New Delhi is preparing to roll out a fresh round of manufacturing incentives specifically designed to accelerate Apple’s migration of iPhone production to Indian soil, a move that signals the Indian government’s deepening ambition to position the country as the world’s preeminent electronics manufacturing hub. The initiative comes at a moment when geopolitical friction between Washington and Beijing, coupled with Apple’s own strategic diversification, has created an opening that India intends to exploit with maximum force.
The numbers already tell a striking story. Apple exported roughly $17.5 billion worth of iPhones from India in the fiscal year ending March 2026, according to reporting by 9to5Mac. That figure represents a dramatic escalation from just a few years ago, when India’s share of global iPhone manufacturing was negligible. Now the Indian government wants more — significantly more — and it’s willing to put real money behind that ambition.
The proposed incentive package, still being finalized within India’s Ministry of Electronics and Information Technology, is expected to build on the Production Linked Incentive (PLI) scheme that was first introduced in 2020. That original program offered manufacturers cash rebates of 4% to 6% on incremental sales over a five-year period, a structure that proved enormously effective at luring Apple’s primary contract manufacturers — Foxconn, Pegatron, and Tata Electronics — into making substantial capital commitments in India. The new round is reportedly being designed to offer even more generous terms, with particular emphasis on high-value component manufacturing rather than just final assembly.
This distinction matters enormously.
For years, India’s role in Apple’s supply chain has been primarily as an assembly destination. Components — processors, displays, camera modules, precision glass — were manufactured elsewhere, overwhelmingly in China, South Korea, and Japan, then shipped to Indian factories where they were put together into finished iPhones. The value captured by India in this arrangement, while significant in absolute terms, represented only a fraction of the total manufacturing value chain. The new incentive structure aims to change that equation fundamentally by encouraging suppliers to set up component fabrication facilities within India itself.
Apple’s motivations for diversifying away from China have been well documented but continue to intensify. The Trump administration’s tariff policies — including the punishing duties on Chinese-manufactured electronics that were first imposed in 2025 and have since been ratcheted higher — have made the cost calculus of China-centric production increasingly unfavorable. And it’s not just tariffs. Supply chain disruptions during the COVID-19 pandemic, periodic lockdowns, and rising labor costs in Chinese manufacturing centers have all contributed to what Apple CEO Tim Cook has described as a strategy of “geographic diversification.”
India offers something China’s other rivals — Vietnam, Thailand, Malaysia — cannot easily match: scale. With a population exceeding 1.4 billion and a median age of roughly 28, India possesses a labor force of extraordinary size and growing technical sophistication. The country produces more than 1.5 million engineering graduates annually. Labor costs, while rising, remain substantially below Chinese levels. And critically, India represents Apple’s fastest-growing major market for device sales, meaning that local manufacturing also serves demand-side objectives by reducing import duties on finished goods sold domestically.
Foxconn, Apple’s largest contract manufacturer, has been the most aggressive mover. The Taiwanese giant has invested more than $1.5 billion in its sprawling facility near Chennai in Tamil Nadu and has publicly committed to further expansion. In recent months, Foxconn has begun manufacturing the iPhone 16 Pro and Pro Max models in India — a significant milestone, as premium-tier production was previously reserved exclusively for Chinese facilities. The company’s chairman, Young Liu, has made multiple visits to India over the past year, meeting with Prime Minister Narendra Modi and senior government officials to discuss expansion plans.
Tata Electronics, which acquired Wistron’s Indian iPhone manufacturing operations in 2024, represents perhaps the most symbolically important player. As an Indian-owned company assembling iPhones, Tata gives the Modi government a domestic champion to point to — proof that Indian firms can compete at the highest levels of precision electronics manufacturing. Tata has been expanding its facility in Hosur, Karnataka, and is reportedly in discussions to build a second major plant, potentially in Gujarat or Maharashtra.
But challenges persist. And they are not trivial.
