Apple is reportedly looking to move around 15-30 percent of its supply chain outside of China to Southeast Asia. The company is preparing for a “fundamental restructuring” of its supply chain due to the rising tensions between the U.S. and China and the ongoing trade wars between the two countries.
Apple has asked its major suppliers to evaluate the cost of shifting 15 to 30 percent of their production outside of China.
“A lower birthrate, higher labor costs and the risk of overly centralizing its production in one country. These adverse factors are not going anywhere,” said one executive with knowledge of the situation. “With or without the final round of the $300 billion tariff, Apple is following the big trend [to diversify production],” giving itself more flexibility, the person added.
The countries being considered for setting up new factories and moving the supply-chain to include Mexico, India, Vietnam, Indonesia, and Malaysia. Some of Apple’s supply-chain partners already have factories in India and Vietnam which is why they are among the favourites for most.
All major Apple suppliers including Foxconn, Wistron, Pegatron, Compal, and others have been asked to look at options outside of China. Smaller Apple suppliers which print PCBs will decide where to move depending on where these major suppliers move.
Most Apple suppliers admit that it won’t be easy to move production outside of China. While possible, it is a time-consuming process that will require most companies to spend millions — if not billions — of dollars to set up their factories. Nonetheless, by moving production outside of China, Apple will be able to diversify its supply-chain. This will have multiple benefits including insulating Apple products from the trade war between the U.S. and China.
Foxconn, one of Apple’s key supplier, has already claimed that it can produce all the iPhones required for the U.S. outside of China if needed.