‘Very Painful’ Trade War Has HP Supplier Shifting Out of China By Bloomberg

© Reuters.  ‘Very Painful’ Trade War Has HP Supplier Shifting Out of China

© Reuters. ‘Very Painful’ Trade War Has HP Supplier Shifting Out of China

(Bloomberg) — HP Inc (NYSE:).-laptop maker Inventec Corp. aims to shift production of notebooks for the U.S. market out of China within months, seeking to protect its business from escalating tariffs in the trade war.

Inventec, which also assembles Apple Inc (NASDAQ:).’s AirPods, will migrate its entire American-bound laptop operation to its home base of Taiwan, President Maurice Wu said. It aims to complete that wholesale move within two to three months, Wu told investors on a post-earnings call Tuesday. His company is a major producer of notebook computers for HP, which accounts for an estimated third of its revenue. It also intends to shift more output of smart devices to Taiwan and Malaysia, Inventec executive David Ho said without elaborating.

From Inventec to Apple-assembler Hon Hai Precision Industry Co., the Taiwanese companies that make most of the world’s electronics are reconsidering their reliance on the world’s No. 2 economy as Washington-Beijing tensions simmer. Rising tariffs on Chinese-made products threaten to wipe out their margins and up-end a well-oiled, decades-old supply chain.

“The trade war is very painful for us,” Wu said, concluding a call during which executives shared how production shifts have hurt the company’s efficiency and margins.

Inventec’s shift marks one of the largest envisioned moves in production since Trump announced his decision to slap 10% tariffs on $300 billion of Chinese imports — including consumer gadgets from smartphones to notebooks — starting September. Spurred on by clients, which include household names like Dell Technologies Inc. and Nintendo Co (T:)., many Taiwanese contract manufacturers are now drawing up contingency plans, shifting select assembly operations or exploring alternative venues.

On Tuesday, Compal Electronics Inc. Chief Executive Officer Martin Wong said his company, a rival to Inventec, has also shifted some notebook lines to Taiwan and was considering investing more in Vietnam should tariff-conflicts persist.

Still, few major manufacturers have moved output in truly significant amounts and China’s status as the world’s production base for electronics is unlikely to diminish anytime soon. Alphabet (NASDAQ:) Inc.’s Google has already shifted much of its production of U.S.-bound motherboards to Taiwan, averting a 25% tariff, Bloomberg News has reported.

(A previous version of the story was corrected to amend HP’s contribution to Inventec’s revenue)

(Updates with executive’s comments from the fourth paragraph.)

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