Some Roomba Production Underway in Malaysia; Tariffs Exclusions Remain a Big Question for iRobot
IRobot started making some models of its Roomba vacuum line in Malaysia as part of an effort to shift away from China, the company said in a Nov. 21 news release. “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," said Colin Angle, CEO at iRobot. The company previously announced the plans to begin a production line in Malaysia (see 1910230027).
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The company also is still waiting to hear about possible exclusions to the third list of Section 301 tariffs on goods from China, something that could provide a big boost to earnings, Merrill Lynch analyst John Babcock said in a Nov. 21 research report. "Tariff relief would likely provide the greatest benefit to earnings, and could come from either an exemption from List 3 tariffs (which we’ve estimated could add $70-80mn to earnings at the 25% tariff rate on the Roomba) or a reduction in tariff levels," Babcock said. "We do think [iRobot] has a solid case supporting its exemption application, and would note that roughly 40-50% of List 1 and List 2 exemption requests were approved. Meanwhile, if tariffs were to remain an obstacle, [iRobot] would likely accelerate the production of Roombas in Malaysia."