Escalation of the US-China Trade War: It Will Take Years to Move Apple Contractors from China
Last week, US President Donald Trump brought down the stock market with his statements on foreign trade policy in relation to China. After his statements, the Dow Jones Index notably fell, and the shares of many American companies in the technology sector, whose business is somehow connected with China, lost in price. Trump not only expressed his willingness to raise tariffs on imports of goods from China, but he also urged the "great American companies" to leave this country, and publicly called the current leader the "enemy". Due to this, Apple's shares fell by 4.6%, and the stock price of AMD suffered from these statements most of all, it fell by 7.4%. Intel shares rate fell on 3.9%, while NVIDIA securities lost 5.2% of their market value. The main part of Apple products is produced in China by contractors of the company, and if they have to follow the recommendations of the current president of the United States, even transferring a small part of production outside the PRC will take about a year and a half. According to Wedbush experts, the transfer of 5-7% of the iPhone production program from China to India or Vietnam will require at least 18 months. Foxconn will need about three years to transfer up to 20% of production from China, and to transfer half of the production, it will take five years. In China, at least 1.4 million employees are involved in iPhone factories, and such a migration is unlikely to cost a reasonable price. It is doubtful that Foxconn will agree to sacrifice its profits to compensate for tariff increases in the United States.