The trade war between America and China is far from over. Whether or not the two governments ink a deal, it might have long-lasting effects on the global economy. One of those effects includes the relocation of some production facilities for various components and products, as companies asses other markets. And now a new report claims Apple is among the companies that have instructed major suppliers to evaluate the cost implications of moving 15% to 30% of their production out of China.
Multiple sources told Nikkei that the trade war is what triggered the request, but there won’t be any turning back even after a deal between the US and China is made. That’s because Apple has apparently decided that the risks of relying mainly on China for manufacturing its products are too big, so it’s now investigating alternatives.
Even if successful, these move to other markets may take years since production can’t just shift to a different country. Furthermore, most of Apple’s products will still be made in China, the report notes. The country offers both a well-trained workforce that can meet Apple’s manufacturing needs, as well as the infrastructure to serve Apple and other western companies.
Nikkei says that Apple expanded its capital expense studies team at the end of 2018. More than 30 people work on production plans with suppliers and negotiate with governments over financial incentives, the report notes. And all of Apple’s key suppliers, including Foxconn, Pegatron, and Wistron (iPhone); Quanta (MacBook); Compal Electronics (iPad); and Inventec, Luxshare-ICT, and Goertek (AirPods) have been asked to evaluate expanding into other countries. Moreover, component makers that supply parts for Apple devices are also monitoring the suppliers so that they can adapt their manufacturing plans.
Foxconn already said in June that it’s ready to help Apple shift production, the report notes. Catcher, which makes iPhone housings, is also looking at building new factories out of China. There’s no deadline for the move to other countries, and several different markets are being considered for the time being, including Mexico, India, Vietnam, Indonesia, and Malaysia. Of those, India and Vietnam are the most likely candidates for iPhone manufacturing.
Once a location is chosen, production could start in as little as 18 months with a small volume trial to test the new site. In other words, most iPhones will continue to be manufactured in China for many years to come.
