Feb 7, 2019 - Economy & Business

Sonos could shift manufacturing from China if trade war escalates

Smart speaker company Sonos will re-examine its Chinese supply chains if the U.S.-China trade war worsens, company CEO Patrick Spence told Axios.

The impact: Spence said it could take "up to one year" to shift manufacturing and its supply chain out of China to avoid feeling the effect from a potential escalation of tariffs. However, the impact the company has felt so far from the trade war is "financially immaterial."

"We are actively evaluating ways to increase the flexibility of our manufacturing footprint and supply chain, including sourcing and producing products outside of China."

Sonos has been warning about the potential impact of tariffs since it filed paperwork to go public last year.

The big picture: Hardware companies are in the trade war's line of fire, as Axios' Ina Fried reported last year.

GoPro, for example, "warned it would move most manufacturing of U.S.-bound gear outside of China by this summer."

Between the lines: Sonos belongs to a class of hardware-dependent companies — along with GoPro and Fitbit — whose stocks have taken a hit as Google, Amazon and Apple assert more dominance in these product areas.

  • Sonos shares have fallen 30% since its public debut last August.
  • In its earnings report on Wednesday, which topped analysts expectations for earnings and revenue and announced the departure of its longtime CFO, Sonos said it had 22.7 million products in over 8 million households globally. That's up from the 19 million products in about 6.9 million households reported in March.
  • Neither Apple, Amazon or Alphabet break out unit sales for smart speakers.

Quick take: Spence tells Axios that while "macroeconomic conditions can certainly impact consumer demand through business cycles," the 16-year-old company has survived economic downturns.

  • Still, companies that bank on a strong economy, when consumers are flush with cash, are in focus as concerns about a coming recession grow.

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