Apple has asked its suppliers in China to shift a part of its hardware production out of China to Southeast Asia. The move comes in the midst of trade tensions between the US and China as the Cupertino giant slowly restructures its supply chain.
According to a report by Nikkei, Apple is talking to its key manufacturing partners including Foxconn, Pegatron and Wistron to evaluate options for moving 15 – 30 percent of its hardware production out of China. Apple is reported to be of the opinion that the risks of relying so much of production in China is too great at the point and is still on the rise.
A source close to the situation said “A lower birthrate, higher labour costs and the risk of overly centralising its production in one country. These adverse factors are not going anywhere, with or without the final round of the $300 billion tariffs”.
The shift of production does not just apply to Apple’s iPhone suppliers – Foxconn, Pegatron and Wistron but also to the company’s MacBook maker in China – Quanta Computer, iPad maker – Compal Electronics and Inventec, Luxshare-ICT and Goertek involved in making AirPods. All these partners have been asked to evaluate options outside of China.
Apple currently assembles 90 percent of its products in China with only some of them coming from other regions including India. The shift of production on a large scale will thus take time, three years at least. Another important factor is the fact that the company is currently employing 10,000 people in China with 5 million Chinese jobs relying on Apple’s presence in the country, 1.8 million of which are into software and iOS apps.
Besides Southeast Asia, Apple is also considering expanding production units in Mexico, Vietnam, Malaysia and India.