US-based speaker maker Sonos Inc to grow operations in Malaysia — report

US-based speaker maker Sonos Inc to grow operations in Malaysia — report
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KUALA LUMPUR (May 29): California-based speaker maker Sonos Inc is working with suppliers to boost production capacity in Malaysia.

In a report yesterday, The Wall Street Journal (WSJ) said Sonos is working to lower its tariff cost, but the company’s efforts have been hampered by coronavirus restrictions and a shortage of semiconductors.

The WSJ said Sonos, which sells voice-activated, Internet-connected speakers and other audio electronics, plans to source all of its US-bound products from Malaysia by the fall (September to December), citing chief financial officer (CFO) Brittany Bagley.

The US is the company’s core market, generating more than half of its revenue.

“It has taken longer than we thought it would, but we are still very much on track with our Malaysia strategy,” said Bagley, who became the company’s CFO in 2019.

The report said Sonos began relocating orders in 2019 with Chinese suppliers to Malaysia in an effort to diversify its supply chain.

Its tariff cost has since come down, but the company wants to reduce them further as tariffs remain in place between the US and China.

The WSJ said Sonos declined to provide the percentage of its US-bound products currently made in China.

The company said it would continue to source products for sale in Europe, the Middle East, Africa and the Asia-Pacific region from China. Sonos doesn’t own or operate any plants.

Its plans to increase orders from Malaysia have been met with obstacles.

Manufacturing plants in the country had to shut down temporarily because of pandemic-related restrictions and Sonos faced challenges in hiring workers.

The company declined to say how many suppliers it has or how much it will cost to boost orders from manufacturing partners in Malaysia, added the report.

“What we pay in tariffs has come down materially,” Bagley said, referring to the shift to Malaysia and a reduced tariff rate for imports from China last year.

The tariff rate fell to 7.5% in February 2020 from 15% previously as part of a trade agreement between the US and China.

The WSJ said Bagley declined to provide figures of how much Sonos pays in tariffs.

Sonos’s cost of revenue grew 63.8% to US$167.2 million (about RM691.12 million) in the latest quarter.