Luxshare Precision Industry Co, a key partner of Apple in China is acquiring a major stake in an iPhone assembly plant currently operated by Taiwan’s Pegatron Corp. This $300 million deal positions Luxshare to become a more formidable player in the electronics manufacturing sector.

Luxshare will buy 62.5% of Pegatron’s unit in China

The deal involves Luxshare buying 62.5% of Pegatron’s unit in Kunshan, located in Jiangsu province, one of China’s most affluent regions. Pegatron, based in Taipei, is known for assembling iPhones at its Kunshan campus and another site in Shanghai. This strategic acquisition gives Luxshare a stronger foothold in competing with Foxconn Technology Group, Apple’s primary manufacturing partner and the world’s largest electronics contract manufacturer.

Foxconn, formally known as Hon Hai Precision Industry, is responsible for producing approximately 70% of all iPhones, primarily at its Zhengzhou site in Henan province. However, Luxshare’s growing presence within Apple’s supply chain cannot be overlooked. The company, also known as Luxshare-ICT, manufactures a variety of Apple products, including iPhones, iPods, Apple Watches, and the mixed-reality headset Vision Pro.

Apple’s CEO, Tim Cook, recently visited a Luxshare factory, commending the company’s efforts in supporting Apple’s environmental initiatives, particularly in reducing carbon emissions. This move by Apple to strengthen ties with Chinese suppliers like Luxshare highlights its strategy to its manufacturing base while also navigating the complex geopolitical landscape.

Shares in Luxshare saw a notable increase following the announcement of the deal, while Pegatron’s shares experienced a decline. Simultaneously, Apple is subtly adjusting its production strategy, reducing dependency on Taiwanese manufacturers amid growing tensions between Washington and Beijing. It’s simultaneously expanding its manufacturing footprint in India with the help of Foxconn and Pegatron. The upcoming times will definitely be interesting (and definitive) for the company, that’s for sure.

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Apple recently unveiled its highly anticipated mixed reality headset dubbed the Vision Pro. This 3,500 US Dollar headset is a first of its kind product from the company. Now, a fresh report has even revealed the suppliers behind the new gadget.

Apple Vision Pro is being build by brand’s AirPods supplier Luxshare

Apple has contracted Luxshare Precision Industry Co as one of its primary suppliers for the Vision Pro. For those unaware, this contract manufacturer is also a major supplier for the AirPods and will even produce the iPhone 15 models. Now, the Cupertino based giant has brought aboard Luxshare and six other Chinese companies to assemble its latest high end gadget, which is the new Vision Pro headset.

The other six manufacturers in the Apple supply chain includes the likes of Cowell E Holdings that is a camera module maker and Shenzhen Desay Battery Technology, which is providing the lithium batteries and power management system for this product. Notably, this move from Apple also shows the company’s shift to include more Chinese suppliers in its supply chain and its growing connection with the region despite the geopolitical situation surrounding the region.

Although, the iPhone maker’s new mixed reality headset is still primarily being supplied by its Taiwanese suppliers. This includes optical parts maker Largan Precision, Optical lens products manufacturer Genius Electronic Optical, and others. According to Ivan Lam, senior analyst at Counterpoint, “It is evident that Vision Pro’s current suppliers, similar to the structure [of companies] behind the iPhone, are among the world’s top consumer electronics component providers”.

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Luxshare, one of the Apple suppliers, is building an enormous new iPhone factory in China. The new factory would help boost its iPhone assembly capabilities to better rival other suppliers like Foxconn and Pegatron.

According to a Nikkei Asia report (Via AppleInsider), the supplier of the Cupertino based giant is apparently setting up a massive 285,000 square meter manufacturing facility in Kunshan City, China. Furthermore, the firm plans to complete the first phase of the new giant site in the middle of next year and production of iPhone models could begin sometime later in the same year. Luxshare is investing a sizeable 1.73 billion US Dollars in this project.

Through the new plant, the company would be able to boost its iPhone assembly even further, with its volume production expected to rise from 6.5 million units to 12 million or even 15 million units by 2022 end. To put things into perspective, the new manufacturing park spans a whopping 40 football fields. Notably, Luxshare has also leased and renovated a nearby plant that was previously owned by an iPad assembler.

