William Gallagher
Apple's iPhone assembly partner Pegatron appears to be making a move to Indonesia to sidestep the US/China trade dispute, despite recent news of a truce.
The iPhone assembly company Pegatron is reported to be moving production of all devices affected by US tariffs away from China and to a factory on Batam Island in Indonesia. Including non-Apple devices, the production being moved equates to $1 billion in revenue annually, with the plant expected to begin operations in mid-2019.
"The Trump-Xi meeting will not affect the pace of Pegatron's strategy," an unnamed source told the Nikkei Asian Review. "The investment will be made either by the end of this month or at the beginning of next month at the latest, as it will require two quarters for Pegatron to move, install and certify equipment before the plant becomes fully operational."
Also according to the Nikkei Asian Review, plans under consideration also include northern Vietnam as a possible site for future manufacturing. However, according to the news site's source "investment in Batam Island is going faster than other places."
A Pegatron spokesperson refused to confirm the claim but said the company was "surveying all of the possibilities".
Pegatron remains a significant iPhone assembler but Apple did appear to scale down its use of the firm following alleged capacity and component sourcing issues. Reportedly, Pegatron had originally been slated to produce between 50 and 60 percent of all iPhone XR orders but is now to make only 25 percent. Rival Foxconn may be producing the other 75 percent.
Two unnamed sources told the Nikkei Asian Review that Pegatron is renting factory facilities rather than constructing new ones, specifically so that it can begin production sooner. The rented facility will employ between 8,000 and 10,000 laborers.
The move fits with Pegatron's Chief Financial Officer Charles Lin's telling investors that new facilities could be situated across three countries in Southeast Asia. Similarly, Pegatron Chairman Tung Tzu-hsien did recently announce that the firm intends to expand operations in its northern Taiwan site in order to make tariff-affected devices.
Pegatron's expected move would mean that it joins other companies relocating electronics production away from China, including Apple Watch assembler Quanta Computer, HomePod and AirPods maker Inventec, and potentially Foxconn as well.
A spokesperson for Quanta told the Nikkei Asian Review that "the latest development of the trade tensions between the world's two largest economies will not change Quanta's ongoing plan."
Tim Cook at a Foxconn assembly plantUnder the shadow of reports alleging that Foxconn is moving operations out of China, iPhone assembler Foxconn's chairman Terry Gou said that he expects trade tensions to last "five to ten years."
"Uncertain policies are causing pressures on manufacturers," said Gou. "Only through multi-location strategies can they respond [to] fast-changing dynamics."
Historically, The Nikkei Asian Review has a very poor track record regarding Apple's hardware plans and intentions. However, reports that it generates about the business of Apple's suppliers — such as this report — are nearly always accurate.
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9 Comments
"Reportedly, Pegatron had originally been slated to produce between 50 and 60 percent of all iPhone XR orders but is now to make only 25 percent. Rival Foxconn may be producing the other 75 percent."
So this may be why the XR orders have been cut and given to Foxconn, to allow for the move to take place. Why is no one talking about this..this is MAJOR news.
Good. I hope as many companies as possible give China the middle finger and take their business elsewhere.
China’s arrogance, support of IP theft, and blatant ignorance of WTO guidelines for decades is finally catching up to it.
its time countries banded together and hit China right where it hurts.
Always warms the cockles of my heart to see at least one classic American bigot parrot conservative blather about intellectual "property" theft. US patent law is about as archaic as it gets and many nations refuse to cooperate with Uncle Sugar as the trade cop of the world. I listened to this crap for years in international commerce - whines over Japan, Taiwan, Korea - now, China. All while I worked for American and English firms with higher QC standards then current in the GOUSA.
Aside from cultural and commercial history forming different trade practices, no one holds a gun to purchasers' heads forcing them to sign contracts with provisions for process transfer. Don't want to deal? Don't sign! Try to find a tidy little Republican company in East Bumshoe, Texas, to make your widgets. Without the number of jobsite engineers Chinese contractors typically have on payroll to guide assembly line changeovers - BTW.
Internationalized supply/production chains have moved the global economy higher, faster than insular 18th Century ideologues ever admit. That rising tide has floated all our boats. Want job retraining, modernized production? Plenty of Western nations manage to do so. They haven't goverments run by a 2-party cartel that prioritize corporate tax cuts, obscene military budgets, over education and opportunity.
Vote for Eideard. He has it all under control.