Google plans to stop making Pixel products in China in 2027!!

Google has told suppliers it plans to have all of its Pixel smartphones, watches and wireless earbuds produced outside of China starting next year amid ongoing Washington-Beijing tensions, Nikkei Asia has learned.

Google has been aggressively expanding capacity in Vietnam and India to lower its dependency on China in recent years, though a significant portion of its production remains in the country. The successful development and production of high-end Pixel phones in Vietnam this year -- which is more complicated than smartwatches and earbuds -- gave Google the confidence to proceed with the 2027 timeline for moving all Pixel production out of China, sources with direct knowledge of the matter said.

If realized, the move would make Google the second global brand after Samsung to decouple its smartphone production from China.

"Compared with Apple, Google has no burden [to leave China] as it does not sell Pixel phones in the Chinese market," said one of the people with knowledge of the plan. "The progress in Vietnam is smooth, as Samsung has built a smartphone supply chain ecosystem there that Google could also access."

Nikkei Asia was the first to report on Google's plan to move new product development for high-end Pixel models from China to Vietnam.

The American tech giant has told suppliers that it plans to increase its Pixel phone shipments by 8% to 10% this year from last year's total of around 12 million units, despite the skyrocketing cost of memory chips, according to multiple sources, as Google has high hopes that its smartphones will serve as an important portal for consumers to use its Gemini AI applications.

To increase its bargaining power for memory chips, Google has been bundling chip orders for its cloud-computing business with those of smartphones in negotiations with the likes of Micron, Samsung and SK Hynix, according to one source.

"The strategy for the Pixel phone this year is: Attack. We are told Pixel phones need to keep their shipment growth momentum at all costs," the source said.

An executive with a Google and Xiaomi component supplier told Nikkei Asia that the American company is one of the few smartphone makers that did not lower its shipment forecast this year.

"Google's Pixel phone base is rather small, which gives it significant room to grow, and considering its massive cloud-computing business, even surging memory chips costs would not be too much of a burden," the executive said. "It could grab some share from Apple in the U.S., Japan and Europe when Apple raises prices for iPhones."

Google last week launched its latest flagship Pixel 11, Pixel 11 Pro and Pixel 11 Pro Fold, with the starting price of $899 for models with 256GB of memory. The price is higher than the previous generation Pixel 10, which cost $799 and came with a 128GB memory capacity.

Gerrit Schneemann, senior analyst at Counterpoint Research, said Google has been more conservative in terms of raising prices on existing models than brands like Samsung and Motorola, which have noticeabley adjusted prices of their midrange offerings.

"In the U.S., Google has been successful in translating promotional activity into sales. The premiumization of the market continued in Q2, and especially the Pixel 9a and 10a models fall into an attractive price segment, considering pricing pressure on prepaid market segments and fewer competing brands," Schneemann said.

Apple and Huawei are among the few smartphone makers besides Google that aim to increase their shipments despite the chip crunch, Nikkei Asia reported earlier. Xiaomi, Oppo and Vivo all have slashed their forecasts several times this year as they struggle with surging costs of memory chips and other chip supplies.

Apple CEO Tim Cook has acknowledged that the company will have to pay higher costs for memory chips across its product lines this quarter. The U.S. tech company has raised prices for existing MacBooks and iPads, as well as for iPhones sold in Japan.

Google did not respond to Nikkei Asia's request for comment.