Author: Lindsey Boycott
Estimated read time: 3 minutes
Publication date: 19th Jun 2019 10:00 GMT+1
All Silicon Valley can talk about right now is more integration – more cloud, more connection and more cooperation. Conversely, all the international community can talk about is why they need to become less interdependent – and tech-investors are watching it all with a weather eye on the China-US sky.
Despite all the benefits that going global has bestowed upon business, the recent rise in tensions between China and the United States has meant new challenges to the way tech companies engage in commerce. While America’s President Donald Trump and China’s Paramount Leader Xi Jinping play chicken with each other’s economies – all the talk of tighter restrictions and tariffs have made the markets volatile.
Supply chains are the unsung heroes that make the modern world go around and it isn’t until something seriously disrupts the process that people realize how much it impacts the economics behind business. Electronic devices are the most complex things that people produce and components are often built by highly-specialized manufacturers in different parts of the world – often crossing oceans multiple times as more technology is added to the hardware.
China has cornered the market on electronics assembly and, according to Henry Yeung from the National University of Singapore, commands half the world’s workforce capacity for building them. Companies like Intel Corp. (NASDAQ: INTC), for example, announced that they are reviewing their global supply chain process to reduce their reliance on China’s role in their production.
Tariffs are making it hard to manufacture and move products, Intel says, and they will make changes if they have too. The company’s stocks were one of the hardest hit after President Trump’s May 5 tweet about raising tariffs on goods coming out of China – ping 10 percent in the first six trading days following the initial spate of trade talk. Consequently, Intel has had to reduce their revenue forecast for the year due to what they have called “China headwinds.”
Likewise, Apple Inc. (NASDAQ: AAPL) recently announced that Taiwan-based Foxconn Technology Group – their major partner in manufacturing – is prepared to bid Beijing a fond farewell if things don’t turn around. They have enough supply to keep phones coming to an eager North American market.
“Twenty-five percent of our production capacity is outside of China and we can help Apple respond to its needs in the US market,” said Young Liu, a representative of Foxconn, in an investor briefing on June 11. He went on to say that arrangements were being made for India to step in as a partner. “We have enough capacity to meet Apple’s demand.”
Apple’s stocks upticked 1 percent that same day, to $194.99 at close in New York. The company made it clear they are not moving operations out of China as of yet but do want to reassure investors that they are preparing for every eventuality.
Disclaimer: The writer is an experienced financial consultant who writes for Finscreener.org. The observations he makes are his own and are not intended as investment or trading advice.
Copyright © 2016-2021 Finscreener.org. All Rights Reserved.
Disclaimer: Before deciding to trade you should carefully consider your investment objectives, level of experience and your risk appetite. Forex and Tradegate data is a real-time with a 30 second refresh. Prices may not be accurate and may differ from the actual market price. Prices on the website are indicative and solely for informational purposes, not for trading purposes or advice. Please be aware of the risks associated with trading the on financial markets, it is one of the riskiest investment forms. Past performance does not guarantee future profits. We take no responsibility for any losses that may arise as a result of the data contained on this website. The content and the website are provided "as is", without any warranties. In no event will Finscreener.org, its employees, owners, directors, affiliates, partners, data provider, third party or anyone else liable to anyone else for any decision made regarding information on this website.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 67% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
This could take some time, please wait.