Trump-fuelled uncertainties”.

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“We don’t know if the tariffs will remain consistent for the next five years. Had this been certain, India could have potentially navigated and found a strategy for the long run. From where it stands today, Trump’s uncertain global policy could swing trade tariffs either way, or even abolish them in the near term. India may also lose some assembly contracts to Brazil, and in the near-term, domestic value addition won’t have an instant impact on the sector,” Singh said.