iPhone Production Doesn’t Have To Stay In China

iPhone Production Doesn’t Have To Stay In China

June 30, 2019

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.


Video Spotlight: Apple Doesn’t Need to Make All iPhones for U.S. in China


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Williams-Sonoma: Systems Approach to Mitigating Tariffs

Williams-Sonoma: Systems Approach to Mitigating Tariffs

Williams-Sonoma is engaging in efforts to mitigate the impacts of tariffs on imports from Chinese production.

In addition to pulling shipments forward to beat the tariff this summer, the company will reduce China sourcing by 50% in 2020. Williams-Sonoma will expand its manufacturing operation in factories in Tupelo, Mississippi.

The mitigation helps Williams-Sonoma avoid raising prices by 11%.


Video Spotlight: Williams-Sonoma CEO: Dodging Tariffs on China


This post is based on the Supply Chain Dive article, Williams-Sonoma will halve China sourcing in the next year, by Emma Cosgrove, June 4, 2019; and the YouTube video, Williams-Sonoma CEO: Dodging Tariffs on China, by  Mad Money | CNBC, May 14, 2019. Image source: Shutterstock / RomanR

Discussion Questions:

1. What are the factors that drive Williams-Sonoma’s decision to halve the amount of goods it sources from China?

Guidance: Chinese tariffs make it more costly for Williams-Sonoma to outsource its production to China. The company has been shifting its production from China to Vietnam, Indonesia, Thailand, and Cambodia to lower production cost. The company will also expand its factories in Tupelo, Mississippi to produce in-house.

2. What considerations go into Williams-Sonoma’s capacity strategy?

Guidance: Williams-Sonoma adopts Continue reading

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