AP Photo/Kin Cheung
Apple's iPhone sales in China have taken a major hit.
- Apple's manufacturing partners are looking to diversify their production to locations outside of China, such as India, Vietnam, and Indonesia.
- The trade war and the coronavirus pandemic sparked concern about the company relying on one country for the majority of its production.
- However, the ease and efficiency of basing manufacturing in China will be difficult for companies to ignore.
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Apple's supply chains could be rewoven as key manufacturers for the company consider relocating and diversifying centers of production outside China as the coronavirus rattles supply chains, according to a report by Bloomberg.
Wistron Corp. could transition half of its production capacity into countries beyond China in the next year, the report said. Other Apple partners such as Hon Hai Precision Industry Co. (also known as Foxconn), Inventec Corp., and Pegatron Corp., are also considering reorganizing their supply chains.
The potential to reorient manufacturing locations was ushered in as the trade war between China and the US erupted and is becoming an increasingly serious consideration as the coronavirus ravages supply chains and the global economy, according to Bloomberg. Both the plight of the trade war and the coronavirus epidemic reveal the risks of relying on one country to manufacture a product.
Wistron Corp. already produces some iPhone technology in India as well as Vietnam and Mexico and is saving $1 billion to continue spreading its manufacturing efforts elsewhere, the report said. Producers such as Pegatron are also looking to expand into Vietnam and India: Pegatron is already branching out to Indonesia and hopes to expand in Taiwan as well.
The same goes for smaller manufacturers with partnerships outside of Apple, such as Meiloon Industrial Co., a speaker producer for Harman International Industries and Xiaomi Corp.
"We're talking about adjusting some knobs, not some sort of wholesale, fundamental change," Apple CEO Tim Cook said in late February the company wasn't making any sudden changes because of the coronavirus shake-up, according to Bloomberg.
Moving production outside of China is not a simple process for companies because of the ease China offers, including a large market base, skilled workers, productive distribution systems, and a closely-knit network of suppliers. But for some companies, the inconvenience of diversifying manufacturing is worth avoiding the risk of putting production in one country.