iPhone 17: the implications of Apple making the entire line-up in India

Apple’s decision to manufacture the entire iPhone 17 line-up in India marks a transformative moment for the country’s electronics sector and its role in global supply chains. With production now anchored in Tamil Nadu and Karnataka through partners like Foxconn and Tata Electronics, India is no longer just a market—it’s a strategic manufacturing base.

This shift significantly reduces reliance on imports, thereby avoiding customs duty typically levied on fully assembled smartphones brought into India. It also insulates Apple from potential tariff escalations in key export markets, including the U.S., where certain Indian goods now face up to 50% tariffs—though smartphones remain exempt for now.

Fiscal Incentives and Export Acceleration

Local manufacturing not only saves the 20% Basic Customs Duty (BCD) on imports but also unlocks benefits from India’s Production Linked Incentive (PLI) scheme, which offers 4-6% cash incentives on incremental sales of mobile phones manufactured in India over five years. This has helped Apple’s contract manufacturers surpass $10 billion in iPhone exports in FY25, with exports surging 53% year-on-year in the first half of 2025 to reach 23.9 million units. India’s role as an export hub is rapidly expanding. In the first half of 2025, 78% of iPhones assembled in India were shipped to the U.S., up from 53% a year earlier. Between April and July 2025 alone—a traditionally lean season—exports hit a record $7.5 billion, up 63% from the previous year.

 State governments have stepped up with targeted support: Tamil Nadu has extended capital subsidies, fast-tracked 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.

 Apple’s India sales hit a record $9 billion in FY25, driven largely by iPhone demand. Shipments grew 21.5% annually to 5.9 million units in the first half of 2025, with the iPhone 16 being the top-selling model. Interestingly, 86% of Indian buyers opted for non-Pro models, and 128GB variants accounted for nearly a third of all sales, reflecting a value-conscious yet brand-loyal consumer base.

Tax Structure and Pricing Paradox

From a tax standpoint, the GST rate on finished smartphones remains unchanged at 18%. While the GST Council has rationalised rates on select electronics components, core parts like semiconductors and display panels still attract the standard rate. Despite local assembly, iPhones in India remain significantly more expensive than those manufactured in China. This is because of a number of reasons. For instance, iPhones have imported components—high-value parts that attract import duties. There’s the GST impact as well, with the 18% rate adding to the final retail price. Add to this the fact that third-party retail channels mark up 10-12% for their margins. And of course, Apple maintains this pricing as it wants to maintain its premium positioning. As a result, iPhones in India may cost ₹30,000–₹45,000 more than the same models sold in China or the U.S.

While making iPhones in India may not immediately lower consumer prices, the long-term impact is clear: enhanced supply chain efficiency, reduced tax leakage, and a stronger case for India as a premium device manufacturing hub. The Make in India initiative, bolstered by Apple’s expanded footprint, is expected to generate substantial employment, boost exports, and enhance India’s credibility as a high-tech manufacturing powerhouse.

(Arora is Partner-Tax Planning & Optimisation, Grant Thornton Bharat. Views are personal.)