India’s infrastructure, while improving rapidly, still lags behind China’s in critical respects. Power reliability remains inconsistent in some manufacturing corridors. Port logistics, though better than a decade ago, can’t yet match the speed and efficiency of Shenzhen or Shanghai. The bureaucratic apparatus — despite Modi’s much-publicized “ease of doing business” reforms — still presents friction that multinational manufacturers find frustrating. Multiple industry executives, speaking on condition of anonymity, have described a gap between the policy ambitions articulated in New Delhi and the on-the-ground reality in individual states.
Water scarcity is another concern that doesn’t get enough attention. Semiconductor fabrication and advanced electronics manufacturing are water-intensive processes. Several of the states most aggressively courting Apple suppliers — Tamil Nadu, Karnataka, Maharashtra — face chronic water stress. The Indian government has acknowledged this challenge and has included water infrastructure investments in its broader industrial policy framework, but execution has been uneven.
There’s also the question of whether India can develop a sufficiently deep local supplier base quickly enough. China’s dominance in electronics manufacturing rests not just on its assembly capabilities but on the extraordinary density of its component supply chain. Within a few hours’ drive of any major Chinese electronics factory, a manufacturer can source virtually every component needed for a smartphone. India is nowhere close to replicating that density. The new incentive package aims to address this by specifically targeting component manufacturers, but building a world-class supplier network is a generational project, not something that happens in a single policy cycle.
Still, momentum is clearly on India’s side. JPMorgan analysts have estimated that India could account for 25% of total iPhone production by 2027, up from approximately 14% currently. Some analysts believe even that projection may prove conservative if the new incentive structure is sufficiently aggressive and if U.S.-China trade tensions continue to escalate.
The geopolitical dimension can’t be overstated. The U.S. government has been actively encouraging American companies to reduce their manufacturing dependence on China, and India — as a fellow democracy and increasingly close strategic partner — is the preferred alternative in Washington’s eyes. The Quad alliance, which links the U.S., India, Japan, and Australia, has included supply chain resilience as a core pillar of cooperation. Apple’s shift toward India fits neatly within this broader geopolitical framework, giving the company strategic alignment with the policy preferences of its home government.
For Modi, the stakes are equally high. Manufacturing has been central to his economic vision since he first took office in 2014, when he launched the “Make in India” campaign. Progress was initially slow, and critics were quick to point out that India’s manufacturing sector as a share of GDP actually declined in the early years of the initiative. But the combination of the PLI scheme, Apple’s diversification imperative, and the broader geopolitical realignment has created a genuinely transformative moment. Electronics manufacturing has become India’s fastest-growing export category, and Apple is by far the largest single driver of that growth.
The employment effects are substantial. Apple’s contract manufacturers in India now employ an estimated 150,000 to 200,000 workers directly, with several multiples of that number employed in ancillary and support roles. These are predominantly young workers, many of them women, earning wages that — while modest by Western standards — represent significant economic advancement in the Indian context. The social and political implications of this employment generation are not lost on the Modi government, which faces persistent pressure to create jobs for India’s enormous youth population.
So what does the new incentive package actually look like? Details remain fluid, but reporting from Indian financial outlets suggests several key elements. First, higher cash rebates for component manufacturing — potentially 8% to 10% on incremental sales, compared to the 4% to 6% offered under the original PLI scheme. Second, accelerated customs duty exemptions for capital goods imported for factory construction. Third, dedicated industrial zones with pre-approved environmental clearances and guaranteed power and water supply. Fourth, and perhaps most ambitiously, incentives for semiconductor packaging and testing operations, which would represent a significant step up the value chain from current activities.
The semiconductor angle is particularly interesting. India has been pursuing domestic chip fabrication with mixed results — the Tata-PSMC joint venture for a $10 billion fab in Gujarat is still in early construction stages and won’t produce chips for several years. But semiconductor packaging and testing — the back-end processes that take fabricated wafers and turn them into usable chips — require less capital investment and can be established more quickly. Several of Apple’s chip packaging suppliers have reportedly been approached about setting up Indian operations, with the new incentive package serving as the primary inducement.
