Foxconn sees limited impact from Huawei ban, US-China trade war

Foxconn has issued a statement about the recent “market developments”, obliquely referring to the US ban on doing business with Huawei and escalating trade war with China. The company said the impact should, at the end of the day, be limited, Digitimes reported, citing a company statement through the Taiwan Stock Exchange (TWSE). Foxconn, which rarely issues statements about orders, said there may be some changes to customers orders but that these should have a limited impact, “after combining all ups and downs of order flow." 

The company did not specify which customers or orders could be affected. Foxconn, which assembles iPhones, did say it has formed a "dedicated executive team" to closely monitor the latest developments between the US and China. 

iPhone impact

Meanwhile, a study by Digitimes Research showed that Apple's iPhone sales will be undermined by the US-China trade war. The study noted that of the top four smartphone vendors in the US market, making up 90 percent of the market, Samsung and LG have enough production capacity outside of China, while Apple and Lenovo both rely heavily on the production of ODM markers in China. 

Apple’s only production support outside of China comes from Wistron’s factory in India, which has a monthly capacity to make several hundred-thousand older-generation iPhone models as of the first half of this year, Digitimes noted. Apple is working on increasing capacity in India, with the extension slated to complete in the third quarter of this year. Foxconn has a newly established plant in India. Pegatron has yet to start looking for a factory site in India.   

In order to meet demand for the release of new iPhone devices in September as well as demand for legacy models in the US market before the end of the year, these ODMs together would have to make 6-7 million iPhones a month starting July-August in India, the study estimates, saying capacity for Wistron and Foxconn will not be at those levels until the end of the year. This means Apple will have trouble meeting demand for new iPhones.   

Apple Watch, AirPods not so affected  

Digitimes noted that Apple wearables Apple Watch and AirPods were originally included in the list of goods subject to higher US import tariffs from September 2018. The two categories were however removed from the list just before implementation. Apple started establishing production capacity for Apple Watch and AirPods outside China in the second half of last year.  

Quanta Computer and Compal Electronics are the two ODMs for the Apple Watch devices. Quanta will however gradually cease the production of the Apple Watch from the second quarter, with Inventec and China's Luxshare Precision Industrial making up the leftover supply gap. Compal's and Luxshare's plants in Vietnam could be used for the production of Apple Watch, with Inventec's plant in Malaysia another possible alternative, the study added.   

Apple currently outsources the production of AirPods devices to Inventec, Luxshare and Goertek. The contingency plans will call for the relocation of Airpods production capacity to Luxshare's and Goertek's plants in Vietnam.