Apple wants to move a huge chunk of iPhone production away from China and cut its exposure to the trade war

Yves Herman/Reuters

Apple is seriously thinking about shifting a big chunk of its production out of China, Nikkei Asian Review reports.
Anonymous sources told Nikkei that Apple asked its biggest suppliers to calculate what it would cost to move between 15% to 30% of its production away from China.
Apple wants to make the shift to reduce its exposure to the trade war, but also wants to become less reliant on one country for its flagship products.
Sources said India and Vietnam are frontrunners to pick up the slack on smartphone production.
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Apple is seriously considering moving a huge chunk of its manufacturing away from China, Nikkei Asian Review reports.

Multiple sources told Nikkei that Apple has asked its biggest suppliers to evaluate how much it would cost to shift 15% to 30% of production to Southeast Asia, in what would represent a dramatic restructuring of its supply chain.

The query was prompted by the protracted trade war between China and US President Donald Trump’s administration, which threatens to drive up the cost of Apple hardware through increased tariffs.

One source told Nikkei that even if the trade war were to be resolved, Apple would still want to diversify its supply chain by branching out into other countries.

"A lower birthrate, higher labor costs, and the risk of overly centralizing its production in one country. These adverse factors are not going anywhere," they said.

The change will be gradual if Apple does decide to diversify its supply chain, sources said, and one anonymous supplier told Nikkei we might not see results until "two or three years from now."

In a note on Wednesday, Wedbush analyst Daniel Ives agreed with this timeline and said it would be a "gargauntuan [sic] endeavor." He added: "We believe this is all a poker game and Apple will not diversify production out of China overnight and certainly a long-term US/China trade deal is key for Cook & Co. to sleep well at night."

Sources told Nikkei that Mexico, India, Vietnam, Indonesia, and Malaysia, are among the countries being considered to pick up the slack. India and Vietnam are frontrunners as locations that could make iPhones — a scenario that was also observed by Wedbush.

The Nikkei report comes days after Apple’s biggest iPhone assembly partner, Hon Hai Precision Co., said it was prepared to move iPhone production completely outside of China should the trade war continue to escalate.

Trump recently said he would move forward with a plan to impose tariffs on about $300 billion worth of additional goods if Chinese President Xi Jinping does not attend the G20 summit at the end of June. Trump also increased the tariff rate on more than $200 billion worth of Chinese goods from 10% to 25% last month.

Apple declined to comment when contacted by Nikkei, and was not immediately available for comment when contacted by Business Insider.

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Source: Business Insider – feedback@businessinsider.com (Isobel Asher Hamilton)