Thu, Jun 13, 2019 - Page 1 News List

Google moving hardware production out of China

Bloomberg

Alphabet Inc’s Google is moving some production of Nest thermostats and server hardware out of China, avoiding US tariffs and an increasingly hostile government in Beijing, people familiar with the matter said.

Google has already shifted much of its production of US-bound motherboards to Taiwan, averting a 25 percent tariff, said the people, who asked not to be identified discussing internal matters.

While US officials have identified Chinese-made motherboards as a security risk, Google did not bring that up during discussions with its suppliers, they said.

Tariffs have also pushed US-bound production of its Nest devices to Taiwan and Malaysia, the people said.

The migration is taking place as foreign and domestic companies seek to pivot their production away from China amid US President Donald Trump’s efforts to reset the perimeters for global trade and manufacturing.

The Taiwanese contract manufacturers that make most of the world’s electronics, including Apple Inc partner Hon Hai Precision Industry Co (鴻海精密), have since last year accelerated the shift at their clients’ behest.

Hon Hai on Tuesday said that it has enough capacity to make all iPhones bound for the US outside of China if necessary, although Apple has so far not asked for such a shift.

While Google’s production of hardware in China pales in comparison with the likes of Apple, its shift might herald a broader trend as tensions escalate.

The US search giant earns some advertising revenue from China and has explored avenues to court consumers and corporations in the world’s No. 2 economy — from sharing artificial intelligence tools to even a censored search service.

It is also lobbying Washington for permission to continue supplying Android to Huawei Technologies Co (華為), the Financial Times has reported.

It is widening its footprint elsewhere: Google in March announced it was creating a new campus in Taipei and expanding staff in the nation, although it is unclear whether this is related to its manufacturing diversification.

Among the Google hardware saddled with higher tariffs, server motherboards are among the most critical to its operations, as the company builds its own data centers.

Moreover, among major US tech companies that operate giant data centers, Google is keener than others to shift server motherboards out of China.

That is because it sometimes only procures the components, while its rivals tend to buy complete server racks from suppliers, one person said.

Motherboards are categorized as printed circuit board assembly, which face 25 percent tariffs if they are imported directly into the US, while server racks as a whole have not yet been affected.

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