Apple explores moving 15-30% of production capacity from China

Malaysia among countries eyed by Apple to move production capacity

The countries being considered include Mexico, India, Vietnam, Indonesia and Malaysia. India and Vietnam are among the favorites for smartphones, Nikkei said, citing sources who did not want to be identified as the discussions are private.

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TOKYO: Apple Inc has asked its major suppliers to assess the cost implications of moving 15%-30% of their production capacity from China to Southeast Asia as it prepares for a restructuring of its supply chain, according to a Nikkei Asian Review report on Wednesday.

Apple's request was a result of the extended Sino-U.S. trade dispute, but a trade resolution will not lead to a change in the company's decision, Nikkei said, citing multiple sources.

The iPhone maker has decided the risks of depending heavily on manufacturing in China are too great and even rising, it said.

Earlier this month, credit rating agency Fitch said it views Apple, Dell Technologies Inc and HP Inc as potential blacklist candidates if China blacklists U.S. companies in retaliation for restrictions on Huawei.

Key iPhone assemblers Foxconn, Pegatron Corp, Wistron Corp, major MacBook maker Quanta Computer Inc, iPad maker Compal Electronics Inc, and AirPods makers Inventec Corp, Luxshare-ICT and Goertek have been asked to evaluate options outside of China, Nikkei reported.

The countries being considered include Mexico, India, Vietnam, Indonesia and Malaysia. India and Vietnam are among the favorites for smartphones, Nikkei said, citing sources who did not want to be identified as the discussions are private.

Last week, Foxconn said it had enough capacity outside China to meet Apple's demand in the American market if the company needed to adjust its production lines, as U.S. President Donald Trump threatened to slap further $300 billion tariffs on Chinese goods.

Analysts at Wedbush Securities said in a best case scenario Apple would be able to move 5%-7% of its iPhone production likely to India in the next 12 to 18 months.

Given the complexity and logistics involved, brokerage said, it would take at least 2-3 years to move 15% of iPhone production from China to other regions.

"We believe this is all a poker game and Apple will not diversify production out of China overnight and certainly a long-term US/China trade deal is key for Cook & Co to sleep well at night," Wedbush analysts said.

China is a key market for Apple as well as a major production center for its devices. The company got nearly 18% of its total revenue from Greater China in the quarter ended March.

Earlier in June, Trump met with Apple Chief Executive Officer Tim Cook to discuss trade and other hot-button issues facing the tech company as Trump deliberates whether to make good on his threat to hike tariffs on imports from China.

A group of more than 30 people from Apple's capital expense studies team have been negotiating production plans with suppliers and governments over monetary incentives that could be offered to lure Apple manufacturing, the report said.

A deadline has not been set for the suppliers to finalize their business proposals, Nikkei said, adding that it would take at least 18 months to begin production after choosing a location.

Apple and Foxconn did not respond to requests for comment. - Reuters

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Huawei CEO says he would oppose  Chinese retaliation  against Apple  CNA

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The founder of the Chinese technology giant Huawei, Ren Zhengfei, has said in an interview with Bloomberg that he would be "the first to protest" if Beijing retaliates against the US-based tech giant Apple.

A Bloomberg reporter has asked the Huawei CEO in an interview whether he would retaliate against Apple amid "calls by some in China" to take countermeasures against the US company.

"That will not happen, first of all. And second of all, if that happens, I'll be the first to protest. Apple is the world's leading company. If there was no Apple, there would be no mobile internet. If there was no Apple to help show us the world, we would not see the beauty of this world. Apple is my teacher. It's advancing in front of us. As a student, why should I oppose my teacher? I would never do that", Ren Zhengfei has told Bloomberg in an interview, published on Sunday.

Huawei has been accused by several countries of being sponsored by the Chinese state and spying on its behalf through its devices.

Visitors walk past Huawei's booth during Mobile World Congress in Barcelona, Spain, February 27, 2017 © REUTERS / Eric Gaillard Huawei Crackdown: China Prepares Law That May Ban US Tech Firms From Its Market − Report

US President Donald Trump issued an executive order earlier in May that added Huawei and its 70 affiliates to a trade blacklist, thereby restricting its activity in the country. US companies are hence required to receive permission before trading with the telecom company.

As a result, Google had to suspend business operations with Huawei, including the transfer of all hardware, software and technical services, except those publicly available via open source licensing. This move has already impacted the telecom giant, with several mobile carriers, such as UK Vodafone and EE suspending their launches of new Huawei products.

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The standoff between Huawei and Apple was sparked by the December arrest of Huawei Chief Financial Officer Meng Wanzhou, the daughter of Huawei's founder in Canada, for alleged violations of US sanctions on Iran. Beijing decried the move and demanded that Canada immediately release the Chinese national.

In January, the Chinese telecom giant punished staffers who used an iPhone to send an official company tweet amid a standoff between the two tech giants. In an internal memo, published online by Chinese media, Huawei said those responsible were demoted and had their salaries slashed by $730.

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Meanwhile, US Secretary of State Mike Pompeo claimed on Thursday that the Chinese tech giant allegedly had close links to not only the Chinese government but also to the Chinese Communist Party. He said that these ties significantly threatened any US-related information that passed via Huawei's devices. Pompeo also said the State Department expected more companies worldwide to cut ties with Huawei in the future.

