US–China Trade War Fuels India’s Rise as Top Smartphone Exporter to US

A vendor looks at a display of smart phones at his mobile store in Secunderabad, the twin city of Hyderabad, Indian, on Aug. 28, 2024. Noah Seelam/AFP/Getty Images

Commentary

India has overtaken China as the leading smartphone exporter to the United States, signaling a significant shift in global supply chains and a major economic blow to the Chinese Communist Party (CCP).

India’s advance to this position has been driven largely by Apple’s strategic shift in manufacturing away from China amid escalating U.S.–China trade tensions and tariffs. This transition is giving India a significant economic boost while the Chinese regime suffers losses in income, exports, and global market share.

There is ongoing speculation about whether President Donald Trump and CCP leader Xi Jinping will reach a negotiated resolution to the trade war, or whether China would even abide by such a deal. But regardless of the outcome, uncertainty and instability have already pushed many foreign companies to reduce their reliance on China. Trump’s 145 percent tariff on Chinese goods, which was met with a 125 percent retaliatory tariff from Beijing, has only accelerated the shift. As a result, companies are increasingly redirecting investment and supply chains toward alternative manufacturing hubs such as India and Vietnam.

During the second quarter of the year, 44 percent of smartphones imported into the United States were made in India, a significant rise from 13 percent the year before, according to a new report by research company Canalys. Meanwhile, China’s share fell to 25 percent, dropping it to third place behind Vietnam.

Apple has rapidly expanded its production capacity in India and now dedicates most of its exports there to the U.S. market. Though Apple devices made in China are exempt from some of Trump’s reciprocal tariffs, they still face a 20 percent minimum levy.

While critics might argue that Apple remains “dependent” on its established manufacturing base in China, which is partially true, the shift still represents a significant loss for the CCP. The value of Apple’s iPhone annual production in India has doubled to $14 billion, with projections reaching $34 billion by 2026–2027. Every dollar of business redirected to India is a concrete economic setback for China, impacting foreign investment, manufacturing output, exports, and jobs.

China has actively sought to disrupt Apple’s expansion in India. About a year ago, Chinese authorities delayed approval for the machinery Apple needed to import for iPhone production. More recently, Chinese Customs authorities indefinitely withheld equipment required to retrofit assembly lines for the upcoming iPhone 17.

In addition, Beijing pressured Foxconn to withdraw more than 300 Chinese engineers and technicians from its Indian facilities, experts originally deployed to assist with technology transfer and workforce training. In a purely punitive move, China has also restricted exports of magnets essential for electric vehicle manufacturing.

The downturn in phone exports is already being felt in Chinese provinces such as Guangdong and Henan, which host major iPhone production hubs. These regions now face potential job losses and slower industrial growth. However, the shift in cellphone manufacturing to India is just one indication of the broad impact the trade war is having on China. Current projections suggest that Chinese exports to the United States could decline by as much as $485 billion by 2027.

Although exports to the United States account for only about 3 percentage points of China’s GDP, the employment impact is far greater, according to Goldman Sachs, which estimates that 10 million to 20 million Chinese workers are tied to U.S.-bound export industries. Losing access to the U.S. market presents a fundamental challenge for China, as no other market matches America’s demand for high-value goods or its purchasing power.

While China has begun redirecting exports to countries like Russia, this strategy has clear limitations. Russian consumers primarily purchase lower-value goods, and the market volume is far smaller. Russia simply cannot absorb exports on the same scale as the United States.

Compounding the problem, Chinese products sold in emerging markets yield lower profit margins than those sold in the United States. Meanwhile, China remains deeply reliant on U.S. technologies, particularly software and advanced semiconductors. These dependencies create acute vulnerabilities that cannot be resolved through market diversification. Moreover, losing partnerships with foreign companies such as Apple will reduce technology transfer and could significantly slow China’s technological progress.

The critical question is whether these shifts represent temporary adjustments or permanent structural changes. Several factors suggest they are likely to be lasting. First, the billions of dollars already invested in India’s manufacturing infrastructure have created sunk costs, making it financially unattractive for companies to reverse course. Second, U.S.–China tensions are structural, driven by long-term competition for technological and global dominance, rather than by short-term trade imbalances. This conflict is unlikely to be resolved, and U.S.–China relations are continuing to deteriorate.

Risk management has become a priority for multinational companies. After facing severe supply chain disruptions during COVID-19 and the U.S.–China trade war, many companies now prioritize resilience over cost minimization. However, bureaucratic red tape, restrictive import policies, and unpredictable regulations have hindered global companies from fully committing to India. This doesn’t necessarily mean companies will return to China; instead, some may shift operations to Vietnam, others may bet on India improving its industrial policy, or perhaps many have already concluded that navigating India’s bureaucracy is a price worth paying to exit China.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.