Chinese iPhone assembly contractor Luxshare Precision is set to officially acquire the controlling stake of Pegaglobe (Kunshan), the iPhone assembly plant under Pegatron. This series of acquisitions will provide Luxshare with a stronger competitive advantage against Foxconn. Concurrently, Luxshare is reinforcing its component layout to enhance its capability to expand iPhone orders.

Following the acquisition of Wistron’s Jiangsu and Kunshan plant, Luxshare has now secured the controlling stake of Pegaglobe (Kunshan), a subsidiary of Pegatron. This marks another acquisition of China’s plants involved in manufacturing iPhone for Taiwanese companies.

According to UDN citing from industry insiders,  Luxshare’s acquisition of Pegaglobe (Kunshan) is likely to have received Apple’s approval. Luxshare has consecutively broken the pattern of iPhones being solely manufactured by Taiwanese companies, suggesting that Luxshare has the opportunity to reshape the landscape of iPhone manufacturing in the future.

Having acquired iPhone manufacturing plants in China from Wistron and Pegatron, Luxshare not only gains more market share in manufacturing but also expands its presence in the upstream iPhone component supply chain. This ongoing integration of upstream components enhances Luxshare’s capability to secure more iPhone orders.

In the past three years, Luxshare has been consistently acquiring iPhone-related supply chain entities. In July 2020, Luxshare’s subsidiary, Lizhen Precision (Jiangsu), acquired Wistron Investment (Jiangsu) and Wistron InfoComm Manufacturing (Kunshan) for RMB 3.3 billion (approximately USD 467 million), marking the beginning of Luxshare’s acquisition of plants involved in iPhones assembly for Taiwanese companies.

Recently, Luxshare finalized an agreement with the global provider of connectivity and power solutions – Qorvo. Luxshare will acquire Qorvo’s testing and packaging facilities in Beijing and Dezhou, with the transaction expected to be completed in the first half of next year. This move is seen as Luxshare’s effort to build a more comprehensive iPhone component supply chain.

Read more

• [News] Apple Supplier Qorvo Sells Chinese Test and Packaging Plant to Luxshare
• [News] Tata Group Plans to Build New iPhone Assembly Plant in India, Aligning with Apple’s Localization Strategy for the Supply Chain

(Photo credit: Luxshare)

The global provider of connectivity and power solutions Qorvo announced that it has reached a definitive agreement with Luxshare Precision for the acquisition of Qorvo’s assembly and test facilities in Beijing and Dezhou, China.

According to Qorvo’s official news, the companies anticipate completing the transaction by the first half of calendar 2024, subject to receipt of regulatory approvals and the satisfaction or waiver of other closing conditions.

Upon closing, Luxshare will acquire each facility’s operations and assets, which include the property, plant and equipment, as well as the existing workforce, to enable seamless continuity of operations. Qorvo will continue to maintain its sales, engineering and customer support employees in China to continue serving customers.

Following the close of the transaction, Luxshare will assemble and test products for Qorvo under a newly established long-term supply agreement. The Beijing and Dezhou facilities primarily support Qorvo’s highly integrated advanced cellular products.

Luxshare Precision Expected to Deepen Ties in Apple’s Supply Chain

Reportedly, to establish a presence in the Chinese Radio Frequency (RF) industry, Qorvo has set up facilities in Beijing and Dezhou, Shandong. The Dezhou facility is twice the size of the Beijing facility and is primarily engaged in the assembly, packaging, and testing of RF devices.

The product range includes RF switches, multiplexers, tuners, amplifiers, and various other series. At the time of the public information available, the Dezhou facility was responsible for packaging 75% of Qorvo products and testing 85%-90% of Qorvo products.

Now, Qorvo has decided to sell its Chinese factories, aiming to further reduce capital intensity, support the pursuit of long-term gross margin goals, and ensure continuity in serving Chinese customers.

This move aligns with the current development trends, and in the future, Qorvo intends to achieve continuous market presence in China and improve profitability through the collaboration with Luxshare Precision.

From the perspective of Luxshare Precision, one significant point of connection between Qorvo and its business lies in end customers. As widely known, one of Qorvo’s major clients is the consumer electronics giant Apple, and Luxshare Precision has been providing outsourced manufacturing services for Apple for many years, consistently deepening its integration into Apple’s supply chain.

Read more

• [News] Luxshare Doubles Business with 3 iPhone 15 Orders, Breaking Foxconn’s High-End Supply Dominance
• [News] Apple-Backed Luxshare Disrupts Foxconn’s Manufacturing Dominance with iPhone Production Shift

(Photo credit: Apple)

Luxshare, a crucial player in the Chinese Apple supply chain, is facing challenges in its Indian expansion plans due to the strained relations between China and India. Several Indian media outlets reported that Luxshare has revised its initial investment plan of $330 million, opting to forgo establishing manufacturing facilities in India, stating, “This decision is a setback for India.”

Following these reports, Luxshare clarified on the evening of the 20th that the mentioned reports are inaccurate, emphasizing that Luxshare has not made any $330 million investment decisions in India.

Akin to Taiwanese companies, Chinese companies have been establishing manufacturing facilities in India in recent years as Apple gradually diversifies its supply chain to Vietnam, India, and other locations, reported by ET Telecom. Earlier this year, the Indian government tentatively approved approximately 14 Apple suppliers from China, including Luxshare and Sunny Optical.

