Fitbit to Move Manufacturing of Smartwatch, Tracker Out of China

(Bloomberg) --

Fitbit Inc. said it’s shifting manufacturing operations out of China for all of its health trackers and smartwatches to avoid U.S. tariffs on imports from the country.

Starting in January, the company expects those products won’t be of Chinese origin and therefore not subject to import duties, Fitbit said in a statement Wednesday. Fitbit said it will give more details on the financial implications of the move during its third-quarter earnings conference call.

Shares in San Francisco-based Fitbit fell 2% at 11:35 a.m. in New York, leaving them down 27% this year.

Fitbit joins other U.S. companies moving out of China amid an ongoing trade war between the two countries. Tile Inc., which makes Bluetooth-enabled location trackers, also said it’s considering a similar move and is looking at Mexico, Malaysia, Vietnam and “possibly the U.S.” as future manufacturing hubs. Last year, GoPro Inc. announced it would move much of its U.S.-bound camera production out of China. And Apple Inc. has been battling the White House over requests to get the iPhone and other products off the list of Chinese-made goods slated to be hit with tariffs on Dec. 15.

“This is a great example of companies making proactive decisions to mitigate tariff related-risk by, in this case, taking their entire supply chain out of China,” said Tom Forte, an analyst at D.A. Davidson. Others “may choose to follow suit as this trade war gets long and diffuse, and potentially escalates.”

Davidson, who has a buy rating on Fitbit, said the stock market isn’t giving companies enough credit for their efforts to mitigate tariff-related risks. “I expect that as earnings season comes we’ll be hearing a lot more about this from companies.”

Trade negotiators are heading to Washington for talks starting Thursday and China is open to reaching a partial trade deal with the U.S., an official with direct knowledge of the discussions said. The trade talks have failed to make serious headway since negotiations collapsed in early May.

To contact the reporters on this story: Molly Schuetz in New York at mschuetz9@bloomberg.net;Kiley Roache in New York at kroache@bloomberg.net

To contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Robin Ajello

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