Smartphone Export Crisis Escalates

According to the Global Trade Research Institute (GTRI), India’s smartphone exports to the US have collapsed by 58% between May and August 2025, despite most shipments being tariff-free. The decline is described as “counter-intuitive” and signals an urgent policy emergency.

This dramatic fall is unprecedented, particularly for zero-duty products, which show the steepest declines, puzzling trade analysts.

Possible Causes Behind the Decline

Production Shift Hypothesis :

• Foxconn and Tata Electronics, India’s largest smartphone exporters, may be relocating production to Vietnam or China for newer models.

• Component shortages in Indian assembly plants have been flagged as another potential factor.

• Apple’s strategy remains uncertain despite existing iPhone production commitments in India.

Tariff Impact :

• August saw an accelerated tariff escalation: 10% → 25% → 50% by month-end.

• September 2025 is the first full month under a 50% tariff regime, expected to intensify export contraction across smartphones, textiles, chemicals, shrimp, and solar panels.

Broader Export Context

From May to August 2025, India’s total exports to the US declined 22.2%, from $8.8B to $6.9B. Tariff-free products were the hardest hit, falling 41.9% ($3.37B → $1.96B).

• Pharmaceutical exports: down 13.3% ($745M → $647M)

• Market share: US continues as the largest destination with 44% of India’s smartphone exports ($10.6B of $24.1B globally), followed by the EU at 29.5% ($7.1B)

GTRI Calls for Urgent Investigation

Ajay Srivastava, GTRI Founder, emphasized today:

"We need to understand why smartphone exports to the US are falling sharply. Is production shifting to China or Vietnam, or are component shortages crippling Indian assembly plants?"

Immediate measures suggested:

• Investigate the paradox of falling tariff-free exports

• Audit supply chains at Foxconn and Tata Electronics

• Monitor September 2025 data for further deterioration under the full 50% tariff regime

Strategic Implications

The smartphone export collapse threatens India’s PLI (Production-Linked Incentive) manufacturing strategy, potentially undermining a flagship policy success. Labor-intensive sectors remain vulnerable, and without urgent clarification and intervention, the disruption may extend into Q4 2025, affecting economic and trade forecasts.

Final Word

India’s smartphone export crisis is a red flag for policymakers. Despite zero-tariff advantages, production shifts and supply chain disruptions are jeopardizing the sector’s growth. Immediate government action, including supply chain audits and strategic intervention, is critical to safeguard India’s manufacturing momentum and PLI objectives.