Microsoft is reportedly moving Surface and Xbox production — no prizes for guessing why

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I’m seeing reports, first from The Verge and originally from Nikkei, that Microsoft is planning to shift its Surface device production away from China. Honestly, I was a bit surprised to even learn they *still* manufacture Surface products, and I suspect some others might be too. It’s a move that could be seen as positive news for those concerned about supply chain diversification.

Surface is Microsoft’s range of devices, including laptops, 2-in-1s, and accessories. I used to own a couple of Surface laptops, but unfortunately, they both stopped working after a while. To be clear, that was several years ago, so things may have improved since then.

What’s really interesting – and potentially good news – is that Xbox might move its manufacturing out of China. This could eventually lead to lower prices for the console, which currently seems to be getting more expensive instead of cheaper.

Microsoft is likely changing where it manufactures its products because of increasing global political tensions. With the U.S. and China escalating trade threats, the company is probably reconsidering its production locations. Here’s a closer look at the situation and what we might expect in the future.

Deep supply chain moves

The report suggests Microsoft wants to move more of its manufacturing out of China, not just the final assembly of products. They’re also asking suppliers to produce parts and components outside of China.

This covers components like wiring, circuit boards, and other necessary hardware. The report indicates Microsoft aims to have all new Surface devices made outside of China by 2026.

As an analyst, I’ve been tracking Microsoft’s manufacturing shifts, and it’s clear they’ve already relocated a significant portion of their server production overseas. Given this trend, it wouldn’t surprise me if they decided to manufacture future Surface devices outside of the country as well. It seems like a logical next step based on what we’re already seeing.

Good news for Xbox players worried about expensive consoles! Microsoft is apparently looking into making Xbox consoles in countries other than China.

Manufacturing is already more expensive due to tariffs. While many might assume tariffs caused the recent Game Pass price increase, that’s actually Microsoft’s decision. However, tariffs are definitely contributing to higher prices for gaming hardware.

Shifting manufacturing away from China is a sensible move. It fosters more diverse production networks, reducing dependence on China’s systems and potentially leading to more predictable hardware costs over time.

Why Microsoft is moving — and why now

This action is happening at a time of increased global tension between the U.S. and China, which flared up again this month. President Trump recently proposed a 100% tax on all goods coming from China, starting November 1, 2025. This would essentially double the cost of importing those goods and significantly increase manufacturing expenses for American companies that operate in China.

China is increasing restrictions on the export of rare earth materials, which are essential for making electronics, computer chips, and other tech products. Additionally, both China and the United States are now imposing new fees on each other’s ships entering their ports, further increasing the cost of international trade.

These changes are causing difficulties for U.S. companies that make products in China. If a recent report is true, Microsoft appears to be finding the increasing costs too high. Moving production to other countries would help Microsoft avoid potential political conflicts and unexpected increases in tariffs, making its supply chain more reliable in the long run.

I think this is a positive step. U.S. companies are likely better off reducing their dependence on China, particularly with the ongoing trade tensions and frequent disputes that have arisen during the Trump administration.

Ultimately, customers are the ones who will feel the impact, whether they’re trying to enjoy hobbies like gaming or shopping for devices like laptops, tablets, or phones. This isn’t just a Microsoft issue; prices across the tech industry could increase at any time.

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2025-10-17 15:12