Apple explores handling of 15-30 percent of China's production capacity – Nikkei



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Apple has asked its main suppliers to assess the cost implications of transferring between 15% and 30% of its production capacity from China to Southeast Asia as it prepares to restructure its supply chain, according to a report by Nikkei Asian Review on Wednesday. .

Apple's request was a result of the Sino-U.S. trade dispute, but a trade settlement will not lead to a change in the company's decision, Nikkei said at https://s.nikkei.com/31zCGhw, citing various sources.

The iPhone maker has decided that the risks of relying heavily on manufacturing in China are too great and even growing.

Earlier this month, credit rating agency Fitch said it sees Apple, Dell Technologies and HP as potential blacklisting candidates if China blacklists US companies in retaliation for restrictions on Huawei.

Foxconn, Pegatron, Wistron, the largest maker of MacBook computers, the maker of iPads Compal Electronics, and the makers of AirPods, Inventec, Luxshare-ICT and Goertek, were invited to evaluate options outside China, the Nikkei said .

The countries considered include Mexico, India, Vietnam, Indonesia and Malaysia. India and Vietnam are among the favorites for smartphones, Nikkei said, citing sources who do not want to be identified because the discussions are private.

Last week, Foxconn said it had enough capacity outside China to meet Apple's demand on the US market if the company needed to adjust its production lines, as US President Donald Trump threatened to impose an additional $ 300 billion in Chinese products.

Analysts at Wedbush Securities said that at best, Apple could move between 5 and 7 percent of its iPhone's output to India in the next 12 to 18 months.

Given the complexity and logistics involved, it would take at least 2 to 3 years to move 15 percent of China's iPhones production to other regions.

"We believe this is all about a poker game and Apple will not diversify China's production overnight and certainly a long-term US-China agreement is critical for Cook to sleep well at night," said Wedbush analysts .

China is a key market for Apple as well as an important hub for the production of its devices. The company earned nearly 18% of its total revenue from Greater China in the three months to March.

In early June, Trump met with Apple Chief Executive Tim Cook to discuss trade issues faced by the technology company as Trump deliberates on his threat to raise China's import tariffs.

A group of more than 30 people from Apple's capital expenditure study team have been negotiating production plans with suppliers and governments over monetary incentives that could be offered to lure Apple's manufacturing, the report said.

A deadline has not been set for suppliers to finalize their business proposals, the Nikkei said, adding that it would take at least 18 months to start production after choosing a location.

Apple and Foxconn did not respond to requests for comments.

(Reporting by Sathvik N in Bengaluru; Additional reporting by Aishwarya Nair and Vibhuti Sharma; editing by Gopakumar Warrier, Rashmi Aich and Shailesh Kuber)

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