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Apple explores moving 15-30pc of production capacity from China: report
Apple Inc has asked its major suppliers to assess the cost implications of moving 15 per cent to 30pc of their production capacity from China to Southeast Asia as it prepares for a restructuring of its supply chain, according to a Nikkei Asian Review report on Wednesday.
Apple's request was a result of the extended Sino-United States trade dispute, but a trade resolution will not lead to a change in the company's decision, Nikkei said, citing multiple sources.
The iPhone maker has decided the risks of depending heavily on manufacturing in China are too great and even rising, it said.
Earlier this month, credit rating agency Fitch said it views Apple, Dell Technologies Inc and HP Inc as potential blacklist candidates if China blacklists US companies in retaliation for restrictions on Huawei.
Key iPhone assemblers Foxconn, Pegatron Corp, Wistron Corp, major MacBook maker Quanta Computer Inc, iPad maker Compal Electronics Inc, and AirPods makers Inventec Corp, Luxshare-ICT and Goertek have been asked to evaluate options outside of China, Nikkei reported.
The countries being considered include Mexico, India, Vietnam, Indonesia and Malaysia. India and Vietnam are among the favorites for smartphones, Nikkei said, citing sources who did not want to be identified as the discussions are private.
Last week, Foxconn said it had enough capacity outside China to meet Apple's demand in the American market if the company needed to adjust its production lines, as US President Donald Trump threatened to slap further $300 billion tariffs on Chinese goods.
Analysts at Wedbush Securities said in a best-case scenario Apple would be able to move 5pc-7pc of its iPhone production likely to India in the next 12 to 18 months.
Given the complexity and logistics involved, brokerage said, it would take at least 2-3 years to move 15pc of iPhone production from China to other regions.
“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 as well as a major production centre for its devices. The company got nearly 18pc of its total revenue from Greater China in the quarter ended March.
Earlier in June, Trump met with Apple Chief Executive Officer Tim Cook to discuss trade and other hot-button issues facing the tech company as Trump deliberates whether to make good on his threat to hike tariffs on imports from China.
A group of more than 30 people from Apple's capital expense studies team have been negotiating production plans with suppliers and governments over monetary incentives that could be offered to lure Apple manufacturing, the report said.
A deadline has not been set for the suppliers to finalise their business proposals, Nikkei said, adding that it would take at least 18 months to begin production after choosing a location.
Apple and Foxconn did not respond to Reuters request for comment on the report.
Comments (36) Closed
Pakistan is the Best option for Apple Inc.
If only Modi's budget & reforms fulfill our expectations, most of the capacity moving out of China could be tapped into by India & Viet Nam. Viet Nam has, to a large extent created the environment for such a boom while India is yet a long way away from it. But India has a larger domestic market than Viet Nam.
This is not a trade war or an economic war, it is the economic aspect of a total war. The wise have seen it coming for the last 30 years.
The shift can be a good opportunity for Pakistan to grasp.
PMIK, get your team to Apple and get them to move to PK. Create jobs and stability for PK.
.....and they found India is the top spot to move their production capacity.
@Babol, Electricity, infrastructure, skilled workforce, safety, economic stability what has Pakistan got to offer? Besides why would anybody move to a China's colony?
Moving Apple's assemblies to any other country would cost the organization over 30% increase and higher production costs with much inferior standards. They will have to succumb to the intrigues of Trump.
PM IK must immediately Visit Apple Headquarters in US and sign MOU with CEO Tim Cook to manufacture Apple products in Pakistan
@TruthSerum, we chose wrong ally at right time.
Prudent measures to produce cheap products. Spread those jobs around...
Gordon D. Walker
Canada
The restrictions on Huawei are biting according to them.
@Babol, ..... Why not?
Apply will not move its production line just because of India or Mexico: nor any leanings to Pakistan : their decision based on feasibility report: economic viability: strategic business decisions: Apples’ self interest will be paramount: what PTI can do though: send a lucrative offer that becomes hard to ignore and impossible to refuse !
@Babol, Quality control will be a big issue.
Its already started in India and looks like Apple ready expand further for the entire world.
After Samsung opened its largest smartphone unit in world in India last year now it is the turn of iPhone.Not just smartphones but other major production units are already being shifted to India. Modi knows tricks of trade. Gujarati bhai!!!
Under Narendra Modi the smartphone assembly capacity has gone up. to dizzy heights. 78 % of the phones sold in India were in assembled elsewhere. Today that number has come down to less than 18% There are. over 200 assembly plants in India including one of Samsung's the largest in the world. India now has capacity to assemble. 500 million phones with a 20% value content. International players are now asking for incentives to step up the capacity to 1.25 billion phones to cater to export markets. The top end design and development already takes place in India with major companies having Indian development & research centers in India. India now needs suppliers of locally made components- battery packs touch screens semi conductors and microprocessors. If this progress is being made under the aegis of Hindutva ideology, isn't that wonderful ideology?:):)
@gamechanger, Apple co.has already started assembly of iPhone in Bangalore since last year with an area of 1100 acres of campus and production will start with in 2 years.
A slice of apple for India, yep we will bite it.
For all the Pakistanis thinking that Pakistan may also be an option let me tell many reasons why it is not even under consideration. Skilled manpower, technology, industrial base and investment friendly infrastructure, government policies, raw materials, ports and airports international connectivity, cities where employees specially foreigners can live, security, stable political environment, stable economic environment, stable currency, educated and skilled managerial employable work force, quality control consciousness and equipment and scientist and researchers, solid IT framework, local consumption levels, software development skills ... and the list can go on and on and on and......
@Babol, Why not I go there first, I was so admired at SCO conference, leaders were falling over to meet me. I was Centre stage.
@Babol, Pakistan is not even on the list. Pakistani have made their country such a slum that no serious international company will dare come.
@Ramesh R, Not yet, but we are lobbying.
First try to get PayPal then dream about apple
Chinese should tax iPhones 30 percent and effectively hit Apples forecast and market valuation by 25-30 percent, thereby sending a clear message.
Pakistan needs to do a lot more to get its house in order before MNCs start investing.
@Babol, If apple want self-destruction that Pak is best option.
We welcome new INVESTMENTS :)
The Chinese grossly underestimated Trump. Given the over-leveraged state of the Chinese economy, it can ill-afford to thumb its nose at the US. Whether we like it or not, the entire world depends on the US for its prosperity.
The Chinese grossly underestimated Trump. Given the over-leveraged state of the Chinese economy, it can ill-afford to thumb its nose at the US. Whether we like it or not, the entire world depends on the US for its prosperity.
Pakistan should concentrate on Apples production first. Forget Apple's manufacturing.
APples will come to pakistan but in trucks via CPEC
@ahmed, First try to manufacture Phone overs, then chinku phones.With having one of the lowest innovation and skill index,Pakistan should not expect tech companies to set up factory or R&D centre in Pakistan.
@Babol, already Pakistan is inline with iron brother . How come apple will invest
@Babol, It will be the last match played between India vs Pak if they get into Pak...