Apple's partners hasten move from China

TAIPEI • Apple Inc's main assemblers are moving more output to India and South-east Asia as trade tensions threaten to escalate costs in their longstanding production base of China.

Hon Hai Precision Industry Co, known also as Foxconn, said over the weekend it is investing more than US$200 million (S$270 million) in India and Vietnam. Smaller rival Pegatron Corp said on Sunday it has moved to Indonesia some manufacturing of networking gear hit by rising United States tariffs on Chinese imports, and is now exploring bases in Vietnam and India as well.

While neither explicitly said they are moving production of Apple products, the twin announcements underscore the extent to which the Taiwanese firms that make most of the world's electronics are reconsidering a reliance on the world's second largest economy. From iPhone assemblers like Foxconn and Pegatron to laptop maker Compal Electronics Inc, they're bracing themselves for a fundamental shift in an arrangement that has served them well since the 1980s.

"We have begun shipping from Batam island, Indonesia, in January," Pegatron chief executive officer Liao Syh-jang told reporters on Sunday. "Whether the US will decide to go ahead with new tariffs on March 1 will be a key impact on the speed of the company's further diversification."

Taiwan's largest corporations form a crucial link in the global tech supply chain, assembling devices from Chinese production bases that the likes of HP Inc and Dell then slap their labels on. That may start to change if tariffs escalate, an outcome in the balance as Washington and Beijing begin thorny negotiations on a trade deal.

Pegatron rose as much as 2.2 per cent in Taipei yesterday, while Hon Hai's shares were mostly unchanged. Mr Liao said it is unlikely that Pegatron will be able to churn out gadgets in Vietnam and India in 2019 since it will take two years to set up new plants. But the firm has also moved some production lines back to the northern Taiwanese cities of Taoyuan and Taipei, he said.

On Saturday, Hon Hai said via a series of filings that it had injected some US$213.5 million into an Indian unit, and paid for rights to use 250,000 sq m of land in an industrial park in Vietnam's northeastern Bac Giang province for operations and sales.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on January 29, 2019, with the headline 'Apple's partners hasten move from China'. Print Edition | Subscribe