iRobot Takes a Big Step Toward Negating the Impact of Chinese Tariffs
It's no mystery that tariffs and the ongoing U.S.-China trade war have done iRobot (NASDAQ: IRBT) no favors. The home robotics leader has made as much clear in each of its past
On Wednesday morning, however, iRobot (NASDAQ: IRBT) announced a key step toward blunting the impact of tariffs on its bottom line, saying it has commenced production in a new Malaysian factory earlier than previously expected.
For perspective, during
Angle elaborated in a press release this morning:
"Establishing manufacturing operations in Malaysia is a fundamental component in our initiative to diversify iRobot's manufacturing and supply chain capabilities, while also mitigating our exposure to current and prospective tariffs on products that are imported from China. We are thrilled that the new production line in Malaysia is officially up and running earlier than anticipated. Taking this project from start to finish in less than a year was a massive undertaking that required detailed planning, scenario modeling and crisp execution by our operations team and our partner, Jabil.
iRobot isn't in the clear yet
This doesn't mean the impact of tariffs will be completely absent for iRobot in the coming quarters. As it stands, it is starting by producing "limited quantities" of a single Roomba 600 series model at the new factory, and plans to accelerate production for that model starting in the first quarter of 2020.
"Additional models may be added to the line over the coming quarters and into 2021," the company added today.
But this shouldn't be a huge surprise considering it's in line with Angle's comments during last month's call -- namely that iRobot would begin with a single entry-level Roomba at the factory, then follow with additional stock keeping units on an as-needed basis. This progression is a consequence, Angle says, of the incremental challenge involved with shifting production and developing the infrastructure in Malaysia to support manufacturing of more sophisticated electronics and batteries required for higher-end Roomba models.
The bigger picture
That also raises the question: If the U.S. and China resolve their trade dispute and roll back tariffs altogether, is all this effort for naught? Not necessarily.
"As we move forward, we believe that our investment to establish manufacturing operations in Malaysia will serve us well as the global demand for home cleaning robots across multiple categories continues to grow," Angle said.
Even as it fosters growth from its core Roomba line, iRobot is simultaneously working to spur adoption of its less-mature Braava floor-mopping robots. And looking further ahead, the company plans to
In the meantime, this appears to be an encouraging first step toward realizing iRobot's longer-term supply chain ambitions. As those ambitions continue to play out, I think iRobot will prove to be a
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