June: Apple Inc. has asked its largest suppliers to consider the costs of shifting 15 per cent to 30 per cent of its output from China to Southeast Asia in a dramatic shake-up of its production chain, the Nikkei reported.
The U.S. tech giant asked “major suppliers” to evaluate the feasibility of such a migration, the newspaper cited multiple sources as saying. Those included iPhone assemblers Fox-conn Technology Group, Pegatron Corp. and Wistron Corp., MacBook maker Quanta Computer Inc., iPad maker Compal Electron-ics Inc. and AirPod makers Inventec Corp., Luxshare-ICT and GoerTek Inc., Nikkei cited them as saying.
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 $300 billion worth of Chinese goods, an act that would escalate tensions while levying a punitive tax on Apple’s most profitable product. Company spokeswoman Wei Gu didn’t respond to a request for comment.
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 No. 2 economy, although suppliers are running the numbers on their own given the trade dispute, said one person familiar with the matter, asking not to be identified discussing internal deliberations. 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 Southeast Asia.
Apple does have a backup plan if the US-China trade war gets out of hand: Primary manufacturing partner Hon Hai Precision Industry Co. has said it has enough capacity to make all US-bound iPhones outside of China if necessary, Bloomberg News reported last week.
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 as per 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 said.
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.
Apple is an outsized figure in the US-China negotiation. The high-end iPhone, which accounted for more than 60 per cent 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.