Apple is reportedly moving its manufacturing out of China in response to trade war tensions.
This involves diversifying Apple’s manufacturing sources to other countries, and preparing for a fundamental restructuring of its supply chain.
Tariffs on China goods
Trade tensions between the United States and China are making the tech giant rethink about its reliance on manufacturing products in China.
In May, US President Donald Trump announced that the tariffs of 10 percent levied on US$200 billion of goods made in China would increase to a whopping 25 percent, the South China Morning Post reported.
It’s an alarming number for most companies that rely on the mainland for manufacturing and assembling.
Which is essentially most of the companies addicted to cheap human labour.
Malaysia could assemble iPhones
Even though cheap labour might last forever, cheap and friendly labour less so.
In response to the U.S.-China trade war, Apple is reportedly shifting 15 to 30 percent of its production capacity from China to Southeast Asia, according to Nikkei Asian Review, after speaking to several sources close to Apple.
The countries being considered as part of Apple’s move to diversify its manufacturing locations include Mexico, India, and Southeast Asian countries such as Vietnam, Indonesia and Malaysia.
India and Vietnam are reportedly one of the more favoured options, Nikkei noted.
Difficult to move
Even with this new possibility, establishing manufacturing or assembly lines elsewhere outside of China would take some time.
To move the production of Apple products would require the gathering of skilled workers and the need to create an inventory hub, Mehdi Hosseini, an analyst with Susquehanna International Group told The Wall Street Journal.
Currently, China accounts for more than 90 percent of the assembly of Apple’s products.
The country is highly favoured — and difficult for tech companies to move from — as a manufacturing location.
Some of the advantages China have is its developed infrastructures such as roads, dormitories and utilities, and the relative ease in which companies can adjust the production process.
It’s something that other countries may not be able to match up to, at least in the short term.
This may change, however, if policies necessitate such moves as a response to trade tensions.
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