iPhone 17 manufacturing in India to boost export, supply chain

By Krishan Arora

Apple’s decision to manufacture the entire iPhone 17 lineup in India marks a transformative moment for the country’s electronics sector and its integration into global supply chains. With production now anchored in Tamil Nadu and Karnataka through partners such as Foxconn and Tata Electronics, India is no longer just a consumption market—it is emerging as a strategic manufacturing hub.

This shift reduces reliance on imports and, thereby, avoids the 20% Basic Customs Duty (BCD) typically levied on fully assembled smartphones brought into India. It also insulates Apple from future tariff escalations in key export markets, such as the US, where certain Indian goods now face duties of up to 50%, even though smartphones remain exempt for now.

Apple’s India sales hit a record USD 9 billion in FY25, primarily driven by iPhone demand. Shipments rose 21.5% year-on-year to 5.9 million units in H1 2025, with the iPhone 16 as the top-selling model. Notably, 86% of Indian buyers opted for non-Pro variants, and the 128 GB configuration accounted for nearly a third of all sales, reflecting a value-conscious yet brand-loyal consumer base.

Incentives Powering Exports and Ecosystem Growth

Local manufacturing not only saves on BCD but it also unlocks fiscal incentives under the Production Linked Incentive (PLI) scheme, which provides 4% to 6% cashbacks on incremental sales of mobile phones made in India over five years. This policy support has enabled Apple’s contract manufacturers to exceed USD 10 billion in iPhone exports during FY 2024–25. Exports surged 53% year-on-year in the first half of 2025, reaching 23.9 million units.

India’s role as an iPhone export hub continues to expand rapidly. In H1 2025, 78% of iPhones assembled in India were shipped to the US, up from 53% a year earlier. Even during the typically lean April to July period, exports reached a record USD 7.5 billion—a 63% increase over the same period in the previous year.

State governments have stepped up with targeted support: Tamil Nadu has extended capital subsidies, fast-track environmental clearances, and dedicated electronics parks, while Karnataka has offered land at concessional rates, power tariff rebates, and skill development grants. These incentives have catalysed large-scale job creation and deepened Apple’s supplier base across MSMEs and component makers.

Tax Structure and Pricing Paradox

From a tax perspective, the GST on finished smartphones remains at 18%, with some relief offered through the rationalisation of rates on select electronic components. However, key parts such as semiconductors and display panels continue to attract the standard GST rate.

Despite Apple assembling iPhones locally in India, prices remain significantly higher than in China or the United States due to the continued dependence on imported components, many of which attract import duties. Additionally, an 18% GST is applied to the final retail price, which adds to the overall cost.

Further contributing to the price gap are retail dynamics and brand positioning. Third-party retail channels typically add a markup of 10–12%, while Apple retains its premium pricing strategy in the Indian market to maintain its luxury appeal. As a result of these combined factors—taxes, import duties, retail margins, and brand positioning—iPhones in India can be Rs 30,000 to Rs 45,000 more expensive than the same models sold in other major markets.

From Cost Barriers to Strategic Gains

Although the recent policy changes may not immediately lower end-user prices, their long-term implications are substantial. Streamlined taxation and improved supply chain efficiencies are expected to reduce tax leakage and reinforce India’s role as a premium device manufacturing destination.

Apple’s expanding footprint under the Make in India initiative is also set to generate employment, increase export capacity, and position India as a credible high-tech manufacturing powerhouse.

The author is a Partner – Tax Planning and Optimisation at Grant Thornton Bharat.