Moving day coming for U.S. tech firms in China

Don't get too excited about the 90-day ceasefire in the US-China trade war (Image Darwel / iStockPhoto)
U.S. tech giants are planning to exit China. (Darwel/ iStock Photo)

Amazon, HP, Dell, Microsoft are among a group of tech behemoths expected to move production capabilities out of China in reaction to the continuing trade battle between the U.S. and China.

A report in the Nikkei Asian Review last week cited several sources about the tech giants’ plans. It said they are sticking to their departure scenarios even though a truce was reached between U.S. President Donald Trump and the Chinese President Xi Jinping on June 29. HP and Dell want to move up to 30% of their notebook production work out of China, several sources told the Nikkei Asian Review.

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Meanwhile, Microsoft, Amazon, Google, Sony and Nintendeo want to move at least some game console and smart speaker manufacturing out of China. Lenovo Group, Acer and Asustek Computer are evaluating an exodus, according to its sources. The report didn’t cite sources by name, but analysts have been predicting such moves for months by many electronics manufacturers.

In an earlier report, Nikkei said Apple was exploring moving up to 30% of its iPhone production away from China. Apple would not comment, however.

China makes more PCs and smartphones than any other country. Its combined exports and imports in electronics grew to $1.35 trillion in 2017, according to a report by Chinese researcher QianZhan.

Quanta Computer, Foxconn Technology and Inventec have all moved some production of data center servers out of China to Taiwan, Mexico and the Czech Republic in the past 18 months to avoid the threat of tariffs. The U.S. has tariffs on $250 billion in Chinese imports into the U.S., and some companies worry there could be more tariffs in coming weeks.

The loss of production in China will inevitably lead to job losses, further hurting the overall economy, now at a slow pace.

“The country’s economy will have to brace for a further slowdown and many factory workers need to look for jobs elsewhere,” said Darson Chiu, an economist for the Taiwan Institute of Economic Research. He predicted southeast Asian countries and India will become the new competitive hubs.

“China would suffer over the years ahead if it could no longer benefit from the know-how that globally competitive exporters bring to its economy,” said Mark Williams, a China economist for Capital Economics.

Most of the companies cited in the report would not comment, but Lenovo said it had not made a decision to move production from China, while Microsoft said it had no active plans to withdraw any manufacturing work.

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