Apple: Even if iPhone maker moves out, India won’t lose much, says GTRI
Virendra Pandit
New Delhi: With US President Donald Trump’s ‘advice’ to Apple, Inc. CEO Tim Cook to move his company’s manufacturing units to America, India will not lose much, according to the Global Trade Research Initiative (GTRI).
If the iPhone maker moves its assembly units from India, it will only create entry-level jobs in the US, but its production cost will rise multifold, GTRO founder Ajay Srivastava said, adding that India may only lose some low-paying jobs, the media reported on Friday.
It, therefore, makes little sense.
Trump is pressurizing India through such statements to extract a favorable trade deal under the ongoing negotiations. Why didn’t he ask Cook to move manufacturing from China, which still makes 85 percent of iPhones, while India contributes only 15 percent?
India earns about USD 30 per iPhone, much of which goes back to Apple as a subsidy under the Production Linked Subsidy (PLI) scheme. Also, India is reducing tariffs on key smartphone components at the request of big firms like Apple, which is hurting domestic industry who are into building a local manufacturing ecosystem.
“For every iPhone sold at around USD 1,000 (INR 85,000) in the US, India’s share is less than USD 30 (INR 2,550). Yet, in trade data, the full USD 7 billion export value adds to the US trade deficit.”
If Apple moves its manufacturing to US, India can increase its focus on new-age technologies and move on from shallow assembly lines of smart phones, he said.
“If Apple’s assembly moves out, India will be forced to stop propping up shallow assembly lines and instead invest in deeper manufacturing–chips, displays, batteries, and beyond,” said Srivastava.
Every iPhone made in India carries the imprint of a dozen countries, through its software, design and brand which carries a lion’s share of the value. A Made-in-India iPhone of USD 1000, for example, carries a value of about USD 450 for the device, US component makers like Qualcomm and Broadcom gets another USD 80. Taiwan gets USD 150 for chip manufacturing, South Korea adds USD 90 for OLED screens and memory chips and Japan contributes USD 85 for the camera. Other countries like Germany, Vietnam and Malaysia account for another USD 45 for smaller parts.
India and China as key manufacturers get a mere USD 30 per device, which is less than 3 percent of its cost. Of course, the manufacturing units offer higher opportunities for employment, although the returns are low in value. About 3 lakh workers in China and 60,000 in India work in these units. GTRI says this is the reason why Trump wants Apple to shift its manufacturing to US.
“This is precisely the segment of the supply chain Trump wants to bring back to the US — not because it’s high-tech, but because it delivers jobs,” says Srivastava.
Moving assembly units from India will create only entry-level jobs in the US, but production cost would rise multi-fold for Apple. In India, Apple pays an average of USD 290 per month to assembly workers, while under the US minimum wage laws it will rise 10 times to USD 2,900. The cost of assembling a device will increase from USD 30 to USD 390 per device. Overall, Apple’s profit per device will reduce to USD 60 from USD 450 unless it raises price of iPhone which will hit American buyers.
