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Report: Apple Plans to Reduce Production in China

Not these kind of Apples. (Image credit: Shutterstock)

Apple might be looking for some new orchards. Nikkei Asian Review today reported that the company is looking to move between 15% and 30% of its production outside China, and not just because of the ongoing trade war between the People's Republic and the U.S.

That conflict was said to have prompted Apple's decision to move some of its production outside China, however, as the U.S. continues to raise tariffs on goods imported from the country while also applying them to more product categories. This has effectively forced companies to choose between lower margins, higher prices, and making their products elsewhere. Apple is reportedly leaning towards the last option.

There are other factors at play as well. Nikkei quoted an "executive with knowledge of the situation" as saying that "a lower birthrate, higher labor costs and the risk of overly centralizing its production in one country" would lead Apple to make this shift even if the U.S. and China settle their differences. The trade war merely provided the spark needed to light the kindling set by those other problems.

All that kindling might have eventually caught fire anyway. China reported its lowest birth rate in 70 years earlier this year and labor costs have been rising in the country since 2017. Both trends could make it harder to justify manufacturing everything in the country rather than maintaining production lines in multiple countries.

Nikkei's report arrived shortly after Foxconn said it could move all of its production for Apple hardware outside China. The company won't do something that drastic, though. It still makes sense to rely on Chinese factories to make products that won't be sold in the U.S. That way companies should be able to evade U.S. tariffs and reduce their dependence on China without overhauling their entire supply chain.