Trade war prompts Apple to reconsider Chinese supply chain

Apple's production capacity may become a fresh victim of the spat between the US and China.
Written by Charlie Osborne, Contributing Writer

Apple is reportedly considering a shift in hardware production from China in light of the ongoing trade battle between the United States and the country.

According to the Nikkei Asian Review, the iPad and iPhone maker has asked major suppliers to investigate the potential cost of shifting between 15 and 30 percent of hardware manufacture out of the country to different facilities in Southeast Asia.

Manufacturing partners including Foxconn, Pegatron, Quanta Computer, and Compal Electronics are among those asked to conduct such reviews.

The request has been made in light of the business tension and uncertainty surrounding the tit-for-tat tariff changes and political fighting between the US and China.

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Apple, alongside Keurig Dr Pepper, Dollar Tree, Fitbit, and other companies, has recently petitioned the US government to drop a planned $300 billion trade tariff on Chinese goods which would include consumer products such as iPhones and MacBooks.

Apple has argued that the tariff change would hurt the firm's competitiveness.

However, unnamed sources told the publication that the decision to reconsider its manufacturing sources has been a long time coming as Apple has long believed depending on Chinese manufacture so heavily is a business risk.

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Nikkei's sources said the risks are "too great and even rising," creating an urgent need for Apple to diversify its supply chain. These risks include China's lowering birth rate, increasing labor costs, and centralized supply.

An Apple team dedicated to the project, made up of over 30 people, has already reportedly initiated talks with governments to see which areas may be willing to offer financial incentives for Apple to shift to other suppliers or facilities.

China, as a heavyweight in industrial manufacture, has been a key component of Apple's supply chain for decades. It would be difficult for many other countries to offer the same capacity levels and low-cost supply, and with Apple's success, the Chinese manufacturing ecosystem has grown into a complex, vast web of suppliers and labor.

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However, the moment a company -- even of Apple's size and popularity -- stagnates and sits on its laurels, the possibility emerges of supply chain degradation and the increased risk of problems in the future.

It would take time, money, and effort to shift even a small percentage out of China and there is likely substantial cost associated with changing the supply infrastructure, and so the country will likely remain Apple's core manufacturing area for the foreseeable future -- but with no end in sight for the political tensions between China and the US, exploring such options only makes business sense.

ZDNet has reached out to Apple and will update if we hear back. 

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