Chinese Apple supplier suggests shifting more production to US to dodge brunt of Trump tariffs: report

Apple Supplier Considers Production Shift Amid US-China Trade Tensions

A prominent Apple supplier has indicated it might relocate some production to the United States and other nations to mitigate the impact of potential 104% tariffs imposed by the US on goods from China. This consideration arrives as trade relations between the two largest economies remain strained, impacting global supply chains.

Trade War Implications for Apple’s Supply Chain

Luxshare Precision Industry, a Chinese company responsible for assembling iPhones and manufacturing AirPods for Apple, is reassessing its investment strategies in China. Chairwoman Wang Laichun conveyed during a recent analyst call that the ongoing trade war is prompting the firm to explore alternative manufacturing locations.

Wang stated, “If there’s a viable commercial basis, and after thorough evaluation, we are open to localizing the production of certain products to cater to the demands of the US market.” This statement, sourced from a Reuters transcript, underscores the escalating concerns among Apple’s suppliers regarding the tariff environment.

Impact on Apple Shares and Manufacturing Hubs

Apple’s stock has experienced downward pressure recently, largely due to the detrimental effects of the US tariffs on its intricate supply chain. The technology giant heavily relies on China for the bulk of its hardware production, including its flagship iPhone devices.

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Adding to the complexity, the US has also levied tariffs on Vietnam (46%) and India (26%), both pivotal manufacturing centers for Apple and other tech companies.

Vietnam and India as Potential Alternatives

Vietnam is reportedly engaged in negotiations with the US administration to address the imposed tariffs. Concurrently, Apple is understood to be evaluating a further shift of its production capacity towards India to circumvent the heightened tariff levels in China.

While Wang of Luxshare did not explicitly mention Apple in her comments, the company’s footprint extends beyond China, with operational facilities in the US, Mexico, Vietnam, Thailand, and Malaysia.

Timeline for Production Diversification

Luxshare’s chief executive indicated that establishing substantial production capabilities in alternative countries would be a protracted process. Even in locations where the company already possesses manufacturing plants, the ramp-up time could extend up to eighteen months.

Consumer Sensitivity to Price Increases

Wang also commented on the potential for consumers to seek more cost-effective options as tariff-induced cost increases potentially inflate product prices.

She noted, “Customers are consistently working with suppliers to boost competitiveness,” suggesting a collaborative approach to managing pricing pressures.

Limited Direct Impact on Luxshare’s Profits

Overall, Wang downplayed the projected impact of the tariffs on Luxshare’s profitability, stating that the company’s business model does not heavily rely on direct exports of finished goods to the US.

Apple’s Response Unclear

As of now, Apple has not responded to requests for comment on these developments.

It remains uncertain whether Apple will elevate consumer prices as a consequence of anticipated rises in manufacturing expenses. However, reports suggest some consumers have proactively upgraded their iPhones in anticipation of potential price hikes.