Commentary: Apple’s iPhone factories won’t make India the next China

India has been advancing its place in the global electronics supply chain, with billions of dollars in government subsidies fueling high-tech manufacturing. Apple's move to build an alternative supply chain to avoid China has been met with both optimism and skepticism. While a quarter of iPhones are now produced in factories near Chennai, critics argue that this manufacturing is mostly final assembly, which doesn't add much value.

Vietnam exports more merchandise despite having a smaller economy, suggesting that the "Make in India" initiative has more hype than reality.

To settle the debate, a closer look at mobile phones, the biggest manufacturing success story under the Modi government, is needed. India exports fewer mobile phones than it imports, indicating that the manufacturing progress may not be as valuable as claimed. For every additional dollar going to workers, taxpayers are likely paying more than $1 in subsidies.

To assess the value addition, it's crucial to consider more than just trade data. While India's smartphone market is vast, many locally made phones never leave the country. Instead, examining what factories are actually doing can provide a better understanding of the progress.

Apple's iPhone 14 production in India shortened the production lag from six to two months, and the iPhone 15 was the first Apple device built in India for global sales. This has led to a US$2.1 billion turnaround in the trade balance between 2025 and 2026. However, the future of the trade balance remains uncertain, as memory-chip capacity is being absorbed by data centers, and India's demand for handsets is shrinking.

Additionally, the cost of smartphones could increase due to AI-related price shocks. The Indian government is planning to invest another US$13.4 billion to build a domestic semiconductor industry, but the previous US$10 billion subsidies only resulted in packaging chips made elsewhere. Making advanced chips domestically is a much more complex task.