Apple, Nokia, others worry over manufacturing operations in China

Apple’s suppliers are reportedly considering moving manufacturing of Apple products outside of China, according to a Bloomberg report, as tensions increase between the United States and China over trade policies.

The Bloomberg report, citing unnamed sources familiar with the situation, said that Apple’s manufacturing partners plan to stay in China if the United States continues to levy a 10% import tariff on smartphones. But it could reconsider that position if President Trump raises that rate to 25%.

Apple is one of the world’s largest smartphone vendors.

The tech giant isn’t alone in worrying over its operations in China. Just this week, Samsung said it would shut down a manufacturing plant in China that currently employs 2,600 people, Reuters reported. However, the publication noted that action is likely related to Samsung’s struggles to compete against Chinese smartphone vendors like Huawei on their home turf.

Other companies, though, are moving out of China due to Trump’s tariffs. For example, Inseego said that it will no longer manufacture its equipment in mainland China. The company, which makes some of Verizon’s 5G devices, said the move stems directly from President Trump’s tariffs on the sale of Chinese goods in the United States.

And earlier this year, Ericsson announced it will expand its R&D and manufacturing efforts in the United States ahead of the launch of U.S. 5G services.

And Nokia’s CFO addressed the situation during the company’s recent quarterly earnings conference call:

“Our team has been working diligently to assess the impacts that these tariffs will have on our overall business. While we may not be able to completely mitigate our exposure, we believe that we can reduce this to a manageable level,” Nokia’s Kristian Pullola said, according to a Seeking Alpha transcript of the event. “We are currently working on short-term actions to move some of our manufacturing from China to other countries in the Asia-Pacific regions and increase our production in other locations in the Americas, which are already the main source of supply for our U.S. deliveries. Following these steps, we would expect that our overall annual exposure would be some tens of millions at the gross profit level beginning in 2019 and going forward. Therefore, we expect that the tariffs will have an impact on us, but at this point that impact is relatively limited.”

Interestingly, the situation comes as the Wall Street Journal reported a possible change in China’s positioning on manufacturing and domestic suppliers. The publication reported that the country may replace its “Made in China 2025” plan with one that would play down China’s bid to dominate manufacturing and be more open to participation by foreign companies, according to unnamed people familiar with the situation.

At the same time, the ongoing saga of Huawei’s arrested CFO is pulling at the relationship between the United States and China. Huawei’s CFO—the daughter of the company’s founder—was arrested in Canada last week due to requests from U.S. officials, who are looking to extradite Meng Wanzhou to the United States as part of an investigation into Huawei’s alleged use of the global banking system to evade U.S. sanctions against Iran. Meng posted bail of about $7.5 million and will be subject to 24-hour physical and electronic surveillance in Canada while she awaits a February trial for her extradition.

Perhaps not surprisingly, the Wall Street Journal reported that Huawei’s 1,500 U.S.-based workers are growing increasingly concerned about the situation.