On June 11, a senior executive of Hon Hai Precision Industry told Bloomberg that the Taiwanese contract manufacturer is ready to support Apple (AAPL). The company could help Apple avoid the negative impact of the ongoing US-China trade war. Hon Hai, which is popularly known as “Foxconn Technology Group,” is Apple’s key manufacturing partner. Foxconn’s board nominee and semiconductor division chief, Young Liu, said, “Twenty-five percent of our production capacity is outside of China and we can help Apple respond to its needs in the U.S. market.”
In December 2018, Reuters reported that Foxconn plans to start assembling its top end iPhone models, including iPhone X series phones, in India in 2019. The move was expected to help Apple avoid tariffs in case the US-China trade war escalates more.
US-China trade war
Early in May, the US-China trade war took an ugly turn. The US accused China of backtracking from trade negotiations. On May 10, President Trump increased the tariffs on Chinese imports worth $200 billion. China retaliated by announcing increased tariffs on US imports worth $60 billion starting on June 1.
Last week, President Trump indicated that he wouldn’t hesitate to increase tariffs by another $300 billion on Chinese imports if needed. He said, “I could go up another at least $300 billion and I’ll do that at the right time.” Such a move would likely force Apple to bear higher tariffs for iPhone imports from China into the US.
Could Foxconn help Apple avoid trade war impact?
In the last month, media reports have suggested that China is using anti-America rhetorical to encourage consumers to boycott Apple products.
While Foxconn could help Apple avoid tariffs by moving iPhone manufacturing outside China, Apple might face challenges due to its weakening sales in China. China is Apple’s largest international market.
Read Could China Blacklist Apple, HP, and Dell? to learn more.
At 12:13 PM EST on June 11, Apple stock was trading with 0.7% gains for the day at $193.96. The S&P 500 Index was down 0.1%.