The trade war between the U.S. and China has left many wondering how the production of iPhones could be affected if the situation escalates between the two countries. Foxconn, Apple’s largest supply-chain partner, says that the company has enough capacity outside of China to fulfill the iPhone demand in the United States.

The statement was made by Foxconn’s semiconductor division chief Young Liu at the company’s investor briefing in Taipei.

“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,” said Liu, adding that investments are now being made in India for Apple. “We have enough capacity to meet Apple’s demand.”

As the trade war between the U.S. and China have intensified, we have seen a number of key Apple suppliers look at countries other than China for setting up their new factories. Foxconn itself is in the process of finalizing a factory in India where it would assemble high-end iPhones.

Liu also revealed that Apple has not instructed Foxconn to move its production outside of China so far. The U.S. has put Huawei in an Entity list thereby banning all U.S. companies from indulging in trade with it. President Trump has also increased the import tariff on a number of Chinese products imported in the United States. China has so far only retaliated by hiking the tariff on certain U.S. goods it imports.

Pegatron, another key Apple supplier, already has an assembly plant in India and it is looking to further expand its production capacity there. It is also investing up to $1 billion to set up an iPhone chip assembly factory in Indonesia.

Our Take

By manufacturing all iPhones for the U.S. outside of China, Foxconn and Apple could sidestep any hike in export duty from the Chinese government. This would ensure that Apple is not forced to increase the iPhone prices in the U.S. and its profit margin also remains unaffected.

[Via Bloomberg]

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