Fitbit Says It's Pulling Out Most Of Its Products From China

FITBIT
FILE PHOTO: The ticker symbol for Fitbit is displayed at the post where it is traded on the floor of the New York Stock Exchange (NYSE) February 23, 2016.
(Photo: REUTERS/Brendan McDermid/File Photo)

US President Donald Trump and his administration's handling of the China trade issue has a new casualty: Fitbit Inc. The company announced on Wednesday that it will transfer some of its products from China to other markets to save on costs.

In a surprise decision by the US tech firm, Fitbit said it will pull out almost all of its gadgets produced in the Chinese mainland because the US and China's trade spat is taking a huge toll on its business.

All of Fitbit's digital trackers and smartwatch devices "will not be of Chinese origin" starting January next year due to humongous American taxes.

In the early months of 2018, in reaction to ongoing levies imposed by the US, Fitbit started exploring a possible sources of income from China," Ron Kisling, chief financial officer, disclosed.

As a result of Fitbit's search for potential income-generating markets, Kisling said the company has made major transformations to their "supply chain and manufacturing operations." More changes are expected to be made in the coming weeks or months, sources said.

Stocks of the San Francisco, CA-based tech company made a quick rally during pre-market sessions on Wednesday after it announced the China pullout. The stock dropped about 1.6 percent from its last close moments after the stock's brief surge.

Penetrating the Chinese market has never been a walk in the park for many Western companies, especially since the country and the US have yet to sort out their differences in the trade front, not to mention ongoing tariffs, and the obstacles involved in getting a license and other regulatory hurdles to make a presence in China.

The imposition of a new set of levies is forcing companies with assembly plants in China to either relegate the burden of funding their operations in the country to other entities or just simply absorb them.

As it looks now, Fitbit is among the first big tech players to publicly disclose its separation from China, which has for years served as an important area for Silicon Valley billionaires thanks to China's oversupply of well-rounded low-salaried workers and thriving industrial infrastructure.

Distancing itself from China may be a good move for Fitbit, which for years has felt extreme pressure from competing with tech giants like Apple Inc in the wireless-gadgets arena, and registering poorer-than- estimated profits. For a good number of tech firms, leaving the Chinese soil would likely be more expensive and very complicated.

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