GoPro Factory Goes Nomad to Dodge Tariff Threat

Despite the fact that the United States and China are currently in the middle of a 90-day “cease fire” in their ongoing trade war, with new tariffs on hold until March 2019 while the two countries try to reach agreement, not everyone is waiting around to see who comes out on top. In a recent press release, action camera manufacturer GoPro has announced their intention to move some production out of China in the face of potential tariff expansions; which many analysts fear will be the result of the current stalemate. That’s right, only some of their production is moving.

“We’re proactively addressing tariff concerns by moving most of our US-bound camera production out of China,” says GoPro CFO Brian McGee. “We believe this diversified approach to production can benefit our business regardless of tariff implications.” Reading his words carefully, the key phrase here is “diversified approach”. GoPro doesn’t intend to move their entire production capability out of China, but only the production of the cameras which are designated for importation into the United States. GoPro models which are to be sold to other parts of the world will still be made in China.

This might seem an extravagant move just to avoid US tariffs, but with better than 40% of GoPro’s revenue for the third quarter of 2018 coming from the Americas, the company stands to be hit hard by the proposed 25% tax. Combined with the fact they shuttered their drone division last year citing “an extremely competitive aerial market”, and the proliferation of “GoPro clones” available for pennies on the dollar, it seems pretty clear that belt-tightening is the name of the game for the company that was once synonymous with action cameras.

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Electronics Manufacturers React To China Trade Tariffs

Mere weeks ago, the United States announced it was set to impose a 25% tariff on over 800 categories of Chinese goods. These tariffs include nearly every component that goes into the manufacture of any piece of electronic hardware, from resistors to capacitors, semiconductors to microcontrollers, and even the raw components that are turned into printed circuit boards. These tariffs will increase the cost of materials for electronics, even if those electronics are ultimately manufactured in the United States because suppliers and subcontractors must source their materials from somewhere, and more often than not, that place is China.

Now, manufacturers are feeling the pinch. An email distributed by Moog Music last Friday has asked their supporters to contact their senators and representatives.

In the world of musical synthesizers, there is no bigger name than Moog. The company was founded in the 1950s manufacturing theremins, and in the 1960s, production moved to synthesizers. The famous Minimoog, launched in 1970, has been featured on tens of thousands of albums. Modern music simply wouldn’t exist without Moog synthesizers. After a buyout, mismanagement, and bankruptcy in the 1980s, the company was reborn in the early 2000s, moved into a beautiful factory in Asheville, North Carolina, and has gone on to produce some of the most popular synthesizers ever made.

The company’s statement says these new tariffs will, ‘immediately and drastically increase the cost of building our instruments, and have the very real potential of forcing us to lay off workers and could.. require us to move some, if not all, of our manufacturing overseas’. In a statement on Twitter, Moog says they source half their PCBs and a majority of other materials domestically, already paying up to 30% more than if the PCBs were sourced from China. However, because the raw materials for PCB manufacture are also sourced from China, board manufacturers for Moog’s synths will be forced to pass along the 25% tariff to their customers.

The threat of Moog being forced to move production of their instruments to China is real. Like cell phones, laptops, and other finished goods, synthesizers are not covered by the new tariff. As noted by Bunnie Huang, these tariffs have the perverse incentive of shifting US manufacturing jobs to China.

These tariffs have been a point of contention for the electronics and engineering communities. Anyone can easily pull up the distributor information from a Mouser or Digikey order and find the country of origin for an entire Bill of Materials. It has already been confirmed that most of the FR4 and other raw components that go into manufacturing PCBs in the United States come from Chinese suppliers. These items can be cross-referenced with the list of items that will be subject to a 25% tariff next week. Manufacturing electronics in the United States, even if you get your PCBs from US manufacturers and parts from US suppliers, will cost more in just a few short days.