A senior Foxconn executive says that the company could move production of all iPhones destined for the US out of China if the current trade war demands it. In comments reported by Bloomberg and The Wall Street Journal, the head of Foxconn’s semiconductor business group, Young Liu, said, “25 percent of our production capacity is outside of China and we can help Apple respond to its needs in the U.S. market.”
“We have enough capacity to meet Apple’s demand,” Liu said at an investors’ conference. Apple has yet to instruct Foxconn to move production out of China according to Liu.
Apple might need to rethink manufacturing after tariffs up to 25 percent come into effect at the end of June. The new tariff is expected to apply to the wholesale cost of devices like phones, laptops, and tablets imported from China to the USA, the market where a third of Apple’s iPhone revenue comes from. It would be up to Apple to decide how much of the extra cost to pass on to US consumers. Analysts quoted by Bloomberg suggest that passing the cost of the tariffs on in their entirety could result in price increases of between nine and 16 percent, resulting in a drop in demand of anywhere between 10 and 40 percent. Alternatively, absorbing the cost entirely could hit Apple’s earnings per share by six to seven percent.
Liu conceded that Apple has not given its Taiwanese partner instructions to move production out of China, but he said Foxconn is “capable of moving lines elsewhere according to customers’ need.”
The Hon Hai senior executive said it will respond swiftly and rely on localized manufacturing in response to the trade war, just as it saw the need to have a base in the U.S. two years ago before the trade dispute began.
Foxconn has been considering expanding its production plants in India as a way to diversify its supply chain away from China, where most of the Taiwan-based firm’s facilities currently reside.
Apple manufactures most of its iPhones through Foxconn, but the latter’s growing India base provides security in the face of Apple’s vulnerability to rising U.S.-China tensions over trade and technology.
Foxconn already has plants in India, and in late 2017 it was reported that the firm would invest around $356 million to expand its facilities there to begin assembling Apple’s high-end iPhones. Manufacturing iPhones in India could help Apple lower prices by allowing it to avoid a tariff that adds 20 percent to devices imported from China.
