If Apple CEO Tim Cook decides to move manufacturing unit from India to US, it will be Apple which will lose more than India says a report by Global Trade Research Initiative founder Ajay Srivastava.
India may lose some low paying jobs, the report says, but if we see holistically currently, India earns USD 30 per iPhone, much of it is given back to Apple as 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 in the US, India’s share is less than USD 30. Yet, in trade data, the full USD 7 billion export value adds to the US trade deficit,” says Ajay Srivastava founder GTRI.
“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,” says 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, the report notes. A ‘Made in India’ iPhone of $1,000, carries a value of about $450 for the device, US component makers like Qualcomm and Broadcom gets another $80. Taiwan gets $150 for chip manufacturing, South Korea adds $90 for OLED screens and memory chips and Japan contributes $85 for camera. Other countries like Germany, Vietnam and Malaysia account for another $45 for smaller parts.
India and China as manufacturers get a mere $30 per device, which is less than 3 per cent of the device cost. But manufacturing units while returns low in value, is high in employment. 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 U.S.–not because it’s high-tech, but because it delivers jobs.” says Srivastava
Moving assembly units from India will create entry-level jobs in the US, but production cost would rise multi-fold for Apple. In India Apple pays an average of $290 per month to assembly workers, under U.S minimum wage laws it will rise to $2,900 – a 13-fold increase. The cost of assembling a device will increase from $30 to $390 per device. Overall, Apple profit per device will reduce to $60 from $450 unless it raises price of iPhone which will hit American buyers.
Will Tim Cook, Apple CEO sacrifice such a big portion of its high profit to rebuild America or he will go with a commercial decision, is still to be answered.
There are many questions still to be answered. Is Trump playing a pressure tactics through these statements to put pressure on India for a favourable trade deal under the ongoing negotiations. Why did Trump didn’t asked Cook to move manufacturing from China, which still makes 85 per cent of iPhones, India contributes only 15 per cent.
