Luxshare Explores Production Shift Amid US Tariffs
In response to new US tariffs, Apple supplier Luxshare is actively engaging with clients about relocating more of its production outside China, including potential operations in the United States. Chairwoman Wang Laichun shared insights during a recent analyst call, indicating that while the tariffs may not significantly impact profits, the company is considering increased investments abroad and reassessing its plans in China.
Strategic Shift in Production Plans
Luxshare, known for assembling iPhones and manufacturing AirPods, is navigating the complexities introduced by President Trump’s tariffs that took effect recently. Wang Laichun emphasized that the tariffs would have minimal effect on the company’s overall profits and revenue, as Luxshare exports only a small volume of finished products to the US. However, she acknowledged the necessity of exploring more investment opportunities outside China and potentially pausing some domestic projects.
During the call, Wang stated, “If there is a commercial guarantee and we are able to conduct a good evaluation, we do not rule out having some products being localized to meet the needs of the US market.” This indicates a proactive approach to adapt to the changing trade landscape, with Luxshare seeking assurances from clients regarding the feasibility of establishing services in North America.
Investment Considerations and Regional Focus
Luxshare has a diverse production footprint, with facilities not only in China but also in Malaysia, Thailand, Vietnam, the United States, and Mexico. Wang mentioned that the company is contemplating increased investments in Southeast Asia, although she did not specify exact locations. The decision to shift production away from Vietnam is complicated, as the country has a well-developed industrial infrastructure and talent pool. Currently, Vietnam faces a 46 percent tariff, significantly higher than those imposed on Thailand and Malaysia, which stand at 36 percent and 24 percent, respectively.
As the Vietnamese government engages in negotiations with Washington over these tariffs, Luxshare’s strategic decisions will likely be influenced by the evolving trade environment. Wang noted that while the company is not considering expansion into India at this time, it remains open to such possibilities if customer demand arises.
Future Production Lines and Market Dynamics
Wang highlighted that establishing a new production line in existing factory locations would require approximately 1 to 1.5 years. This timeline reflects the complexities involved in scaling operations in response to market demands. When asked about the potential impact of tariffs on pricing, Wang stated that hardware manufacturers have historically not absorbed these costs, suggesting that the burden will likely fall on consumers.
Despite the challenges posed by tariffs, Wang acknowledged that customers are increasingly focused on competitive pricing. “Customers have always collaborated with suppliers on how to enhance competitiveness,” she remarked, indicating a collaborative approach to navigating the financial implications of tariffs.
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