[Insights] Intensified Competition between Foxconn and Quanta in Apple’s Supply Chain

On October 31, 2023, Apple held a product launch event for its M3 chips. Reports suggest that Foxconn has secured a portion of existing MacBook Pro and iMac orders from Quanta. This marks the first time Foxconn has taken orders for higher-end MacBook Pro models.

The order distribution between Foxconn and Quanta has shifted, resulting in a more balanced competition. Quanta may need to expedite the introduction of new factory automation projects and relocate production facilities to reduce labor costs and regain its share of MacBook Pro and iMac orders.

TrendForce’s Insights:

1. Foxconn’s Notebook Factories Excel in Materials, Automation, and Factory Management

Up until 2022, Apple’s computer assembly supply chain was primarily served by two Taiwanese companies, Foxconn and Quanta. In the second half of 2022, Chinese company Wingtech Technology entered the Apple computer assembly supply chain for the first time, initially securing a small portion of orders for MacBook Air products. While they currently hold only a fraction of the orders, they will undoubtedly pose a significant challenge to Foxconn and Quanta in the future.

Quanta, favored by Apple for its tech-oriented approach, faces tough competition from Foxconn, known for its high degree of factory management and production line automation.

The reason for Quanta losing a portion of its high-end notebook orders might be linked to the minimal design differences between the new models featuring the M3 chip and their predecessors.

Moreover, their assembly, testing, and packaging processes remain alike. Hence, Apple adjusts order proportions in its supply chain according to the production yield and quotes from assembly factories as part of risk management. Material costs, labor expenses, and production-related costs are the main elements in the product cost structure. At this stage, labor costs in Shanghai are higher than in Chengdu.

Additionally, Foxconn is one of Apple’s computer case suppliers, giving it priority in material usage. Given Foxconn’s extensive projects for production line automation, their acquisition of Apple’s high-end M3 chip orders for the MacBook Pro has significantly bolstered their standing.

In the future, as long as Apple’s computer designs undergo minimal changes, Foxconn can enhance its output by accelerating the replication of similar production lines. This strategy aims to satisfy customer demands across production volume, costs, quality, and delivery time. Consequently, Foxconn’s aim to capture a share of Quanta’s orders is just a matter of time.

2. Quanta Needs to Accelerate Factory Automation and Establish Vietnam Facilities

Quanta’s factory in Shanghai, producing computer goods, operates within a labor-intensive industry. With the continual rise in local labor costs, recruiting in Shanghai, primarily an area with a service and finance-oriented workforce, becomes increasingly challenging. This scenario significantly impacts the overall workforce deployment in the production line.

Despite having facilities in Chongqing, the company’s strong presence of Apple repair centers in Shanghai anchors its focus there. Moreover, the ongoing establishment of Quanta’s Vietnamese facilities abroad will take time to address production capacity. Hence, Quanta might need to expedite factory automation in Shanghai to reduce labor usage, effectively cutting costs, and potentially regaining Apple orders.

Apple’s computer assembly has long been centered around China, but due to geopolitical influences, Quanta has ultimately shifted to establish production facilities in Vietnam

Vietnam has emerged as an electronic industry hub in the “China+1” strategy. Quanta should leverage local resources to transfer small-scale production lines to Vietnam for manufacturing. By obtaining brand verification for these products beforehand, they aim to shorten the preparation time before mass production, with the goal of reducing costs, improving yields, and regaining customer confidence.

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