Microsoft, Sony and Nintendo are reportedly seeking to move some of their console production out of China, in response to the prospect of Donald Trump’s administration imposing tariffs on Chinese-made goods.
According to Nikkei Asian Review, “Multiple sources” said that: “Microsoft, Sony and Nintendo are also looking at moving some of their game console manufacturing out of the country.” Although US President Trump and Chinese President Xi Jingping met and apparently put a temporary halt to the escalating trade war between the two countries at last weeks G20 summit in Osaka, Nikkei Asian Review asserted: “Multiple sources said the situation was still too uncertain, while rising costs in China were also prompting manufacturers to examine alternatives.”
Nikkei Asian Review contended that the companies are likely to move a percentage of their existing console production out of China, rather than completely pulling it from the country – in order to beat the prospective US tariffs by making consoles earmarked for the US market elsewhere in the world. It quoted “A supply chain executive familiar with the plans,” as saying: “The industry consensus is to move an average of some 30% of production out of China depending on how important the US market is.”
Fortune also struck a gloomy note in the aftermath of the US-China trade truce, quoting Ethan Harris, head of global economics at Bank of America Merrill Lynch as saying: “We think [the trade war] is going to be the big story of the next year, just as it was the big story of the last year,” before adding the current truce is just: “The eye of the storm.”
As we reported, last month, the three platform-holders united to protest Trump’s proposed tariffs on Chinese-made goods in a joint letter. Even if they did manage to remove sufficient console production from China to avoid tariffs and keep the US market supplied, it is likely that the extra costs incurred would raise console prices in the US (and possibly beyond, given that the US is the world’s biggest console market), at a time when the Xbox One and PlayStation 4 are getting towards the ends of their life-cycles and economies of scale should dictate that their prices would drop under normal circumstances.