Microsoft is planning to make a major shift in its manufacturing strategy by producing most of its new products outside of China in 2026, according to a report by Nikkei Asia. The products that will be moved outside China include Surface laptops and data center servers, with the company already having moved a significant portion of its server production abroad.
According to the report, Microsoft has instructed multiple suppliers to prepare for this transition, including not only the final products but also critical components and assembly processes outside China. The goal is for at least 80% of server-related materials to be sourced from outside China, in an effort to reduce geopolitical and supply chain risks amid escalating tensions between the U.S. and China.
Microsoft isn"t the only company making the shift, as Amazon Web Services and Google are also pursuing similar shifts to safeguard their supply chains. AWS is focusing on reducing Chinese reliance for its AI data center servers, while Google is expanding its server production capacity in Southeast Asia, in countries such as Thailand, to diversify its manufacturing ecosystem.
Things have been going downhill in terms of geopolitical relations between the United States and China. Recent events, such as China"s tightened export controls on rare earth materials and battery components, as well as U.S. threats of additional tariffs and frictions over Taiwan, have increased the volatility for U.S. tech companies that have been heavily dependent on Chinese manufacturing.
Companies such as Apple, Samsung, and Google have already started exporting smartphones and other devices from nearby countries such as Vietnam and India after shifting their manufacturing units. The shift to reduce reliance on China will likely open up manufacturing opportunities for South Asian countries, which have been slowly gaining traction to recreate the manufacturing success of China.
Microsoft is also accelerating production of Xbox consoles outside China, although the report mentions that a complete shift hasn"t been mandated yet.
Source: Nikkei Asia (paywall) | Photo via DepositPhotos.com