Apple's India Shift: A Costly Mirage in the U.S.-China Tariff War

The U.S.-China trade war has forced companies like Apple to rethink their supply chains, but shifting iPhone assembly to India may not be the panacea it appears. Analyst Craig Moffett, a long-time Apple skeptic, recently delivered a scathing assessment to clients: moving production to India is an “unrealistic” solution to tariff pressures. His analysis reveals why Apple’s strategy faces insurmountable hurdles—and why investors should brace for further margin erosion and stock declines.

The Tariff Conundrum: Components Still Matter

Apple’s plan to shift U.S.-bound iPhone assembly to India hinges on one fatal flaw: components remain 90% reliant on China. Even if iPhones are assembled in India, tariffs on Chinese-made parts—chips, screens, and batteries—would still apply. Moffett estimates that tariffs on these components could add up to $100 per iPhone, eroding margins despite the assembly shift.

Currently, U.S. tariffs on Chinese goods average 145%, while India’s baseline tariff stands at 10%. However, Moffett argues that even this 10% “baseline” would “pose enormous challenges,” as Apple’s pricing power is already constrained. A 10% tariff on Indian-assembled iPhones would force Apple to raise U.S. prices by $100–$150, risking “demand destruction” as consumers delay upgrades or switch to cheaper alternatives.

The Sales Tsunami: China’s Backlash and Local Competition

While tariffs strain margins, Apple’s sales decline in China poses an even graver threat. Moffett highlights that anti-U.S. sentiment has driven Chinese consumers toward local brands like Huawei, Vivo, and Xiaomi. Apple’s iPhone sales in China fell by 20% in Q2 2024, and Moffett warns this trend could worsen.

The dual blow of rising prices and geopolitical distrust could extend Apple’s sales slump. Moffett notes that Apple’s “product-centric” business model—relying on premium pricing—leaves it uniquely vulnerable. Unlike software-driven peers, Apple’s revenue depends on selling hardware at margins that tariffs are now eroding.

India’s Production Hurdles: Time and Scale

Even if tariffs could be avoided, scaling Indian production is a years-long process. Apple’s Indian factories only began manufacturing top-tier iPhone models (Pro/Pro Max) in late 2024, and Moffett estimates it will take 1–2 years to match China’s output. Foxconn’s Chinese plants employ 50,000 workers at a single facility; replicating this scale in India would require massive investment and infrastructure upgrades.

Moreover, India’s own tariff policies are unstable. U.S. tariffs on Indian imports could rise if trade talks falter, negating any cost savings. Moffett quips, “Apple’s stockpile of 1.5 million iPhones shipped from India before tariffs spiked is a stopgap, not a solution.”

The U.S. Manufacturing Fantasy: $3,500 iPhones?

President Trump’s push for “Made-in-the-USA” iPhones is a pipe dream, Moffett argues. Wedbush analysts estimate that U.S. assembly would cost $3,500 per iPhone—triple the current price—due to labor costs and supply chain inefficiencies. Apple’s $500 billion “U.S. investment pledge” focuses on AI and content, not assembly, further underscoring the impracticality.

The Bear Case: Downgrades and Demand Destruction

Moffett’s analysis culminates in a stark warning for investors: Apple’s stock is overvalued relative to its tariff-exposed business model. He slashed his price target to $141 per share (from $184), a 33% reduction, and maintained a “sell” rating. His calculations show that without tariff relief, Apple’s margins could shrink by 5–7 percentage points, forcing painful price hikes.

Conclusion: No Silver Bullet for Apple

Craig Moffett’s analysis paints a grim reality: Apple’s supply chain diversification is a slow, risky process, and tariffs remain a “two-front battle” threatening both costs and sales. Even if iPhone assembly moves to India, components’ reliance on China ensures tariff pain persists. Meanwhile, China’s market decline and geopolitical headwinds amplify risks.

The data is clear:
- Tariff costs: $100–$150 per iPhone if assembled in India.
- Margin erosion: 5–7% without exemptions.
- Stock risk: Moffett’s $141 price target implies a 20% drop from current levels.

Investors should heed Moffett’s warning: Apple’s iPhone strategy is trapped in a trade war with no easy exits. Until U.S.-China relations stabilize—and that’s a big “if”—Apple’s stock remains a bear’s playground.