Jabil is prepared to move production out of China, if customers ask the St. Petersburg-based electronics manufacturing services company to do so.
Mark Mondello, Jabil’s CEO, described how the company is responding to concerns about tariffs during an interview at the Goldman Sachs Technology and Internet Conference Tuesday in San Francisco.
Jabil (NYSE: JBL), the largest company headquartered in St. Petersburg with about $22 billion in 2018 revenue, has more than 100 facilities in 29 countries, but about half of its 44 million square feet of total space is in China, according to its most recent annual report.
President Trump has said he is considering imposing a tariff hike on imports from China in March, if negotiations cannot resolve an ongoing trade war.
Mondello downplayed the impact of escalating tariffs, citing Jabil’s global footprint, with engineers and supply chains experts everywhere. He also said Jabil’s manufacturing capacity is tied together with an optimized information technology system. “So we move product around in a very flexible, agile fashion all the time.”
Still, Jabil has talked with many of its 350 customers about the issue, Mondello said.
“We’ve had probably, I don’t know, 60, 70, 80 of them over the last nine to 12 months, sit down with us and say, ‘Hey, if I needed to move or wanted to move some product out of China elsewhere, what would that look like?’ So we’ve come up with a playbook for each one of them,” Mondello said. “As we sit today, very few of them are moving existing manufacturing out of China. Some of them have said, maybe on future products, could we think about a different geo? So, right now it’s a bit read and react. I’m not overly concerned.”
If the company were to move business out of China, it likely would be to Malaysia, or potentially Indonesia, Vietnam, Eastern Europe or Mexico. “I’m really comfortable with our ability to execute on that,” Mondello said.
During the wide-ranging interview, Mondello also highlighted Jabil’s medical and packaging operations.
Jabil last year announced a deal with Johnson & Johnson (NYSE: JNJ) for medical devices, where Jabil will be acquiring 14 sites and will support Johnson & Johnson in areas such as endosurgical, spine, trauma and instrumentation.
In addition to the new revenue expected from the deal – about $150 million in the current fiscal year, escalating to more than $1 billion by fiscal year 2021 — Mondello said Jabil is picking up valuable talent in the deal.
“We’re going to bring 6,000-plus J&J employees over to the Jabil team. That’s huge for us. They’re going to be able to help us with the growth. They’re going to help us navigate J&J. They’re going to help us beyond J&J. A number of those employees are hugely talented and would be able to work in other parts of our business over the next two, three, four, five, six years. So not only is it what we believe to be really good business with a really good term sheet, but we get 6,000 new employees that will add different beliefs, different approaches, different technologies, different ideas into the company. And I view the addition of the employees to be every bit as strategically important to us as the business itself,” he said.
Jabil’s packaging business is small but poised for growth as well, Mondello said. Brenda Chamulak, who was named president and CEO of Jabil Packaging Solutions in August, has been leading a team working on advanced technical solutions for consumer packaging.
For example, Jabil is part of the Amazon Dash Replenishment Services. That service provides automatic reordering for items in smart packages, or packages that have embedded technology that senses when new supplies are needed.
“When you think about consumer packaging across so many different areas, [there are] ways to disrupt that market with sensors, technology, and things that today maybe haven’t been embedded in the packaging themselves or included holistically,” Mondello said. “It’s an area where we think our engineering talents, our approach will be well received and accepted. ”