TECH TRADE WAR- US did not win but China might be the loser.
Updated: Jul 18, 2019
The ongoing trade war between the US and China has managed to extend its threat to the tech companies. On 10th May 2019, US President Donald Trump increased the import duties on $200 billion worth Chinese manufactured goods from 10% to 25% and threatened to levy it on $300 billion worth more. Observing Trump's track record on raising tariffs, this threat poses a danger to many tech companies. Various tech products like smartphones, laptops, and consoles could fall under this bigger umbrella.
In a parallel universe, the horror tale of the recent Huawei ban, is fresh in the minds of tech companies. The ban has accounted for a projected loss of $30 billion to Huawei. Consequently, the secure and reliable nature of Chinese manufacturing has become precarious. The US companies' repudiation has forced Trump to revoke the ban partially(allowing them to continue selling to Huawei), but skepticism around Chinese manufacturing is unlikely to fade away.
According to the recent reports, laptop manufacturers like HP and Dell are planning to move 30% of their production out of China. Nintendo, Sony, and Microsoft are testing waters in Vietnam, Indonesia, Thailand to manufacture their gaming consoles. Google is also considering a substantial shift to its existing facility in Taiwan. Apple, which has always perceived China as a haven for it's hardware assembly, has confirmed making 250,000 units per month of its upcoming iPhone 11 in India. The iPhones made in India are currently being sold in the domestic market only, but now 75% of the new iPhones will be exported to the European market.
A cult of chain reactions is commencing, which supposedly will drive tech companies away from China. US destined products would become 25% costlier for being manufactured in China. No company would like to lose its market share to its competitors , while the competitors could merrily undercut them just by manufacturing elsewhere. So if one company shifts, others are ought to follow suit. For example, let's say Sony starts manufacturing gaming consoles in Taiwan, while Microsoft continues its concord with China. Now Microsoft's console will be 25% costlier to the US customers than that of the Sony ones, despite having similar international pricing. So Microsoft would now want to shift some of its production out of China and hence developing a shifting trend.
Although China remains the largest hub for manufacturing tech, yet the tiniest of alterations in the pre-existing culture could be worrying for them. There are countries like India, Taiwan, Vietnam, Indonesia, and Thailand with untapped potential and can compete with China. These countries have abundance of semi skilled labor at cheap costs and cooperative government policies to facilitate manufacturing setups. Due to the Chinese dominance, a need to test their full potential, has never occurred yet. Who knows these countries might fare better than expected in their deliverable. Who knows China might be a loser in this unexpected muddle. Only time will tell.