In a bid to dodge punitive US tariffs, Alphabet Inc.’s Google has hastily been shifting some of its production of Nest thermostats and server hardware out of China, Bloomberg reports, citing sources familiar with the matter.
Google has already shifted much of its production of US-bound motherboards to Taiwan, to steer clear of a new 25% tariff, said the sources,who asked not to be identified.
Similar considerations have reportedly also created incentives for relocating production of the company’s Nest devices, which are exported to the US, to Taiwan and Malaysia.
The US tech giant circumvented the issue of US officials branding Chinese-made motherboards as a security risk at talks with suppliers, the anonymous sources claimed.
Among the Google hardware that has been slapped with higher tariffs, server motherboards are most critical to the tech giant’s operations. The company builds its own data centres in the US and elsewhere, and the hubs help it offer search and productivity tools on a cloud services platform, and power the world’s largest mobile platform as well as other services.
The motherboards are categorised as a printed circuit board assembly, and face 25% tariffs if they are imported directly into the US, while entire server racks aren’t currently affected.
The volatile situation has US companies, long accustomed to the notion of China being the world’s workshop, seeking feasible alternatives.
Customers of Taiwanese electronics contract manufacturers have been requesting an accelerated shift. Apple Inc. partner Foxconn Technology Group said on Tuesday that if called upon, it has enough capacity to produce all iPhones bound for the US outside of China.
Google’s hardware production shift away from China may be a portend of things to come as simmering tensions between the US and China show no sign of abating.
Senior Google executives have reportedly warned the Trump administration that it risks compromising US national security if it pushes ahead with sweeping import restrictions on Huawei.
Google, in particular, is concerned it would not be allowed to update its Android operating system on Huawei smartphones, which it argues would prompt the Chinese company to develop its own version of the software, three people familiar with the matter told the Financial Times.
Foreign and domestic companies in China have been compelled to relocate export-oriented production in the wake of US President Donald Trump’s clampdown on the Asian giant. On 15 May President Donald Trump signed an executive order barring US companies from using telecom equipment from sources the administration deems a national security threat, and went ahead to specifically target the Chinese telecom giant Huawei.
Following the Huawei blacklisting, major US tech giants such as Google and Microsoft have severed ties with the Chinese company.
US intelligence agencies have previously accused Huawei of putting “backdoor” access in its devices at the behest of the Chinese government, which allegedly enables Beijing to spy on users. Beijing and Huawei have both denied the allegations.