China cost rise likely to hit Apple, other tech companies
The cost of making iPhones and other electronic devices is reportedly likely to go up soon due to rising costs in China where many of their parts and much of their assembly take place.
The New York Times reported Tuesday that Chinese factory owners are shifting production away from Shenzhen into China’s interior in an effort to deal with rising wages, inflation in Chinese currency and rising housing costs.
"Electronics companies are trying to figure out how to deal with the higher costs," Jenny Lai, a tech analyst at CLSA in Hong Kong, told The Times. "They’re already squeezed, so squeezing more costs out of the system won’t be easy."
The rising costs are seen as less of a threat to Apple Inc., which has unusually large profit margins of as much as 60 percent on its popular devices, than on tech companies including Hewlett-Packard Co instant payday loan. and Dell Inc., whose devices sell at a much lower markup.
The rising costs come as China appears to be rethinking how long it wants to remain the world’s high tech factory amid growing social pressures to provide better working conditions. Many Chinese workers put in very long hours and work weeks for extremely low wages.
“China doesn’t want to be the workshop of the world anymore,” Pietra Rivoli, a professor at Georgetown University and author of "The Travels of a T-Shirt in the Global Economy" told The Times. "The value goes to where the knowledge is."
Filed under: finance by Specialist