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With the US iPhones currently manufactured in China, the escalation of the trade war between the two countries raises serious concerns. The worst-case scenario would be a 25% rate on iPhones entering the US, which would drive up prices, hurt Apple's bottom line, or both.
But Foxconn said that the iPhone could escape this fate because the assembler has sufficient capacity in other countries to provide all the American iPhones …
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Bloomberg quotes a senior Foxconn executive during a briefing with investors.
The Cupertino, California-based company's main manufacturing partner has enough capacity to make all iPhones to the United States outside of China, if necessary, according to a senior executive at Hon Hai Precision Industry Co. on the Chinese mainland […]
Hon Hai, also known as Foxconn, is the largest manufacturing partner of the US giant. It will fully support Apple if it needs to adjust production as the US-China business niche becomes darker and more unpredictable, said Tuesday Young Liu, chairman of the board and head of the semi- driver, during a briefing with investors.
"25% of our production capacity is outside of China and we can help Apple meet its needs in the US market," said Liu, adding that investments are currently being made in India for Apple. "We have enough capacity to meet Apple's demand."
Liu even hinted that the still fictional Wisconsin plant could be a future option.
The company will react quickly and rely on localized manufacturing in response to the trade war, just as it foresaw the need to create a base in the US state of Wisconsin two years ago, did it? he declares.
In April, Foxconn confirmed information that it will launch mass production of iPhone in India this year. It is thought that this is mainly aimed at serving the local market, avoiding Indian import duties, but it seems that Foxconn would be able to sufficiently strengthen its capabilities to assemble the US iPhones.
Pegatron, the assembler of Apple's competing products, is also expected to move some MacBook and iPad productions out of China this month.
Some Apple accessories are already taxed at 25% when they enter the United States from China, this cost being absorbed by Apple.
If Foxconn is right, it does not solve all the threats of Apple related to the trade war. There has been a growing movement in China to boycott Apple products in retaliation for US policy, as well as discussions that the Chinese government would make life difficult for Apple.
Goldman Sachs recently warned that Apple's end result could be a 29% drop in global profits. However, it is based on an extreme scenario that China would ban the sale of iPhone in the country. Apple CEO Tim Cook recently said that he considered that it was unlikely that China's target Apple.
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