Apple has asked its major suppliers to evaluate the cost implications of shifting 15-30 percent of their production capacity from China to Southeast Asia as it prepares for a fundamental restructuring of its supply chain, the Nikkei Asian Review reported. The moves comes in response to the escalating trade tensions between the US and China and sees Apple looking to reduce its reliance on manufacturing in China for the long term.
An executive with knowledge of the situation said the company sees risks in relying on China even if it resolves the dispute with the US. A lower birthrate, higher labor costs and the risk of overly centralizing its production in one country are adverse factors that will not end. These factors are driving other companies to shift production outside China as well.
Some 5 million Chinese jobs rely on Apple's presence in the country, including those of more than 1.8 million software and iOS app developers, according to a study available on the company's website. Apple itself employs 10,000 staff in China, the company said.
Shifting the supply chain for manufacturing to other countries will take time. "It's really a long-term effort and might see some results two or three years from now," said one supplier. "It's painful and difficult, but that's something we have to deal with."
At the end of last year, the company began to expand its so-called capital expense studies team, according to sources familiar with the matter. The team of more than 30 people is discussing production plans with suppliers and negotiating with governments over financial incentives they might be willing to offer to attract Apple manufacturing, as well as regulations and the local business environment.
The iPhone assemblers Foxconn, Pegatron, Wistron, 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 told the Nikkei.
The countries being considered for diversification include Mexico, India, Vietnam, Indonesia and Malaysia. India and Vietnam are among the favorites for smartphone diversification, the report said.
Apple declined to comment.
