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Apple plans to move up to 30% of its production outside of China

Jun 19, 2019, 2:00 pm

Apple considers moving between 15 and 30% of its hardware production outside of China, according to a Nikkei report. According to this publication, the company has a group of people analyzing this initiative. And it would have already contacted Taiwanese suppliers such as Foxconn, Pegatron, and Wistron to see what options they have to carry this idea forward.

It should be remembered that, according to a Nikkei report released in March 2018, 13.5% of Apple’s suppliers are Chinese, including BOE Technology and Jiangsu Changjiang Electronics Technology, as well as 25 other companies from that same country. Although the majority of the 200 suppliers are, first of all, from Taiwan (51), followed by Japan (43) and the United States (39).

Everything would give to think that the search to replace the Chinese suppliers by others is framed in the commercial battle between the country governed by Xi Jinping and the United States. However, it is not the only thing that must be taken into account. Apple seeks to change its production structure beyond this.

A lower birth rate, higher labor costs and the risk of over-centralizing production in a country, these adverse factors are not going anywhere… with or without the final round of the USD 300 billion tariffs – one Apple executive to Nikkei

It is likely that production will move to Southeast Asian countries. As for the iPhone in particular, the production would migrate mainly to Vietnam and India. In the latter country, the company led by Tim Cook produced low-cost telephone models for the country. And it is one of the markets where several companies are betting both for obtaining cheap labor and for the production and sale of equipment.

The installation of operations centers in India, Malaysia, Indonesia, and Mexico is also being considered. All large markets and with good opportunities from the business point of view.

Moving production outside of China will take time. It is estimated that it will take at least 18 months and could take between two and three years to be fully operational. There are about five million people’s jobs in China that depend on the production chain of Apple in the country and of them, about 10 thousand are direct employees for the company.

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