Tech giant Apple has requested its major suppliers to shift at least 15 percent to 30 percent of their output from China to Southeast Asia. This is because the ongoing trade war between the US and China is slowly impacting its supply chain, according to several media reports.
In May, Apple’s shares fell after HSBC warned that the trade war impact on the company is still going on. HSBC analyst Erwan Rambourg cut his target price on Apple shares to $174 from $180 per share, citing its existing challenges in China.
These suppliers include Apple’s iPhone assembler Foxconn Technology, Pegatron, and Wistron. Nikkei reported other manufacturers of Apple products such as Quanta Computer, Compal Electronics, Inventec, Luxshare-ICT and GoerTek were also involved.
In case the US-China trade war goes out of control, Apple has an alternative plan, media reports said. Hon Hai Precision trading as Foxconn Technology said that Apple has the potential to manufacture US-bound iPhones outside of China if necessary.
According to Bloomberg, Hon Hai board nominee and semiconductor division chief Young Liu, said, “Twenty-five percent of our production capacity is outside of China and we can help Apple respond to its needs in the US market.
“We have enough capacity to meet Apple’s demand.”
Nikkei reported that there is no stipulated deadline given to the suppliers to make their business shift. However, they are working on the prospective locations to establish a part of their manufacturing base.
Apple suppliers’ shares are dropping as they have started to comply with the US ban on Huawei Technologies. “We believe an escalation/elongation of the trade tension will likely have an impact on how Chinese consumers perceive US branded products, chiefly iPhone and given that China plays a big role in terms of products and services revenue for Apple, this remains a key risk,” Rambourg said.