As Trade War Rages, Apple Plans To Shift Up To 30% Of Production Outside China

Since the trade war began last year, analysts have been closely parsing every production-related decision by Apple and its suppliers, seeing them as bellwethers of the global consumer-tech industry: Will the American tariffs permanently restructure the global supply chain? Increasingly it's looking that way. Because not long after a Foxconn executive warned that the largest manufacturer of iPhones in mainland China was ready to help Apple shift production elsewhere, Nikkei reports that suppliers for iPhones, iPads, MacBooks and Apple Ear Pods have all drawn up plans to move 15%-30% of production outside of the mainland, with India, Vietnam, Mexico, and Malaysia looking like the top alternatives.

Foxconn

At this point, even if Washington doesn't follow through with plans to slap tariffs on another $300 billion in goods, companies, including Foxconn, Pegatron, Wistron, Quanta Computer, iPad maker, Compal Electronics, and AirPods makers Inventec, Luxshare-ICT and Goertek have all been asked by Apple to evaluate options outside of China.

Other suppliers are watching these companies, and monitoring where they go.

"We need to know where those big assemblers are heading to so that we can initiate our plan too," an executive at an Apple component supplier told Nikkei.

Apple supplier Wistron has assembled cheaper iPhones in India since 2017, and Foxconn started assembling more iPhones there this year, but volumes have been very small. More than 90% of Apple's products are still assembled in China. And last year, the number of mainland Chinese and Hong Kong-based suppliers surpassed the number from the US and Japan for the first time, accounting for 41 of the top 200 suppliers.

Chart

China

This is the biggest reason why Apple needs its suppliers to write up plans for long-term "diversification" of production. But trade tensions aren't the only issue with China: Apple also raised demographic issues like lower birth rates. Ultimately, millions of jobs in China are at risk.

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Craig Richards 4 weeks ago Member's comment

Sounds like a smart move by #Apple to me. No one likes uncertainty. $AAPL