The Chinese Foreign Ministry said Friday that Pompeo's remarks were made in an attempt to stir up ideological resistance against the company.

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Last year, the United States, Australia, Japan, and New Zealand banned the company from participating in government contracts due to security concerns. Huawei has vehemently denied all allegations of spying.

Huawei has  repeatedly denied it is controlled by the Chinese government, military or intelligence services.

Ren also responded to critics who claim that Huawei got to where it is currently through intellectual property (IP) theft and government support.

"The US has not developed that technology so from where should I steal it?" he asked.

"We are leading the US. If we were behind, Trump would not need to make so many efforts to attack us." As the number of companies supplying Huawei with components and software falls, Ren added that Huawei would use its own products instead.

"The US manages its own companies. The US is not the international police - they can't manage the whole world. The rest of the world decides whether they should work with us based on their own business interests and positions," he said.

"If the US imposes further restrictions on us, we will reduce our purchases from the US and use more of our own chips. If American companies have permission from Washington to sell to us, we will continue to buy from them."


Last week, Trump also, for the first time,linked a dispute over Huawei, which he views as a threat to American security, with a deal to resolve the US-China trade war.

"Huawei is something that is very dangerous," Trump told reporters at the White House. "You look at what they've done from a security standpoint, a military standpoint. Very dangerous."

Ren told Bloomberg that there was no need for negotiation over the issue.

"The US has never bought products from us. Even if the US wants to buy our products in the future, I may not sell to them. There is no need for negotiation."

Source: Reuters/CNA/aa(mn)

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Martin Jacques
Martin Jacques (2012)
Born	1945 (age 73–74) Coventry, England, Great Britain, U.K
Nationality	British
Education	King Henry VIII School, Coventry
Alma mater	University of Manchester (B.A.) University of Cambridge (PhD)
Occupation	Editor, academic, author
Website	MartinJacques.com

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Tariffs won’t make US firms produce in US

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"It would not be profitable to build the Focus Active in the U.S. given an expected annual sales volume of fewer than 50,000 units," automaker Ford Motor Company said in a statement on Sunday.

US President Donald Trump tweeted earlier on Sunday that "'Ford has abruptly killed a plan to sell a Chinese-made small vehicle in the US because of the prospect of higher US Tariffs.' CNBC. This is just the beginning. This car can now be built in the USA and Ford will pay no tariffs!" Ford quickly clarified the facts, evidently rebuffing Trump's tweet.

Likewise, tech giant Apple Inc. wrote a letter to US Trade Representative Robert Lighthizer, saying that a proposed 25 percent tariff on $200 billion of Chinese imports would cover a "wide range of Apple products."

In another tweet, Trump told Apple to make their products in the US instead of China. Apple hasn't responded.

According to the US media, the price of iPhone may increase to $2,000 if the company does as told.

The multinational companies that produce automobile and mobile phones have different manufacturing and sales layouts. Car manufacturers tend to produce their products where they are sold, while mobile phone manufacturers optimize their production chain costs worldwide. That's the natural law of economic globalization which can't be easily changed by a country's government.

The White House lacks understanding of the global production and value chains. "Make your products in the United States instead of China" seems naive. Instead of coercing companies to follow demands, imposing tariffs will only scare them off.

Simply making US companies produce in the US can't deal with the complicated global industry today. We have also learnt from history that neither side will gain in a trade war.

China is the world's largest automobile and mobile phone market. Setting tariff barriers between Beijing and Washington won't make US companies give up on China for the sake of their own country. As long as China doesn't make things hard for US companies, it's unavoidable that they will place production operations in China. The Chinese market can help them make money, but the White House can't.

Most American high-tech companies will face difficulties if they leave China. The larger the market is, the higher return the companies will get from their research and development. High-tech companies, if they can't grow to be giant, don't usually survive for long, and it would be fatal for many of them to lose the Chinese market.

There hasn't been a previous US government that dares to instruct multinational companies in production layouts, and the current administration has overestimated its executive power. The global industrial chain today is formed by market rules established over decades and can't be easily changed by one government.

It would be the White House's dream to expect that the US is not only the world's technology and financial center, but also the world's factory that sells its products globally. If the US doesn't want to wake up from this dream, then the outside world has to step in and rouse Washington.

Source:Global Times

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The Death of the iPhone

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When I first predicted the "death of the iPhone" in January 2016, most people just laughed.

But when Apple reported its first-ever decline in iPhone sales just three months later, many began to quiet down and listen.

Now, even Tim Cook is recognizing the slowdown, after posting a surprise sales decline in second-quarter earnings this week.

According to Apple's own CEO:

"We're seeing what we believe to be a pause in purchases on iPhone."

Cook has his own theories, but he's missing the bigger picture. Apple has failed to innovate, and it's costing the company a fortune.

Many are banking on the iPhone 8, but the truth is even it won't stand up to what's coming next::

Simply put, the age of the iPhone is coming to an end...

And the age of augmented and virtual reality is just around the corner.

For investors, that means a once-in-a-lifetime opportunity you don't want to miss.

Good Investing,

Jason Stutman
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