AAPL Apple Inc

By Yoko Kubota and Tripp Mickle 

Apple Inc. is asking suppliers to study shifting final assembly of some products out of China, people familiar with the matter said, as trade tensions prompt the company to consider diversifying its supply chain.

While any major changes would be difficult and could take months to years to implement, Apple is looking into the feasibility of shifting up to a third of the production for some devices, some of the people said. Destinations under consideration include Southeast Asia, the people said.

No decision has been made on such a move, some of the people said. Any such transition, they said, is unlikely to significantly affect the iPhone in the near term because the company relies on hundreds of thousands of workers available in China to manufacture the high-volume product relies heavily on human hands for assembling, as well as a deep network of suppliers there.

Apple is expected to launch updated iPhone models in the fall. Foxconn Technology Group, its biggest assembler, is starting preparations to ramp up production for those models in China, other people familiar with the matter said. Taiwan-based Foxconn said company policy precludes commenting on current or potential customers or any of their products.

"There is some flexibility to move Mac and other products, but it won't be easy," said Mehdi Hosseini, an analyst with Susquehanna International Group who focuses on the technology supply chain. "You have to have relatively skilled labor. You have to create an inventory hub. It would take time."

The situation is delicate for Apple, given its longstanding dependency on China for manufacturing and as a market. Many manufacturers are shifting some production out of China to avoid the higher tariffs Washington is imposing on hundreds of billions of dollars in Chinese-made goods.

An Apple spokesman declined to comment.

Apple assembles most of its products--including the iPhone, iPad and MacBook--in China through contract assemblers such as Pegatron Corp., Wistron Corp. and Foxconn, which is formally known as Hon Hai Precision Industry Co.

Still, Apple is making contingency plans. In May, the U.S. laid out nearly $300 billion of new Chinese imports that would face up to 25% levies as early as this summer, including smartphones and notebook PCs.

To avoid this new wave of tariffs, Apple has accelerated production and shipment of some China-made products for stockpiling, the people familiar with the matter said.

Apple has also been asking suppliers whether it's possible to further cut costs, the people said. This would help bring down the total cost for Apple products and, in the case that tariffs hit, help Apple absorb some of the costs.

Yang Jie

contributed to this article.

Write to Yoko Kubota at yoko.kubota@wsj.com and Tripp Mickle at Tripp.Mickle@wsj.com

(END) Dow Jones Newswires

June 20, 2019 07:54 ET (11:54 GMT)

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