Apple Cuts China Reliance, Boosts iPhone Production in India and Vietnam

India has officially overtaken China as the top exporter of smartphones to the United States, and Apple is behind this shift. The iPhone maker’s aggressive supply chain diversification has led to India’s smartphone exports to the US surging from 13% to 44% in just one year, according to research firm Canalys.

It is clear that Apple's "China Plus One" strategy is not just a plan, but a reality now with China losing its export share as India and Vietnam gained. This blog explores why Apple is distancing itself from its Chinese manufacturing base and how its new hubs in India and Vietnam benefit the US tech giant.

Apple’s “China Plus One” Strategy Begins to Pay Off

According to Canalys, total smartphone shipments to the U.S. in Q2 2025 reached 27.1 million units. The shift in manufacturing origin for these devices is stark, with the volume of "Made-in-India" smartphones for the U.S. market growing by a massive 240% YoY.

"Apple has scaled up its production capacity in India over the last several years as a part of its ‘China Plus One’ strategy and has opted to dedicate most of its export capacity in India to supply the US market so far in 2025," notes Sanyam Chaurasia, Principal Analyst at Canalys.

U.S. Smartphone Imports by Country of Origin

Source: Canalys

Apple has begun manufacturing and assembling Pro models of the iPhone 16 series in India, but is still dependent on established manufacturing bases in China for the scaled supply needed for Pro models in the US, according to Canalys.

Why is Apple Cutting its Reliance on China for iPhone Production?

For decades, China was the undisputed centre of Apple's manufacturing empire. However, economic and geopolitical challenges have compelled Apple to re-engineer its global supply chain. This pivot is a calculated move to build a more resilient and future-proof production network.

• Navigating Geopolitical and Trade Uncertainty: While iPhones have largely remained exempt from direct U.S. tariffs on Chinese goods, the broader trade environment remains volatile. The risk of future tariffs and the general instability of the U.S.-China relationship creates uncertainty for Apple Inc. 

As Canalys points out, "Even if smartphones remain exempted from tariffs, many other categories are impacted, which might greatly impact consumers’ spending patterns and keep smartphone demand modest." This indirect impact and the need to mitigate long-term risk are powerful motivators for diversification.

• Lessons from Pandemic-Era Disruptions: The COVID-19 pandemic exposed the profound vulnerabilities of a concentrated supply chain. Strict "zero-COVID" lockdowns in key Chinese manufacturing hubs like Zhengzhou, dubbed "iPhone City," caused severe production bottlenecks and shipment delays for Apple, impacting global product availability and highlighting the urgent need for geographic diversification.
• The Eroding Cost Advantage: As China's economy has matured, its labor costs have gone up as well. The steady rise in wages has diminished the significant cost advantage that once made it the world's factory floor. This has naturally led Apple to seek out new regions where it can achieve more favorable production economics.

Apple has aggressively implemented its "China Plus One" strategy. This involves making substantial investments to cultivate manufacturing ecosystems in new countries, primarily India and Vietnam. However, Apple's goal is not to completely abandon China, but to create a balanced and flexible global presence that can better withstand regional shocks.

Financial and Strategic Upside of Diversification for Apple Inc

Moving significant production capacity out of China is a monumental undertaking, but the long-term benefits for Apple are compelling.

• Significant Cost Savings: India and Vietnam offer a considerable labor cost advantage. Manufacturing wages in these nations are significantly lower than in China, translating into direct savings. For instance, the manufacturing and assembly cost for a high-end iPhone in India is estimated to be just $30, a mere 3% of a $1,000 retail price, providing a substantial boost to profit margins.
• Lucrative Government Incentives: Both India and Vietnam are actively courting high-tech manufacturing with attractive government policies. India's Production Linked Incentive (PLI) scheme offers a 4% to 6% cash incentive on incremental sales of locally manufactured phones. Meanwhile, Vietnam offers a more favorable tariff rate of just 0.7% for importing electronic components, making it an ideal hub for assembling products like AirPods and MacBooks.
• Unlocking New Growth Markets: Establishing a major manufacturing presence in India does more than just cut costs for Apple. It also positions Apple to capture a larger share of one of the world's largest and fastest-growing smartphone markets. By producing locally, Apple can better navigate domestic policies.

By spreading its manufacturing base across India, Vietnam, and China, Apple reduces its vulnerability to any single point of failure. The company has committed $16 billion to its operations in India and Vietnam.

While China will remain an important piece of Apple's manufacturing puzzle, the strategic shift to India and Vietnam is accelerating at a great speed. This pivot is a forward-looking strategy designed to secure Apple's manufacturing, enhance its profitability.

Disclaimer:

The content is meant for education and general information purposes only. Investments in the securities market are subject to market risks, read all the related documents carefully before investing. Past performance is not indicative of future returns. The securities are quoted as an example and not as a recommendation. This in no way is to be construed as financial advice or a recommendation to invest in any specific stock or financial instrument. The Company strongly encourages its users/viewers to conduct their own research, and consult with a registered financial advisor before making any investment decisions. All disputes in relation to the content would not have access to an exchange investor redressal forum or arbitration mechanism. Registered office address: Office No. 507, 5th Floor, Pragya II, Block 15-C1, Zone-1, Road No. 11, Processing Area, GIFT SEZ, GIFT City, Gandhinagar – 382355. IFSCA Broker-Dealer Registration No. IFSC/BD/2023-24/0016, IFSCA DP Reg No: IFSC/DP/2023-24/010.