Apple Inc. has asked its largest suppliers to consider the costsof shifting 15 percent to 30 percent of their output from China toSoutheast Asia, in a dramatic shakeup of its production chain, theNikkei reported.

The U.S. tech giant asked “major suppliers” to evaluate thefeasibility of such a migration, the newspaper cited multiplesources as saying. Those included iPhone assemblers FoxconnTechnology Group, Pegatron Corp., and Wistron Corp.; MacBook makerQuanta Computer Inc.; iPad maker Compal Electronics Inc.; andAirPod makers Inventec Corp., Luxshare-ICT, and GoerTek Inc.,Nikkei cited them as saying.

China is a crucial cog in Apple's business—the origin of most ofits iPhones and iPads, as well as its largest international market.But President Donald Trump has threatened Beijing with new tariffson about $300 billion worth of Chinese goods, an act that wouldescalate tensions while levying a punitive tax on Apple's mostprofitable product. Company spokeswoman Wei Gu didn't respond to arequest for comment.

Two major Apple suppliers pushed back against the Nikkei report.The U.S. company has not asked for cost estimates for shiftingproduction out of the world's second-largest economy, althoughsuppliers are running the numbers on their own given thetrade dispute,said one person familiar with the matter, asking not to beidentified discussing internal deliberations. Another supplier saidit too had not gotten such a request from Apple and that theCupertino, California-based company had resisted a proposedproduction shift to Southeast Asia.

Apple does have a backup plan if the U.S.-China trade war getsout of hand: Primary manufacturing partner Hon Hai PrecisionIndustry Co. has said it has enough capacity to make all U.S.-boundiPhones outside of China if necessary, Bloomberg News reported lastweek.

The Taiwanese contract manufacturer now makes most of thesmartphones in the Chinese mainland and is the country's largestprivate employer. Hon Hai, known also as Foxconn, has said Applehas not given instructions to move production but it is capable ofmoving lines elsewhere according to customers' needs.

Apple hasn't set a deadline for the suppliers to finalize theirbusiness proposals, but is working together with them to consideralternative locations, the Nikkei said. Any move would be along-term process, it cited its sources as saying.

Beyond Apple's partners, the army of Taiwanese companies thatmake most of the world's electronics are reconsidering a relianceon the world's second-largest economy as Washington-Beijingtensions simmer and massive tariffs threaten to wipe out theirmargins. That in turn is threatening a well-oiled, decades-oldsupply chain.

Taiwan's largest corporations form a crucial link in the globaltech industry, assembling devices from sprawling Chinese productionbases that the likes of HP Inc. and Dell then slap their labels on.That may start to change if tariffs escalate, an outcome now in thebalance as Washington and Beijing spar over a trade deal.

Apple is an outsized figure in that negotiation. The high-endiPhone, which accounted for more than 60 percent of the company's2018 revenue, drives millions of jobs across China as well as aplethora of different industries from retail to electronics. Thecountry is also a major consumer market in its own right, yieldingnearly 20 percent of last year's revenue—weakness there pushedApple to cut its sales forecast in January.

“Twenty-five percent of our production capacity is outside ofChina, and we can help Apple respond to its needs in the U.S.market,” Hon Hai board nominee and semiconductor division chiefYoung Liu told an investor briefing in Taipei last week. “We haveenough capacity to meet Apple's demand.”

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