Apple asks suppliers to shift part of their production from China to Southeast Asia
June 25, 2019 Category China News Round-up, Weekly
Apple has asked its largest suppliers to consider the feasibility of shifting 15% to 30% of its output from China to Southeast Asia and asked major suppliers to evaluate the cost of such a migration. Suppliers included iPhone assemblers Foxconn Technology Group, Pegatron and Wistron, MacBook maker Quanta Computer, iPad maker Compal Electronics and AirPods makers Inventec, Luxshare-ICT and GoerTek. Most of iPhones and iPads are made in China and the country is also Apple’s largest international market. If U.S.President Donald Trump goes ahead with new tariffs on about USD300 billion worth of Chinese goods, this would levy a punitive tax on Apple’s most profitable products.
The company, however, has a backup plan if the U.S.-China trade war gets out of hand. Primary manufacturing partner Hon Hai Precision Industry has said it has enough capacity to make all U.S.-bound iPhones outside 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.
“Apple has probably invested more in a China-centric supply chain than any successful company in recorded history. To just presume that they can jettison everything they have achieved with Foxconn and move to an alternative platform and get the same product with the same quality and the same assembly protocols without skipping a beat – I mean, anything is possible, but that to me sounds like a great tale of fiction,” said Stephen Roach, Professor at Yale University and former Chairman of Morgan Stanley in Asia. China accounts for an important, but declining, share of Apple’s revenue: 10.22% in the second quarter this year, according to Statista, down from 13.17% in the previous quarter and its all-time peak of 17.96% in the first quarter of 2018.
“There is no question that if Apple goes, others will follow,” said Alex Capri, a visiting fellow at the National University of Singapore, who has been predicting decoupling for the past two years. “They are a primary link in the chain. There are a lot of links in that chain that are reliant on Apple. When you have something as big as Apple moving, others have to go where their customer needs them,” the South China Morning Post reports.
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