Apple is playing Chicken with China. Will Beijing flinch?

Danny Vena for The Motley Fool:

Apple has reportedly asked each of its largest suppliers to evaluate the costs to shift between 15% and 30% of its production out of China to other countries in Southeast Asia, according to a report by the Nikkei Asian Review. The company made this request to Foxconn, Pegatron, Wistron, and others, as Apple is considering a massive restructuring of its supply chain in the wake of the trade war. The events of the past year have hammered home the risk of relying too heavily on China for its production…

Moving even just a portion of its manufacturing would be a costly step, both for Apple and for China. Once the wheels are in motion, there may be no going back. Apple employs about 10,000 Chinese directly and an estimated 5 million jobs in China rely in some way on the company, so this talk of Apple moving could be a calculated effort by the company to pressure officials in Beijing to make a trade deal. In a note to clients, Wedbush analyst Daniel Ives said, “We believe this is all a poker game and Apple will not diversify production out of China overnight.”

There would be some initial costs to diversify its manufacturing, but, over the longer term, the company would benefit from not having all its eggs in one basket.

Your move, China…

MacDailyNews Take: Everything that ratchets up the pressure on China to achieve a deal with the U.S. is a good thing, especially as the side benefit to multinational Apple would be to lessen what is currently too much dependence on one country for assembly.

As we just wrote about this yesterday, “File under: Don’t Put All your Eggs in One Basket.”

10 Comments

      1. Lots of places and Apple suppliers are now working on options. Long overdue to MOVE OUT of a Communist country taking advantage of near slave labor to reap high profits. SHAME on Apple!

    1. As is common with some companies, once the bottom line of profit is threatened the company finally reacts to explore options it should have done years ago. Cook is so intune with beancounter profits the REAL reason he is finally making a move. To put all your eggs in one Communist basket in the holy name of fat profits is simply stupid…

  1. So far Apple is navigating through this trade war thing without a problem. They’ve kept off the tariff list long enough to work out ways to minimize the extra costs to move the manufacture of US products to a country other than China if necessary. They use both Foxconn and Pegatron for final assembly of iPhones so they already have two suppliers. Both have plants inside and outside of China. Tim Cook has met with Trump a couple times and Trump has an iPhone so they are doing what they need to politically with Trump. They have done a fantastic job in a very uncertain environment.

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