For a long time, China has been known colloquially as the factory of the world. This is in reference to the fact that almost every major product in the world had a link to China. But that is about to change if a recent report by the Nikkei Asian Review is anything to go by.
Tech giants plotting a mass exit
The publication cited multiple sources which confirmed that Dell (NYSE:DELL) and HP (NYSE: HPQ) were in the process of shifting close to 30% of production plants outside China. Dell and HP are global behemoths when it comes to the PC market. Notably, the companies control 40% of the global PC market between them.
If Microsoft (NASDAQ: MSFT), Amazon (NASDAQ: AMZN) and Google (NASDAQ: GOOGL) actualize their plans to exit China, this will amount to an electronics exodus on an unprecedented scale. According to the Nikkei report, game consoles could also be produced outside Chinese borders in the event Nintendo and Sony follow suit. PC makers like Acer, Asustek Computer and Lenovo Group are evaluating their options, the multiple sources revealed.
Caught in the line of fire
The exit plans for electronic companies do not begin with the recent reports. Last month, reports emerged that Apple would move between 15% and 30% of its smartphone production to other locations away from China.
For starters, the decision was almost necessary given the falling popularity of the iPhone in China. But the most significant factor at play could be the trade war which between the US and China which is threatening to escalate out of control.
In May, the US seemed to target China’s tech ambitions after directing sanctions at Huawei. Huawei is China’s most globally integrated brand and its exploits in the 5G realm give US the goosebumps. Therefore, the targeting of its devices and the apparent intention to curtail the 5G dream irked Chinese authorities.
As such, many of the tech giants which are planning an exit from China could be gearing up for more confrontation. Definitely, none of the brands would wish to be caught up in the line of fire if the trade war rumbles into more shaky grounds.