The China-U.S. trade war has disrupted traditional supply chains with threatened (and partially implemented) tariffs on hundreds of Chinese exports. The 25% tariff would impose a severe tax on Apple’s iPhone, its “most profitable product”.
Hon Hai Precision Industry, also known as the Taiwan contract manufacturer Foxconn, is the primary partner for Apple products. According to their semiconductor division chief Young Liu, Hon Hai has sufficient production capacity outside China (estimated at 25%) if Apple asks its partner to relocate production outside of China.
Such a relocation for final assembly is described as “easy”, but not so the full production of components that go into the final product. It would likely mean moving other assembly from non-U.S. companies back into China. Currently, Foxconn is testing quality for mass production of the iPhone XR near Chennai. Further, there is the future prospect of the Wisconsin plant to further diversify some aspects of the iPhone production.
To date, Apple has not announced any plans for such a change in its production strategy, but further uncertainty regarding the tariffs could change that.
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