However, the condition for approval required these Chinese companies to form joint ventures with local businesses, becoming a hindrance for Chinese investments in India. As a result, some companies are exploring alternative locations. On November 9th, the Bac Giang Industrial Zones Authority in Vietnam announced that Luxshare would make an additional investment of $330 million to construct new production facilities in the province. Indian media interpreted this change in plans by Chinese companies as “India’s loss and Vietnam’s gain.”

In June of this year, Luxshare shareholders expressed concerns about the company’s recent challenges in India. However, Luxshare’s top management emphasized the necessity of comprehensive guarantees in investment, politics, customer relations, and other aspects before contemplating the establishment of manufacturing facilities in India. Currently, Luxshare remains focused on consumer electronics in Vietnam, while maintaining automotive and communication production lines in Mexico.

Chinese media also highlighted that, amid the current tensions in Sino-Indian relations, another major Apple supplier in China, BYD, is facing a similar situation. Previously, BYD planned to expand its presence in India and attempted to establish an iPad assembly line in February 2021. However, BYD announced that this investment had shifted to Vietnam in May, with plans to invest USD 184 million in the production of electronic components.

(Image: Luxshare)

According to a report by Taiwan’s Money DJ, Chinese assembly contractor Luxshare Precision has been actively entering Apple’s supply chain in recent years and has secured contracts to manufacture high-end models of the iPhone 15, no longer exclusively produced by Foxconn. Luxshare Precision’s Chairman, Wang Laichun, revealed in a recent interview that they have secured orders for three iPhone 15 models this year, and this business segment has doubled in performance over the past year.

She also disclosed that they are preparing for the production of Apple’s upcoming head-worn device, the Apple Vision Pro, set to be released early next year.

As reported by The Paper, Wang Laichun pointed out that Luxshare Precision currently provides development and manufacturing services for a range of Apple products, including iPhones, Apple Watch, AirPods, and Apple Vision Pro. They offer an integrated solution, from diverse components and modules to complete system assembly.

Luxshare Precision’s semi-annual report for 2023, released at the end of August, showed that their sales for the first half of the year reached RMB 97.97 billion, with a year-on-year increase of 19.53%. Their net profit was RMB 4.154 billion, marking a year-on-year increase of 22.48%. Not only did they achieve record cash flow, but several financial indicators also improved. Luxshare Precision expects its net profit for the first three quarters of 2023 to reach between RMB 7.040 billion and RMB 7.680 billion, a year-on-year increase of 10% to 20%.

The report noted that Wang Laichun attributes this growth to the company’s process optimization and efficiency improvements, which have led to a significant increase in the number of iPhone production models and quantities in recent years. She also mentioned that the company continues to expand its capacity in China to meet Apple’s demands. Last year, they established a new facility in Kunshan dedicated to iPhone development and production, creating tens of thousands of job opportunities.

(Photo credit: Apple)

The Chinese supply chain, led by Luxshare Precision, has secured Apple AirPods and iPhone assembly orders, while another ODM manufacturer Wingtec Technology, is gradually taking a slice of Taiwan-based orders. This development is poised to impact orders from Apple’s notebook computer between Taiwanese and Chinese factories, creating a ripple effect within the whole supply chain.

TrendForce’s Perspective:

• Taiwanese Manufacturers Face Reallocated Apple Notebook Orders as Chinese Suppliers Strengthen Their Position

Regarding Apple, MacBook assembly was primarily handled by Taiwanese manufacturers Quanta and Foxconn until 2022. With Chinese firm Wingtec progressing from small-scale trial production to mass production of M1 MacBook Air, according to reports in Chinese media, Wingtec’s Yunnan Kunming factory has also received 3C quality certification for M2 chips. This confirms that Wingtec Technology will take on a portion of the future MacBook Air orders. As Foxconn secures the production of larger MacBook Pro models, this shift will primarily affect Quanta’s share in producing Apple computers. Wingtec is set to become the first Chinese factory to manufacture complete Apple MacBook Air units. If Wingtec consistently meets Apple’s product quality requirements and secures additional orders, the fourth quarter of 2023 will become a battleground for Taiwanese manufacturers defending their orders for Apple notebook computers.

• The Taiwanese factories are accelerating the relocation of Apple notebook order production bases to Southeast Asia.

Given the slower recovery of the COVID-19 situation in China, rising labor costs, production capacity constraints, and restricted order volumes approved by customers, various electronic contract manufacturers have shifted their production focus to Southeast Asian countries, including Thailand, Malaysia, and Vietnam. Configuring production capacities for new and existing models, operating new factories, and rapidly transitioning supply chains are challenges of Taiwanese factories.

As Apple’s revenue from notebook computer products gradually contracts, the company is actively pressuring contract manufacturers to lower their product quotes. Additionally, China faces difficulties in recruiting workers, with local manufacturing labor transitioning into service-oriented roles such as live streaming, food delivery, and ride-hailing. This labor shortage has prompted Apple to actively demand that Taiwanese contract manufacturers accelerate the adoption of automation equipment to streamline factory operations, increase production output, and reduce labor costs. In light of the pressure from Apple’s orders and the emergence of the Chinese notebook computer supply chain, Taiwanese factories need to undergo further transformation to maintain their alignment with Apple and offer greater productivity and price advantages.

(Photo credit: Apple)