Apple Inc. plans to restructure its supply chains and has asked its key suppliers to evaluate the cost implications of moving 15% to 30% of their production capacity from China to Southeast Asia. The news comes in via a Nikkei Asian Review report on Wednesday.
Major iPhone makers including Foxconn, Pegatron Corp, Wistron Corp, MacBook maker Quanta Computer Inc, iPad maker Compal Electronics Inc, and AirPods makers Inventec Corp, Luxshare-ICT and Goertek have been asked to assess viability for production outside China, Nikkei reported.
Apparently, Apple’s decision is the result of the extended Sino-U.S. trade dispute. However, no trade resolution can do any good to change the company’s decision, Nikkei said.
The company has learnt high risks of depending on China for manufacturing the tough way. As per credit rating agency Fitch, Apple, Dell Technologies Inc and HP Inc are potential blacklist companies if China decides to blacklist U.S. companies in retaliation for restrictions on Huawei.
The options being considered include countries, Mexico, India, Vietnam, Indonesia and Malaysia. India and Vietnam are among the favourable markets for smartphones, Nikkei said.
Last week, Foxconn said it had enough capacity outside China to meet Apple’s demand in the American market if it comes to adjusting its production lines, as U.S. President Donald Trump threatened to levy further $300 billion tariffs on Chinese goods.
Wedbush Securities Analysts said in a best possible scenario, Apple would be able to move 5% to 7% of its production likely to India in the next 12 to 18 months.
It would take atleast 2-3 years for the company to move 15% of its production from China to other regions, considering the logistics and complexity involved.
“We believe this is all a poker game and Apple will not diversify production out of China overnight and certainly a long-term US/China trade deal is key for Cook & Co. to sleep well at night,” Wedbush analysts said.
China is a key market for Apple and a major production centre for it’s devices. Greater China accounted for about 18% of its total revenue in the quarter ended March.
A group of more than 30 people from Apple’s capital expense studies team have been discussing and evaluating production plans with suppliers and governments over monetary incentives that could be offered to lure Apple manufacturing, the report said.
Nikkei said that no time limit has been set for the suppliers to confirm their business proposals, further adding that it would take atleast 18 months to start production after finalizing a location.