For years, iPhones (or their boxes) have said that they were “designed by Apple in California. Assembled in China.” But thanks to an escalating trade war between the US and China, that might not be true in the coming years. Reuters reports that two of Apple’s biggest manufacturing contractors, Foxconn and Pegatron, are working to expand their facilities in Mexico with an eye toward eventually building iPhones there.
Foxconn’s plans aren’t final, Reuters reports. Apple hasn’t signed off on the idea and declined to comment to Reuters. But Foxconn is reportedly looking to make a final decision this year.
Foxconn already has a significant presence in Mexico. Five Foxconn factories in Mexico make televisions, servers, and other products. But building iPhones could represent a major expansion of Foxconn’s activities in the Latin American country.
This isn’t Foxconn’s only effort to diversify away from China. Last year, Foxconn announced plans to begin manufacturing iPhones in India, and the company is now manufacturing the iPhone SE there.
Sources told Reuters that Taiwan-based iPhone contractor Pegatron is also considering a shift to Mexico, but few details about its plans are known.
Mexico is an attractive place for companies to locate labor-intensive manufacturing. It’s close to the United States, while workers there tend to earn lower wages than in the US or Canada. The Trump administration signed an updated trade deal with Canada and Mexico earlier this year, reducing uncertainty about the US-Mexico trade relationship.
But the COVID-19 outbreak could hamper efforts to shift iPhone production from China to Mexico. China has nearly eradicated the virus domestically, while Mexico has had only limited success. Mexico has reported about 6,000 confirmed cases per day in recent weeks. That’s better than the US on a per-capita basis but much worse than China.
At the same time, the deteriorating relationship between the US and China, especially over high-tech products, gives companies like Foxconn strong reasons to diversify. Earlier this month, for example, Donald Trump announced that he would force TikTok and WeChat out of the US market.