It's been a rough start to the year for Apple (NASDAQ: AAPL), with its stock price down 15%.
Over the weekend, the iPhone maker delivered some major news.
As Apple comes to terms with President Trump's trade war with China, it announced plans to make most of its iPhones sold in the US in India by 2026, according to the Australian Financial Review.
This decision comes after the US levied 145% levies on Chinese goods. Although smartphones currently enjoy a 90 day exemption, the unpredictable nature of this situation appears to have prompted Apple to take action.
Apple currently makes around 20% of its iPhones in India. It also sells roughly 60 million iPhones a year in the US, accounting for a significant portion of its global revenue. The goal would require Apple to double its annual iPhone output in India.
Producing iPhones in India is currently 5-10% more expensive than in China.
During the pandemic, when harsh lockdowns hampered production at its largest plant in China, Apple began diversifying its supply chain to other regions. Apple's latest move marks an acceleration of that effort.
Will other companies follow?
India has been touted as an alternative manufacturing hub to China. Apple's decision boosts India's status as a viable option, which may inspire other companies to follow suit.
India is one of the world's fastest growing economies. International Monetary Fund expects it to increase gross domestic product (GDP) by 6.5% in FY24/25. Given the size of its economy, India is perceived as being in a strong position to withstand a recession.
Given India's relatively low exposure to the US, tariff impact is expected to be small. According to Bloomberg, India accounted for just 2.7% of total US imports last year. This is significantly below China and Mexico, which accounted for 14% and 15%, respectively.
How ASX Investors can bet on India
While it's difficult for ASX investors to buy Indian stocks directly, they can invest in ASX exchange traded funds (ETFs) with Indian exposure. For a management expense of 0.8%, Betashares India Quality ETF (ASX: IIND) contains 30 high-quality Indian companies and offers a 12-month distribution yield of 3.4%. For the year to date, IIND has declined 2.8%.
Alternatively, for a slightly lower management expense of 0.69%, Global X India Nifty 50 ETF (ASX: NDIA) exposes investors to India's 50 largest and most liquid companies. It is up 0.4% for the year to date.
Both ETFs have materially outperformed many popular US-focused ASX ETFs this year. For comparison, Vanguard US Total Market Shares Index AUD ETF (ASX: VTS) is down 11.8%.
Those betting that India will benefit from the US-China trade war may wish to consider IIND and NDIA.
