Trade war repercussions as Apple reportedly explores moving 30 percent of production away from China
Apple is reportedly exploring its options to move between 15 to 30 percent of manufacturing out of China, as the trade war between it and the United States deepens.
Apple of course outsources nearly all its manufacturing to third party firms, but it is now reportedly exploring a way to shift a chunk of the production out of China itself and into other Asian nations, as well as countries such as Mexico.
This is not the only production report about Apple to surface. Earlier this year it was reported that Apple had reduced its planned production for its current three new iPhone models.
That came after Apple shocked investors in December when it warned of a “magnitude of the economic deceleration, particularly in Greater China,” that forced it to lower its revenue forecast for its fiscal first quarter.
And now the Nikkei Asian Review has reported that Apple has asked its major suppliers to review costs in southeast Asia and Mexico.
The review comes amid a reported “fundamental restructuring of its supply chain”, which is said to be protracted by the trade tension between China and the US.
According to Nikkei, which cited multiple sources, that even if the trade dispute is resolved there will be no turning back.
Apple has decided the risks of relying so heavily on manufacturing in China, as it has done for decades, are too great and even rising, several people reportedly told Nikkei.
“A lower birthrate, higher labour costs and the risk of overly centralizing its production in one country. These adverse factors are not going anywhere,” one executive with knowledge of the situation was quoted as saying.
“With or without the final round of the $300 billion tariff, Apple is following the big trend [to diversify production],” giving itself more flexibility, the person reportedly added.
Companies such as Foxconn, Pegatron Corp, Wistron Corp which assemble the iPhone have been asked by Apple’s capital expense studies team to evaluate their options.
Other suppliers such as Quanta Computer (MacBook maker), and Compal Electronics (iPad maker) have also been asked to evaluate a move.
So where would the manufacturing be moved to?
Well it seems Asian countries such as India, Vietnam, Indonesia and Malaysia are being mooted, as is Mexico.
Foxconn already said last week that it had enough capacity outside China to meet Apple’s demand in the American market if the company needed to adjust its production lines.
Apple reportedly declined to comment on the report.
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