India cuts tariffs to entice more iPhone manufacturing

India is reducing import taxes on several mobile-device components to boost smartphone production, a boon for companies like Apple Inc. that are increasingly considering the country as a global manufacturing base.

Prime Minister Narendra Modi’s government late Tuesday announced it was lowering tariffs on components including plastic and metal mechanical parts, SIM sockets and screws. An industry group welcomed the move as a step in the right direction.

Modi is trying to make India an electronics manufacturing powerhouse, luring global brands such as Apple away from China. At the same time, he’s trying to build an ecosystem of domestic suppliers to ensure India grabs a larger part of the value chain instead of being just an assembly location.

“This is a critical and welcome policy intervention by the government towards making mobile manufacturing competitive in India,” Pankaj Mohindroo, chairman of India Cellular and Electronics Association, said in a statement. “Building scale, riding on low input tariffs is key to transforming India into a global hub for electronics manufacturing and exports.”

The lobby group, which counts Apple, its Taiwanese suppliers Foxconn Technology Group and Pegatron Corp. as well as homegrown contract manufacturer Dixon Technologies India Ltd. among its members, said last month higher duties hurt India’s cost competitiveness by up to 7%.

Modi’s project has had some early successes, with Apple among companies that have boosted production in the country. India now accounts for more than 7% of the iPhone’s global output.

Apple is exploring ways to reduce its reliance on China as tensions between Washington and Beijing continue to escalate. Its longtime partners, who make most of the world’s iPhones from sprawling factories in China, have added assembly lines in India at a rapid pace over the past years.

Lower import tariffs will make assembly more cost-effective, and could encourage manufacturers to increasingly build devices for exporting as domestic smartphone consumption slows down. India’s smartphone exports doubled in the fiscal year through March 2023 to about $11 billion.

“That scale will help strengthen India’s ambition to become the factory of the world by pushing more component makers to set up local factories,” said Navkendar Singh, an analyst at tech researcher IDC.