Luxshare, a key Apple supplier known for assembling iPhones and producing AirPods, is considering shifting some of its production to the United States to mitigate the impact of newly imposed U.S. tariffs. This potential move was revealed by the company's chairwoman, Wang Laichun, during a recent call with analysts, offering a glimpse into the strategies global manufacturers are contemplating in response to the evolving trade landscape.

Wang Laichun stated that the current tariffs would have a minimal impact on Luxshare's profits and revenue, as the company exports only a small percentage of its finished goods to the U.S. However, the company is weighing significant adjustments, including scaling back some investment plans in China while exploring increased production abroad. "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 U.S. market," Wang said.

Luxshare has already received inquiries from customers regarding providing services in North America, particularly for highly automated production processes. Wang indicated that the company would require assurances from clients before committing to such a move, emphasizing the importance of long-term development and safety considerations.

The company already has production bases and research centers in several countries, including the U.S., Mexico, Vietnam, Malaysia, and Thailand, in addition to its facilities in China. Wang hinted at potential expansion in Southeast Asia but did not specify any locations. Interestingly, Luxshare is not currently planning to expand into India unless a customer specifically requests it.

Several factors are driving Luxshare's consideration of U.S. production. Rising labor costs in China have been gradually eroding the country's cost advantage, prompting companies to explore alternative manufacturing locations. The new tariff structures have created substantial cost differentials between manufacturing locations. Tariffs on electronics from China are now approximately 54%, compared to 26% for products from India and 36% for Thailand, creating significant cost advantages for non-Chinese production. For individual products like the iPhone, production costs could rise by over $300 per device due to tariffs, potentially slashing gross margins from their current levels to just 13%.

However, establishing manufacturing operations in the U.S. is not without its challenges. Setting up new production lines in existing factory locations typically takes one to one-and-a-half years. Moreover, Luxshare would need to secure land and make significant investments to build new factories, as it currently has no manufacturing facilities in the U.S.

Despite these challenges, Luxshare's willingness to consider U.S. production reflects the growing pressure on global manufacturers to adapt to the changing trade environment. By localizing production, Luxshare could potentially avoid tariffs, reduce transportation costs, and gain better access to the U.S. market.

Whether Luxshare will ultimately decide to move forward with U.S. production remains to be seen. The company's decision will likely depend on several factors, including the level of commercial guarantees it receives from its customers, the outcome of its evaluations, and the overall economic and political climate.