Trade war: Foxconn ready to support Apple if it needs to make iPhones outside China

Apple Inc has a backup plan if the US-China trade war gets out of hand.

The Cupertino, California-based company’s primary manufacturing partner has enough capacity to make all iPhones bound for the US outside of China if necessary, according to a senior executive at Hon Hai Precision Industry Co.

The Taiwanese contract manufacturer now makes most of the smartphones in the Chinese mainland.

China is a crucial cog in Apple’s business, the origin of most of its iPhones and iPads, as well as its largest international market. But President Donald Trump has threatened Beijing with new tariffs on about $300 billion worth of Chinese goods, an act that would escalate tensions dramatically while levying a punitive tax on Apple’s most profitable product.

Also read:Foxconn gearing up to make new iPhones in India

Hon Hai, known also as Foxconn, is the American giant’s most important manufacturing partner. It will fully support Apple if it needs to adjust its production as the US-China trade spat gets grimmer and more unpredictable, board nominee and semiconductor division chief Young Liu told an investor briefing in Taiwan on Tuesday.

“Twenty-five per cent of our production capacity is outside of China, and we can help Apple respond to its needs in the US market,” said Liu, adding that investments are now being made in India for Apple. “We have enough capacity to meet Apple’s demand.”

Apple shares were up less than 1 per cent to $194.40 in New York on Tuesday morning.

Swift response

“Apple has not given Hon Hai instructions to move production out of China, but it is capable of moving lines elsewhere according to customer’s needs,” Liu added. “The company will respond swiftly and rely on localised manufacturing in response to the trade war, just as it foresaw the need to build a base in the US state of Wisconsin two years ago,” he said.

Its unclear if India will ever become a major production base for Apple’s marquee device. Foxconn is now running quality tests for the iPhone Xr series there and plans to begin mass production at a facility in the suburbs of Chennai. Older models are already assembled at a Wistron plant in Bengaluru .

Foxconn has also agreed to build a 13,000-worker facility in Wisconsin in exchange for more than $4.5 billion in government incentives. But that project has since come under criticism for low-paying jobs, sudden dismissals and ever-changing goals.

On Tuesday, executives reaffirmed that employment goal, saying construction remained on schedule and that it will hire as many as 2,000 Americans by the end of 2020. “It will also start making networking and server products for the US market by the end of the next year, on top of LCDs starting next year,” Liu said.

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