Apple itself has been characteristically tight-lipped about its India manufacturing strategy, but the company’s actions speak clearly. Tim Cook’s visit to India in 2023, during which he opened Apple’s first retail stores in Mumbai and Delhi, was widely interpreted as a signal of the company’s long-term commitment to the Indian market. Subsequent visits by senior Apple operations executives, including COO Jeff Williams, have focused on manufacturing expansion. The company has also been quietly building out its software development and services operations in India, with major engineering centers in Hyderabad and Bangalore.
The competitive dynamics among Indian states add another layer of complexity. Tamil Nadu, which hosts Foxconn’s largest Indian facility, has been the dominant player so far. But Karnataka, home to Tata’s Hosur plant and the country’s technology capital of Bangalore, is pushing aggressively to capture a larger share. Gujarat, Modi’s home state, has landed the semiconductor fab and is angling for more. Telangana, Uttar Pradesh, and Maharashtra have all made pitches. This interstate competition has generally been beneficial for manufacturers, who can play states against each other for better terms, but it has also led to concerns about fragmentation and duplication of effort.
One underappreciated risk is quality. Apple’s manufacturing standards are among the most exacting in the consumer electronics industry. Early production runs in India reportedly experienced higher defect rates than equivalent Chinese operations, though these have improved significantly as workers have gained experience and processes have been refined. Maintaining Apple-grade quality at scale, while simultaneously ramping up production volumes, will be a continuing challenge. Any high-profile quality failures could set back India’s manufacturing credibility substantially.
The broader implications extend well beyond Apple. Samsung, which already operates one of the world’s largest smartphone factories in Noida, has been expanding its Indian manufacturing footprint. Google has begun manufacturing Pixel phones in India. And the Indian government’s incentive programs are attracting interest from manufacturers across the electronics spectrum, including laptop, tablet, and wearable device makers. If India can demonstrate that it can manufacture iPhones at scale with acceptable quality and cost, the argument for manufacturing other complex electronics products in the country becomes significantly easier to make.
China’s response has been measured but pointed. Chinese state media have published articles questioning India’s manufacturing readiness and highlighting infrastructure and skills gaps. More substantively, Chinese component suppliers have been somewhat reluctant to establish Indian operations, creating bottlenecks that Indian policymakers are now trying to address through the new incentive package. The relationship between India and China — complicated by border tensions and strategic rivalry — adds a layer of difficulty that doesn’t exist when, say, Vietnam courts Chinese manufacturers.
For Apple shareholders, the India shift has mostly positive implications. Geographic diversification reduces concentration risk. Indian manufacturing costs are competitive. And the growing Indian consumer market — expected to become one of Apple’s top five globally within the next few years — creates natural synergies between production and sales. The principal risk is execution: if India fails to scale manufacturing quickly enough, or if quality issues emerge, Apple could find itself caught between a China it’s trying to leave and an India that isn’t yet ready to fully replace it.
That’s the tightrope. And both New Delhi and Cupertino know it.
The coming months will be critical. The Indian government is expected to formally announce the new incentive package before the end of the current parliamentary session. Apple’s contract manufacturers will then need to make concrete investment commitments. Construction timelines for new facilities typically run 18 to 24 months. And the ramp-up to full production takes additional time beyond that. The decisions being made now will determine the shape of the global iPhone supply chain for the rest of this decade and likely well into the next.
What’s already clear is that the center of gravity is shifting. Not overnight, and not without complications. But the direction is unmistakable. India is building, factory by factory, incentive by incentive, the infrastructure to become the world’s second-most-important country for iPhone manufacturing. Whether it can eventually challenge China for the top spot remains an open question — one that will be answered not by policy pronouncements but by the hard, unglamorous work of building supply chains, training workers, and hitting quality targets, day after day, at a scale that the country has never before attempted.
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