According to a report by McKinsey & Company, India now fulfills around 40% of the United States’ smartphone demand that was previously met by China.
The report highlights that the US is actively diversifying its import sources, replacing nearly two-thirds of goods it once sourced from China (worth over $80 billion) by seeking alternative suppliers such as India and ASEAN nations.
“For instance, India has boosted smartphone exports to the United States to levels that are approximately 40 percent of what China used to provide, while ASEAN economies have filled about two-thirds of the value of US laptop imports that were previously sourced from China,” it stated.
Smartphone imports from India to the US surged by around $15 billion, whereas imports from China fell by roughly $18 billion.
The overall shift intensified significantly in 2025 amidst increasing US tariffs and trade restrictions on Chinese products. The report indicates that US imports from China decreased by about $130 billion in 2025, nearly three times the reduction observed in each of the prior two years.
ALSO READ | Trump’s trade war with China in focus ahead of May summit
While alternative suppliers succeeded in replacing around two-thirds of this decline, a net gap of about $50 billion still exists.
The report notes that the extent of replacement varied across different sectors. High-value consumer electronics, such as smartphones, laptops, and other devices, were among the easiest to relocate.
ALSO READ | Apple now makes about 25% of iPhones in India after China pivot
Companies managed to transfer the final stages of production, mainly assembly, to countries like India, Vietnam, and Thailand without needing to entirely reconstruct their supply chains.
At the same time, China’s role in the supply chain is evolving. The nation has ramped up exports of intermediate goods like semiconductors, batteries, screens, printed circuit boards, and other electronic components. These inputs are being shipped in larger quantities to emerging manufacturing hubs, including India and ASEAN countries.
Exports from China to these regions have climbed to nearly half of its total exports, compared to about one-third in 2017.
ALSO READ | Exclusive | Apple’s iPhone manufacturing drives electronics component manufacturing in India, say sources
Beyond Asia, the report also discusses changing trade dynamics in Europe. In 2025, the European Union registered a trade surplus of $5 billion. However, it is simultaneously facing challenges from “increasing imports from China and elevated US tariffs affecting key exports, especially cars.”
To address this, the EU is enhancing its trade partnerships by strengthening relations with rapidly growing economies. In January this year, it signed new trade agreements with India, marking a significant shift in its global trade relationships.
ALSO READ | India-US trade talks get tougher as new pressure points emerge
