Trade War Among US and China Leads Companies To Look For Production Shift

Rising tension of trade war among US and China is moving towards various restrictions and now President Trump threatening to raise tariffs on all Chinese imports and declaring a national emergency shutting Huawei out of the U.S. market. Observers of U.S.-China relations have become increasingly concerned about the future of this most consequential bilateral relationship.

A news released by Nikkei, on several US-based technology companies are planning to shift substantial production out of China. The major companies into Personal computer makers HP and Dell Technologies are planning to reallocate up to 30% of their notebook production out of China, according to the Nikkei.

Microsoft, Google, Amazon, Sony and Nintendo are also looking at moving some of their game console and smart speaker manufacturing out of the country, multiple sources told the Nikkei Asian Review. Other leading PC makers such as Lenovo Group, Acer and Asustek Computer are also evaluating plans to shift, according to people familiar with the matter.

Tech companies' plans, spurred by the bitter trade battle between Washington and Beijing, U.S. President Donald Trump and Chinese President Xi Jinping struck a truce at last weekend’s Group of 20 summit in Japan, paving the way for a restart in trade talks after months of stalemate. However, the companies are not likely to alter their plans of moving some of their production out of China as they also face higher operating costs in the country.

As per the report, the decision by some of the world's biggest computer and game console brands to shift production -- mainly of products destined for the U.S. -- follows manufacturing reviews by other tech companies. Apple is exploring the cost implications of moving up to 30% of its smartphone production, Nikkei reported last month. Elsewhere manufacturers of servers, networking products, and some key electronics components are shifting out of China, often at the request of U.S. customers.

China is the world's biggest producer of PCs as well as smartphones. The moves will be a blow for China's electronics exports, which have powered the country's decades-long growth. However, many tech companies have been hit hard by the trade conflict, which has seen tariffs slapped on $250 billion worth of Chinese imports into the U.S. while the threat of another round remains.

In June, Apple Inc asked its major suppliers to assess the cost implications of moving 15%-30% of their production capacity from China to Southeast Asia as it prepares for a restructuring of its supply chain. HP, Dell, Amazon, Microsoft and Google did not immediately respond to a Reuters’ request for comment.