Microsoft is preparing to make a significant strategic shift in its global production. Starting in 2026, the company aims to manufacture most of its new products outside of China. Although the company has not yet made an official announcement, this directive to its suppliers is part of a broader shift within the tech sector to reduce its dependence on the Chinese supply chain. Both Amazon Web Services (AWS) and Google are also intensifying their efforts in this transition.
This movement is not limited solely to the final assembly. According to reports, Microsoft is planning to relocate the production of its Surface laptops and data center servers. Additionally, it is driving a change that even includes the component level, with the goal that at least 80% of materials and production do not depend on China.
The company had already begun moving part of its server production outside of China in 2024, given its strategic value in the cloud and artificial intelligence. The plan now extends to Surface and other personal computing devices, and the possibility of applying this change to Xbox production, a production line historically concentrated in China.
There is speculation that Microsoft could relocate some of the assembly of servers and Surface devices to countries such as Vietnam, Thailand, and Indonesia, following the trend of other manufacturers toward Southeast Asia. The goal is to diversify locations to reduce the risks associated with disruptions or logistical costs.
This movement is also reflected in other large technology companies. AWS, for example, is extending its strategy beyond assembly, seeking to diversify its component suppliers, while Google is asking its partners to expand their capacity outside of China, focusing especially on Thailand and Vietnam.
These decisions arise in a context of growing trade tensions between the United States. and China, with new restrictions on chip exports and a global race to deploy large-scale artificial intelligence infrastructure. Dependence on a single country increases costs due to tariffs and risks, so a diversification strategy becomes necessary to optimize lead times and capacities.
Southeast Asia emerges as the major beneficiary of these changes. Vietnam is already an important center for the production of consumer electronics, while Thailand has a tradition in the manufacture of hard drives. Additionally, Indonesia and Malaysia are adding capabilities in assembly and testing, with India also seeking to attract projects through government incentives.
In the realm of cloud and AI, changes in production aim to ensure more predictable lead times, minimize exposure to regulatory risks, and optimize tax and tariff costs by assembling near end markets. Although the unit cost could rise initially, in the medium term it is expected that competition among different production facilities and on-the-job learning will absorb those additional costs.
The technical challenge is not insignificant. Microsoft and AWS are planning changes that go down to the component level, which implies a complete reconfiguration of the bill of materials and the homologation of essential components in new countries. This process requires time and money, but the resulting multi-center model promises to reduce the risk of total production interruptions.
Finally, the domino effect created by a large manufacturer by moving its production can generate significant benefits in the recipient countries through job creation, technology transfer, and reconfiguration of logistics routes. However, the real test will be to observe how these strategic decisions are implemented and how they affect costs and the long-term resilience of the supply chain.
More information and references in Cloud News.
