Apple is exploring moving between 15 and 30 percent of its hardware production out of China, according to a new report by Nikkei. The company reportedly has a growing team looking into moving production, and has asked key manufacturing partners like Foxconn, Pegatron, and Wistron to evaluate the available options.
The catalyst for the shift is the ongoing trade war between China and the US, which is expected to intensify at the end of this month with the introduction of 25 percent tariffs on devices including phones, laptops, and tablets. However, Apple reportedly wants to shift production regardless of whether the trade dispute gets resolved.
”A lower birthrate, higher labor costs and the risk of overly centralizing its production in one country. These adverse factors are not going anywhere… with or without the final round of the $300 billion tariff,” one executive, apparently from an Apple supplier, told Nikkei.
Although Trump has repeatedly claimed that Apple was open to the idea of shifting manufacturing from China to the US, it’s likely that production will instead move to countries in South East Asia, with India and Vietnam considered to be front runners for iPhone production, according to Nikkei. Apple has previously produced lower-cost iPhone models in India, and last year was reportedly considering shifting production of its more premium models to the country in order to avoid its tariffs on imported smartphones. Foxconn recently said that it has the capacity to move production of all US iPhones out of China if necessary. Along with Vietnam and India, Mexico, Indonesia, and Malaysia are also thought to be under consideration.
Shifting production out of China, which has built up a huge ecosystem of logistics and components suppliers around Apple, will be a “painful and difficult” process, according to one supplier quoted by Nikkei. The country has a huge workforce of skilled workers, and its infrastructure is more resilient and less prone to problems like power shortages, which can have serious consequences for large manufacturers. Moving production won’t be a quick process. It is expected to take 18 months at a minimum, with results expected to emerge in between two to three years.
Around five million Chinese jobs are thought to rely on Apple’s manufacturing in the country, and Apple employs around 10,000 people directly in China. It’s unclear how many of these jobs would be impacted by losing 15 to 30 percent of production.
Apple is not reported to have set a deadline for when suppliers need to respond with plans for where to shift production. The company did not immediately respond to a request for comment.