Microsoft Corp. (MSFT  ) plans to shift most new product manufacturing out of China as early as next year, joining other U.S. tech giants in expanding production beyond the world's second-largest economy, according to a report published Thursday.

Server Production To Be Pushed Outside China: Report

The software giant is aiming to shift the production of its Surface laptops and data center servers, including key components and assembly, starting next year, reported Nikkei Asia, citing sources.

The company has already shifted a large part of its server production out of China and is now aiming to source at least 80% of the servers' bill of materials (BOM) from outside the country, the report said.

At the same time, Alphabet's (GOOG  ) (GOOGL  ) Google is also urging suppliers to rapidly increase server production in Thailand, with one assembler doubling capacity by building four new facilities, Nikkei Asia reported, adding that Amazon (AMZN  ) Web Services is also adopting non-China production, particularly for production of its sensitive AI data center servers.

Microsoft, Amazon, and Google did not respond to Benzinga's requests for comment.

Chinese tech firms have long played key roles in global server supply chains, thanks to their growing tech capabilities, quality, and competitive pricing. But rising U.S.-China tensions are now pushing companies to diversify.

US-China Trade Tensions Loom

Microsoft has been reducing its reliance on China. In April, it ended its joint venture with Wicresoft and cut 2,000 jobs. After U.S. backlash over using China-based engineers for military cloud support, the company said in July it would stop the practice.

The geopolitical tension between the U.S. and China has been escalating, with China launching a customs crackdown on Nvidia's (NVDA  ) AI chips and President Donald Trump expressing concerns over China's limits on rare earth exports. Rising Taiwan Strait tensions are also prompting U.S. companies to seek production alternatives outside Greater China.

Price Action: On a year-to-date basis, shares in Microsoft Corp and Alphabet Inc. have risen by 22.23% and 32.13%, respectively, while Amazon.com shares have dropped 2%, as per data from Benzinga Pro.