With the announcement of this huge plant, Apple’s supply chain might see a major shift as iPhone assembly is seeing a move from Taiwan to China. Earlier this year, Chinese partners accounted for around 33 percent of all the new suppliers that Apple added to its supply chain list. As of right now, the company relies on Taiwanese suppliers like Foxconn and Pegatron for the majority of its iPhone assembly, with the former being responsible for 60 percent of the smartphones and the latter accounting for around 30 percent.

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Apple iPhone assembler, Foxconn, has recently set up a new task force to fend off the growing influence of Chinese electronics manufacturer, Luxshare, that has threatened its dominance, as per sources close to the matter.

According to a Reuters report, the project has initiated by Foxconn Founder Terry Gou to target China’s Luxshare. The latter isn’t a known international brand but has become the first firm to have a Mainland China headquarters to assemble iPhones, which is an area that was dominated by Taiwanese manufacturers like Foxconn. One of the sources claimed that the task force was created back in 2019 and has been looking into Luxshare’s technology, expansion plan, hiring, and whether the company is supported by any Chinese government entity as well.

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At the moment, Luxshare only makes 5 percent of Foxconn’s total revenue. Despite this, it is still being considered a notable threat. Furthermore, the growing tensions amid the US-China trade war and the ongoing Coronavirus pandemic have intensified pressures on the global supply chains.

This has led to an increase in tech feuds between nations, with each trying to create the next world leading local tech giant. As per another source, “Luxshare is set to rise … it’s just a matter of how fast it could be.” The source further added that “It makes sense for China to build up its own supply chain and Luxshare is in line with that state policy.”

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Apple might be considering to bring the assembly of its iPhones to Vietnam. A new report has suggested that the company recently visited a factory run by Luxshare, an assembly partner, to check on the living conditions of the workers and the facility.

According to Apple Insider, Apple representatives visited Luxshare’s facility to check the viability of iPhone production in the region. Tang Due Bang, Luxshare Foreign Affairs Manager, apparently said to local media that the factory in Van Trung Industrial Park was scouted to see if it was the right scale, had the proper facilities, and if it had investment capital to start assembling iPhones.

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“The Apple side continually surveyed the workshop of Luxshare in Bac Giang on iPhone production conditions. Apple Corporation is impressed by the speed at which our fast facility is built here. At the same time, through practical research, Apple highly appreciates the potential in Bac Giang province and hard-working workers.” For those unaware, Luxshare is one of the Vietnamese firms that also assembles the Cupertino based giant’s AirPods.

Recently, the company sought financial support to expand the AirPods production, and has reportedly received it. Furthermore, the 30 hectare factory was finished in 5 months, according to Bang, after Apple requested to expand production. At the moment, Luxshare employs around 28,000 workers, which could easily rise to 50,000 to even 60,000 if it gains approval for iPhone assembly.

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Wistron is one of the three iPhone producers for Apple apart from Foxconn and Pegatron. All of them are Taiwanese contract manufacturers. But not anymore, as Luxshare, a Chinese company has officially announced to acquire two subsidiaries of Wistron in Eastern China for 3.3 billion yuan ($472 million).

Luxshare is known for producing accessories, cables, chargers, antennas, and other similar products. Above all, it is also the world’s largest Apple AirPods manufacturer. With the new acquisition, it will also become an iPhone assembler posing a threat to Pegatron’s business in China as per GF Securities analyst Jeff Pu.

According to a Wistron representative, the Kunshan site that is being sold to Luxshare makes smartphones, notebooks and connected devices. Some of these products are expected to be manufactured somewhere else. However, the spokesperson declined to comment on the company’s iPhone business.

Though Wistron is expected to not manufacture iPhones anymore in China, it will continue to assemble cheaper Apple smartphones in India. 

The Luxshare-Wistron deal is said to be finalized by the end of 2020 pending regulatory approval. The acquisition is a win for both Luxshare and Apple as the former can now try its luck in manufacturing iPhones, whereas the latter gets a Chinese partner to expand its local sources.

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(Source)

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