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Apple Inc. has a backup plan if the U.S.-China trade war gets out of hand.
The Cupertino, Calif.-based company’s primary manufacturing partner has enough capacity to make all iPhones bound for the U.S. outside of China if necessary, according to a senior executive at Hon Hai Precision Industry Co. The contract manufacturer now makes most of the smartphones in the Chinese mainland.
China is a crucial cog in Apple’s business, the origin of most of its iPhones and iPads as well as its largest international market. But President Donald Trump has threatened Beijing with new tariffs on about $300 billion worth of Chinese goods, an act that would escalate tensions dramatically while levying a punitive tax on Apple’s most profitable product.
Apple has not given Hon Hai instructions to move production out of China, but it is capable of moving lines elsewhere according to customers’ needs, Liu added. The company will respond swiftly and rely on localized manufacturing in response to the trade war, just as it foresaw the need to build a base in the U.S. state of Wisconsin two years ago, he said.
Foxconn would need at least one or two big factories outside China dedicated to serving Apple’s U.S. requirements, Mawston estimated. If Foxconn freed up non-China production capacity for iPhones, other smartphone clients could find their orders temporarily delayed or sidelined in the short-term, he added.
And it’s not just about the simple assembly of finished goods. The trade war has disrupted a complex global supply chain involving many countries beyond just China and the U.S. Many components that go into devices aren’t made in the U.S., despite being designed there. A phone chip designed by Apple may come out of a factory in Taiwan, then be packaged somewhere else, before being shipped to China for assembly into an iPhone.
It will also start making networking and server products for the U.S. market by the end of next year, on top of LCDs starting next year, Liu said.