Photo: Chance Chan/Reuters
American businesses, from technology startups to large corporations, say they cannot quickly upend their supply chains and stop doing business in China.
It’s The Trump Thing Again
President Trump tweeted Friday that he “hereby ordered” U.S. companies to explore relocating operations out of China and that he would raise existing and planned tariffs on Chinese goods by 5 percentage points. On Sunday, after a tumultuous week for trade negotiations, administration officials said the president didn’t order U.S. companies to leave China and has no plans to invoke emergency powers to force them to do so.
For Tech Companies, China Is The Irreplaceable
Many technology companies are entwined with Chinese parts makers, and tech startups building hardware are in a particularly difficult situation. From electric scooter services to robotics businesses, many get crucial components from China. For them, Mr. Trump’s demand to stop doing business in China seemed impossible.
“There is no other easily identifiable supplier or manufacturer for a lot of parts,” said Eric Klein, a partner at venture-capital firm Lemnos, which invests in hardware startups. Shifting production out of China would be a complex process that would entail re-engineering production facilities, requiring a company to halt or slow production for months, he said.
“It would be financially devastating to a startup that isn’t sitting on a pile of capital,” said Mr. Klein. “The smaller the company, the more fragile their economic state is and changes like this are massively disruptive.”
Some larger manufacturers are feeling the pinch. Broadcom Inc. recently reduced its annual sales forecast by $2 billion partly because of a U.S. ban on exports to Chinese telecom company Huawei Technologies Co. Apple Inc. has explored shifting some of its production out of China, but it would take the iPhone maker years to cut ties with Chinese suppliers, said Daniel Ives, an analyst at Wedbush.
Source: WSJ
The Serious K 