Published June 12, 2019
As the US-Chine trade war continues, so does the threat of further tariffs being imposed by President Trump. They could potentially cut deeply into the profit margins of the iPhone, but according to Foxconn, Apple has nothing to worry about.
As Bloomberg reports, Hon Hai Precision Industry Co. Ltd, which trades as Foxconn, is Apple's major manufacturing partner for the iPhone and iPad. Most of this manufacturing occurs in China, where Foxconn operates 12 factories spread across nine cities. If tariffs were introduced that hit the iPhone, it would be a huge problem for Apple. However, Hon Hai board nominee and semiconductor division chief Young Liu believes it won't be a problem.
Although Foxconn's biggest presence is within China, the company also has operations in Brazil, India, Japan, Malaysia, Mexico, South Korea, within Europe, and the US. With this in mind, Liu points out that, "Twenty-five percent of our production capacity is outside of China and we can help Apple respond to its needs in the U.S. market ... We have enough capacity to meet Apple's demand."
In other words, new tariffs simply means Foxconn would shift all iPhone production out of China and it believes the capacity is already there. Liu also suggests that most of the non-China capacity would be done in India where investment is already being made for Apple device production. Older iPhone models are already produced at a Wistron plant in Bangalore, and iPhone XR quality tests are being run at a facility in the Chennai suburbs with the aim of mass producing devices there.
With so many other factories dotted around the world, you have to believe that Foxconn could react to new tariffs quickly by shifting production. In fact, new tariffs may work in Apple's favor if its manufacturing partner is already planning to react. How many Android smartphone brands could do the same?