Apple has a backup plan if the US-China trade war triggers iPhone tariffs

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.

Business Standard : Apple has a backup plan if the US-China trade war gets out of hand.

The Cupertino-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.

The Taiwanese 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.

Hon Hai, known also as Foxconn, is the American giant’s most important manufacturing partner. It will fully support Apple if it needs to adjust its production as the US-Chinese trade spat gets grimmer and more unpredictable, board nominee and semiconductor division chief Young Liu told an investor briefing in Taipei on Tuesday.

“Twenty-five percent of our production capacity is outside of China and we can help Apple respond to its needs in the US market,” Liu said.

Liu also added that investments are now being made in India for Apple. “We have enough capacity to meet Apple’s demand.”

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.

It’s unclear if India will ever become a major production base. Foxconn is now running quality tests for the iPhone XR series there and plans to begin mass production at a facility in the suburbs of Chennai. Older models are already assembled at a Wistron plant in Bengaluru.

Foxconn has also agreed to build a 13,000-worker facility in Wisconsin in exchange for more than $4.5 billion in government incentives. But that project has since come under criticism for low-paying jobs, sudden dismissals and ever-changing goals. On Tuesday, executives reaffirmed that employment goal, saying construction remained on schedule and that it will hire as many as 2,000 Americans by the end of 2020.

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.

Foxconn set to begin mass production of iPhones in India this year

Foxconn Technology Group Chairman said that Prime Minister Narendra Modi has invited him to India as his Taiwanese company plans its expansion in the country.

Foxconn Technology Group Chairman Terry Gou said the iPhone will go into mass production in India this year, a shift for the largest assembler of Apple Inc.’s handsets that has long concentrated production in

Gou said that Prime Minister Narendra Modi has invited him to India as his Taiwanese company plans its expansion in the country. Apple has had older phones produced at a plant in Bangalore for several years, but now will expand manufacturing to more recent models. Bloomberg News reported this month that Foxconn is ready to start trial production of the latest iPhones in the country before it starts full-scale assembly at its factory outside the southern city of Chennai.

“In the future we will play a very important role in India’s smartphone industry,” Gou said at an event in Taiwan. “We have moved our production lines there.”

India has become the fastest-growing smartphone market in the world, while China stagnates and Apple loses share to local competitors such as Huawei Technologies Co. and Xiaomi Corp. Apple has been a minor player in India, in part because of its high prices, but local manufacturing would help the Cupertino, California-based company avoid import duties of 20 per cent.

“For Foxconn, the China market for iPhones is saturated, and labor costs are three times higher compared with India,” said Karn Chauhan, a Gurgaon-based analyst at Counterpoint Research. “India is still an emerging smartphone market, it has a lot of potential domestically and could serve as an export hub for the region.”

Gou also said on Monday that he plans to step back from daily operations to focus on broader strategy. The founder isn’t stepping down or relinquishing his chairmanship, said Louis Woo, special assistant to Gou.

It’s not yet clear how Apple’s steps into India will affect its China operations. China has been the company’s most important manufacturing base for years, home to Foxconn’s biggest facilities and hundreds of other partners.

Foxconn already has two assembly sites in the southern Indian states of Andhra Pradesh and Tamil Nadu, where it makes devices for Xiaomi and Nokia. Locating more production in India would help diversify Apple and Foxconn’s manufacturing footprint away from China amid ongoing trade tensions with the US.

The Indian assembly line of Foxconn’s Hon Hai Precision Industry Co would serve local and export markets by the time Apple announces its next iPhone models in September, people familiar with the matter have said.

Business Standard