Apple has asked its largest suppliers to consider the costs of shifting 15% to 30% of its output from China to south-east Asia in a dramatic shake-up of its production chain, Japan’s Nikkei newspaper has reported.
The US tech giant asked “major suppliers” to evaluate the feasibility of such a migration, the newspaper said, citing multiple sources.
Those included iPhone assemblers Foxconn, Pegatron and Wistron; MacBook maker Quanta Computer; iPad maker Compal Electronics and AirPod makers Inventec, Luxshare-ICT and GoerTek.
China is a crucial cog in Apple’s business; the origin of most of its iPhones and iPads as well as its largest international market.
But President Donald Trump has threatened Beijing with new tariffs on about $300bn (€268bn) worth of Chinese goods, an act that would escalate tensions while levying a punitive tax on Apple’s most profitable product.
Two major Apple suppliers pushed back against the Nikkei report.
The US company has not asked for cost estimates for shifting production out of the world’s second largest economy, although suppliers are running the numbers on their own given the trade dispute, said one person familiar with the matter.
Another supplier said it, too, had not gotten such a request from Apple and that the Cupertino, California-based company had resisted a proposed production shift to south-east Asia.
Apple does have a backup plan if the US-China trade war gets out of hand: Primary manufacturing partner Hon Hai Precision has said it has enough capacity to make all US-bound iPhones outside of China if necessary.
The Taiwanese contract manufacturer now makes most of the smartphones in the Chinese mainland and is the country’s largest private employer.
Hon Hai, known also as Foxconn, has said Apple has not given instructions to move production but it is capable of moving lines elsewhere according to customers’ needs.
Apple hasn’t set a deadline for the suppliers to finalise their business proposals, but is working together with them to consider alternative locations, the Nikkei said.
Any move would be a long-term process, it cited its sources as saying.
Beyond Apple’s partners, the army of Taiwanese companies that make most of the world’s electronics are reconsidering a reliance on the world’s second-largest economy as Washington-Beijing tensions simmer and massive tariffs threaten to wipe out their margins.
[931738/readmore]That in turn is threatening a well-oiled, decades-old supply chain.Taiwan’s largest corporations form a crucial link in the global tech industry, assembling devices from sprawling Chinese production bases that the likes of HP and Dell then slap their labels on.That may start to change if tariffs escalate, an outcome now in the balance as Washington and Beijing spar over a trade deal.Apple is an outsized figure in that negotiation. The high-end iPhone, which accounted for more than 60% of the company’s 2018 revenue, drives millions of jobs across China as well as a plethora of different industries from retail to electronics.The country is also a major consumer market in its own right, yielding nearly 20% of last year’s revenue — weakness there pushed Apple to cut its sales forecast in January.“Twenty-five percent of our production capacity is outside of China and we can help Apple respond to its needs in the US market,” Hon Hai board nominee and semiconductor division chief Young Liu told an investor briefing in Taipei last week.“We have enough capacity to meet Apple’s demand.”