On July 3, Nikkei reported that “Global consumer electronics makers HP, Dell, Microsoft and Amazon are all looking to shift substantial production capacity out of China, joining a growing exodus that threatens to undermine the country’s position as the world’s powerhouse for tech gadgets.” Citing data from Trendforce, Nikkei also reported that 47% of Dell’s (DELL) laptop shipments and 40% of HP’s (HPQ) notebook computers are shipped to North America. According to the report, Amazon (AMZN) is looking at Vietnam for Kindle and Echo production. In May, President Trump tweeted that companies in China would leave for alternate locations like Vietnam.
Apple (AAPL) supplier Foxconn was thinking about moving some of Apple’s assembly away from China amid the escalation in the US-China trade war. After the sanctions on Huawei, Microsoft (MSFT) and Alphabet (GOOG) reduced their business with Huawei. While President Trump announced easing the sanctions, there’s a lot of uncertainty and confusion.
Trade war truce
While the US and China decided on a trade war truce after the meeting between President Trump and President Jinping, companies might still diversify their supply chains. As we discussed in Does Trumponomics Signal the End of Made-in-China Era, even if the US and China reach a trade deal, we could see a trend where companies diversify their sourcing to limit the impact of any future trade war between the world’s two biggest economies. The trade war between the US and China might not end with a trade deal. Last year, Alibaba’s (BABA) co-founder Jack Ma predicted that the US-China trade war could last for decades. Alibaba announced a share split last month. The company is reportedly looking at a Hong Kong listing.
China’s rise has raised alarms in several western capitals. China has been trying to expand its influence beyond its borders with President Jinping’s flagship Belt and Road Initiative. However, the US has warned that the project could lead to unstainable debts for participating countries. Asian economies might like their chances. Companies want to diversify their supply chain from China. India is also rolling out the red carpet for companies leaving China.