Pandemic Delaying iRobot’s Malaysia Transition to ‘Well Into 2021,’ CEO Says
IRobot anticipates “going back to a world” of 25% Section 301 tariffs on Chinese-sourced goods once its List 3 tariff exclusion expires Dec. 31, CEO Colin Angle said on a Q3 call Oct. 21. The pandemic delayed iRobot’s “original plans” to shift most U.S.-bound production to Malaysia by the end of 2020 to reduce or eliminate its Chinese tariff exposure (see 2002070006), instead pushing the Malaysia transition “well into 2021,” he said.
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The company's Malaysia investments are “finite,” Angle said. “By the end of 2021, we will have the vast majority of product coming into North America manufactured efficiently in Malaysia. What starts the year as a headwind ends the year reversed as a tailwind.” The “dynamics” of product shipments will mean that most of the goods sold in 2021 will still face 25% tariff exposure, he said. “We’ll be able to talk to the state of maturation of our non-Chinese manufacturing capabilities through the year, but it’s going to be late in the year, and largely 2022, before those tariff costs that are reimposed on Jan. 1 are reduced in their impact.”
IRobot continues to “make progress moving to Malaysia,” Angle said. “The physics of the tariff policies are what they are. We’re just trying to be very clear in communicating how that’s going to play out.” Under the List 3 exclusion, CBP refunded iRobot about 60% of its $60 million tariff costs by the end of Q3, Chief Financial Officer Julie Zeiler said. It expects to receive the balance over the next three quarters, but the timing is at CBP’s “discretion,” she said.
The company is “committed to Malaysia,” even if the tariffs were to disappear under a Joe Biden administration, Angle said. “We believe that geographic diversification is critical for a number of different reasons. Malaysia makes a ton of sense. We’re invested in making that our second geography of manufacturing.” IRobot's April 22 tariff exclusion originally was valid through Aug. 7 (see 2004240031), but was later extended to year-end.