Fitbit Moving Manufacturing Out Of China

Fitbit Inc. (NYSE: FIT) has announced that it will stop making its health trackers and smartwatches in China starting in January. All of the company’s manufacturing operations in China will cease and production will be moved to other facilities outside of the country. Fitbit did not reveal the new manufacturing location.

The move will allow Fitbit to avoid U.S. tariffs on imports of its devices from China. Since those products won’t be of Chinese origin, they will not be subject to import duties. The company said that it will provide more details of the impact of the move during its upcoming third-quarter conference call.

Fitbit failed to win a reprieve for its smart watches from the 10 percent U.S. tariff that started on Sept. 1. Another round of tariffs are set to go into effect on December 15. The tit-for-tat tariff war between Washington and Beijing has upended global supply lines and shaken financial markets. While trade talks have failed to make much headway since negotiations collapsed in early May, trade negotiators are heading to Washington this week to continue trying to work out a deal.

The tariffs are forcing companies with manufacturing operations in China to either pass the costs on to consumers or absorb them. Fitbit said it began exploring alternatives to China in 2018. The company’s CFO, Ron Kisling, said in a statement,” As a result of these explorations, we have made changes to our supply chain and manufacturing operations and have additional changes underway.”

China has long been a manufacturing hub for tech companies due to to the country’s abundance of skilled low-wage workers and strong infrastructure for technology. Now, these same companies are having to make tough choices about making their products in China as the trade war continues. Google has reportedly moved production of its Nest thermostats and server hardware out of China. Last year, GoPro Inc. announced it would move much of its camera production out of China.