Apple’s partners quicken shift away from China

This article first appeared in The Edge Financial Daily, on January 29, 2019.
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TAIPEI: Apple Inc’s main assemblers are shifting more output to India and Southeast Asia as trade tensions threaten to escalate costs in their long-standing production base of China.

Hon Hai Precision Industry Co, known also as Foxconn, said over the weekend it was investing more than US$200 million (RM822 million) in India and Vietnam. Smaller rival Pegatron Corp said on Sunday it had moved to Indonesia some manufacturing of networking gear hit by rising US tariffs on Chinese imports, and was now exploring bases in Vietnam and India as well.

While neither explicitly said they were shifting production of Apple products, the twin announcements underscore the extent to which the Taiwanese companies that make most of the world’s electronics are reconsidering a reliance on the world’s second-largest economy. From iPhone assemblers like Foxconn and Pegatron to laptop maker Compal Electronics Inc, they are bracing for a fundamental shift in an arrangement that has served them well since the 1980s.

“We have begun shipping from Batam island, Indonesia, in January,” Pegatron chief executive officer Liao Syh-jang told reporters on Sunday. “Whether the US will decide to go ahead with new tariffs on March 1 will be a key impact on the speed of the company’s further diversification.”

Taiwan’s largest corporations form a crucial link in the global tech supply chain, assembling devices from sprawling Chinese production bases that the likes of HP Inc and Dell then slap their labels on. That may start to change if tariffs escalate, an outcome now in the balance as Washington and Beijing begin thorny negotiations on a trade deal. — Bloomberg