Google will reportedly move the production of its Pixel smartphones from China to Vietnam.
First reported by Nikkei Asian Review, the impending move is spurred by rising labour costs in China and the intensification of tariffs that have arisen from the US-China trade war.
Google is currently converting an old Nokia factory in Bac Ninh, a northern province in Vietnam, into a smartphone factory to handle the production of Google's Pixel smartphones, according to the report.
The Vietnamese workforce is familiar with the production of smartphones as Google's smartphone rival, Samsung, has operated parts of its smartphone supply chain in Vietnam for over a decade.
"Google are likely to keep some activities inside China. The U.S. company knows that if it is going to be serious about making hardware, it could never give up the massive Chinese market," Nikkei's sources reportedly said.
The US search giant intends to eventually move production of most of its American-bound hardware outside of China, the report added, which includes its Pixel smartphones and smart devices such as the Google Home.
The report follows US President Trump tweeting last week that he had "ordered" US companies to start looking for alternative operations base to China.
White House economic director Larry Kudlow then clarified on Sunday that Trump only suggested to US companies to move their operations and supply chains away from China. He did confirm however, that the US President did possess the power to force US companies to move their operations out of China if the trade war escalated to become a matter of national emergency.
The tension in US-China trade war has not dissipated despite having gone on for over a year. The US in recent months imposed tariffs on two tranches of Chinese imports valued at $250 billion and $300 billion.
The US have since increased these tariffs by an additional 5%, citing China's decision last week to enforce additional tariffs on US goods as the reason for the increases. As it currently stands, the US has enforced a 30% tariff on $250 billion worth of Chinese imports, in addition to a 15% tariff on a separate $300 billion in goods.
The tit-for-tat tariff raising between the two countries first began in March last year, when Trump enforced tariffs after an investigation by US Trade Representative Robert Lighthizer concluded China was using foreign ownership restrictions to require technology transfers from US companies to Chinese organisations, as well as conducting espionage to acquire intellectual property and confidential business information.
Tariffs on imported Chinese products cost the US tech industry $1.3 billion in May 2019 alone, according to data from the Consumer Technology Association -- and the cost is expected to grow.
With the China-US trade dispute unlikely to be resolved soon, technology vendors should be prepared to support two trading blocs--one that is heavily partnered with China and the other with the US, says VMware CEO Pat Gelsinger, while Dell CEO Michael Dell reveals the company has made "adjustments" to due to the conflict.
Apple CEO Tim Cook made a "compelling argument" that the US China tariffs hurt it more than Samsung, according to US president Donald Trump.
Tariffs on $300 billion worth of Chinese imports split into two tranches.
Huawei is squeezing Apple's iPhone out of the Chinese smartphone market.