Apple Asking Major Suppliers to Explore Large-Scale Manufacturing Shift Out of China: Nikkei

Apple is seriously considering moving a huge chunk of its manufacturing away from China.

That’s according to a new report from Nikkei Asian Review which explains that Apple has asked its suppliers to size-up the cost implications of shifting 15 to 30 percent of their production capacity from China to Southeast Asia; currently, approximately 90 percent of all Apple products are assembled in China.

The firm has reportedly asked “key” iPhone, iPad and MacBook assemblers — including Foxconn, Pegatron, and Wistron — to evaluate options outside of China, with Mexico, India, Vietnam, Indonesia and Malaysia being touted as potential production sites.

Apple’s concerns over its exposure to China derive in part from the protracted trade tensions between Washington, D.C. and Beijing. But even if such tensions are resolved, several sources said there would be “no turning back.” Apple has decided that China’s lower birth rate and higher labour costs add to the risks of overconcentration in one country.

“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.

From the Nikkei Asian Review report:

Key iPhone assemblers Foxconn, Pegatron, Wistron, major MacBook maker Quanta Computer, iPad maker, Compal Electronics, and AirPods makers Inventec, Luxshare-ICT and Goertek all have been asked to evaluate options outside of China, multiple sources say. Many other Apple suppliers such as print circuit board and casing providers are closely monitoring where these major assemblers would shift their production.

Foxconn already said in June that it’s ready to help Apple shift production, the report notes. Catcher, which makes iPhone housings, is also looking at building new factories out of China. There’s no deadline for the move to other countries, and several different markets are being considered for the time being, including the aforementioned countries Mexico, India, Vietnam, Indonesia, and Malaysia. Of those, India and Vietnam are the most likely candidates for iPhone manufacturing.

It is understood that it would take at least 18 months to shift Apple‘s production line. An executive explained that “the production line for Apple’s products is very complicated, and when production begins, it will only be small volumes to test the water.”