Apple has asked its primary suppliers to try shifting 15 to 30 percent of its manufacturing processes from China to Southeast Asian countries like India, Vietnam, Indonesia, and Malaysia, suggest reports. This may be seen as Apple’s way of responding to the ongoing trade war between China and the United States, which is already making its presence felt on Apple’s share prices. Besides, with chances of the new tariff being implemented, Apple users may anticipate a significant hike in device prices.
The impending threat of new tariff, albeit acting as a catalyst, is nonetheless coupled with other factors, including ongoing tension in trade between Washington and Beijing, and the conglomerate running the risk of overly centralizing its production in one country with lower birthrate and high labor cost. Insider sources say that the latest shift may be seen as Apple’s way of diversifying production to combat the adversities as mentioned earlier, which are not going anywhere anytime soon.
Although the shifting is expected to be a long-drawn and challenging process for suppliers, they shall have to take the necessary steps if they want to maintain their business with Apple. The companies named in an article as suppliers expected to relocate include important names like Foxconn, Pegatron, Quanta, Compal Electronics, Inventec, Luxshare-ICT, and Goertek. Choice of countries for relocation, as already mentioned, include Mexico, India, Vietnam, Indonesia, and Malaysia; with India and Vietnam heading the list, especially in smartphone manufacturing. Apple has yet to fix a deadline for manufacturers to finalize proposals.
In spite of negatively impacting suppliers, this move is hardly sudden. Apple supplier Wistron shifted its iPhone production to Bangalore, India, two years back; and Pegatron has been discussing moving iPad and MacBook production out of China for a while. Chassis-maker, Catcher may also move its business out of China. Foxconn, for its part, has made it known that it can seamlessly produce all the U.S.-directed iPhones outside of China, and is presently involved in an attempt to build a 13,000-worker factory in Wisconsin. But the project seems to be facing multiple problems.
However, owing to the complexity of Apple’s supply chain, this shift shall be a long-term move, with Wedbush analyst Daniel Ives suggesting in a note sent to clients that, “in a best-case scenario Apple would be able to move 5%-7% of its iPhone production likely to India in the next 12 to 18 months.”
Moving as low as 15% of its iPhone production outside China, according to Ives, may take Apple suppliers at least two or three years. Which is why Apple may just end up being invested in a long-term trade agreement that is being signed between China and the U.S.