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Luxshare Precision is building a large manufacturing complex in eastern China because its goal is to break the ten-year control of Taiwanese rivals Foxconn and Pegatron in iPhone assembly with Apple’s support.
As the most famous participant in China’s Apple supply chain, Luxshare Precision is building a 285,000 square meter manufacturing park in Kunshan, Jiangsu Province, with a total investment of 11 billion yuan (US$1.72 billion). The site covers an area the size of 40 football fields and will produce millions of iPhones as early as next year.
The sheer scale of the project not only shows the ambitions of Luxshare Precision, but also shows that Apple is increasingly dependent on Chinese suppliers. In the long run, this trend may reshape the global technology supply chain.
According to several people familiar with the matter, Wingtech is another rising Chinese technology manufacturing giant. It has recently entered Apple’s supply chain and won orders for the manufacture of Mac mini and Apple TV.Apple also added BOE Technology??? To this year’s list of high-quality display suppliers for the new iPhone.
According to company documents and government environmental assessment documents seen by Nikkei Asia, in addition to the new comprehensive facility, Luxshare Precision also leased and renovated an adjacent facility that was previously owned by iPad assembler Compal Electronics.
According to building plans and government documents obtained by Nikkei Asia, Luxshare Precision plans to complete the first phase of its new complex around mid-2022.
People familiar with the matter told Nikkei Asia that with the new factory, the Chinese supplier’s goal is to significantly increase its iPhone assembly share, from about 6.5 million units in 2021 to 12 to 15 million units as early as next year. Luxshare Precision currently produces iPhones at another factory in Kunshan, which was purchased from Taiwan Wistron in the summer of 2020.
This article is from Nikkei Asia, A global publication with a unique Asian perspective on politics, economics, business and international affairs. Our own correspondents and external commentators from all over the world share their views on Asia, and our Asia300 section provides in-depth coverage of the 300 largest and fastest-growing listed companies from 11 economies outside of Japan.
Apple ships about 200 million iPhones each year, of which Foxconn assembles nearly 60%, and Pegatron assembles about 30%.
“I was on a business trip nearby and saw Luxshare Precision’s new manufacturing plant. I was shocked by the scale of this complex and the capacity it might build for the iPhone,” an Apple supplier executive told Nikkei Asia. “Judging from the progress of the new facility, the day it threatens Foxconn and Pegatron may come sooner than people expected.”
An executive of another Apple supplier said that although this year is the first year for Luxshare Precision to independently build a new iPhone, the company’s assembly performance has improved faster than expected, and industry insiders should not underestimate it.
In late October, Luxshare Precision and Kunshan Municipal Government held a groundbreaking ceremony. Now, there are stable cranes and excavators coming in and out of the construction site throughout the day. Several on-site workers told Nikkei Asia that thousands of workers have been brought in to speed up construction.
“There are approximately 2,000 to 3,000 workers on site. The building we are building will have four floors, and we are required to complete the construction of the factory by the end of this year,” an onsite worker told Nikkei Shimbun in early December. “We are now building the second floor. Time is tight and we are working overtime every day.”
Another worker told Nikkei Asia that they knew it was a smartphone manufacturing plant and said that they had been asked to complete the first phase around April next year.
The workers said that thousands of workers were brought in to speed up the construction of the factory. © Shunsuke Tabeta
According to government announcements and documents, the total investment in the project has reached RMB 11 billion, including the leasing and renovation of old Compal facilities, and is expected to generate more than RMB 100 billion in sales. Eventually it will have 39 production lines.
The Kunshan City Government stated that it took three days for this record-breaking high-tech investment to be approved and four important permits including construction permits were issued, adding that the construction progress was two ahead of schedule. moon.
Grace Wang, co-founder and chairman of Luxshare Precision, said in a speech in October that it was thanks to the Kunshan government that construction could begin so quickly. “If it were not for our personal experience and witness, it would be hard to imagine that these four key permits could be approved in such a short period of time,” she said.
Luxshare shoulders Beijing’s hopes of establishing a local contract electronics group like Foxconn, and is the technology manufacturer with the fastest growing product portfolio among Apple’s suppliers. It has evolved from a small connector supplier in Apple’s supply chain in 2011 to the most important Chinese component supplier and assembler for the AirPods headset series, Apple Watch and iPhone.
The Chinese technology giant has expanded its manufacturing operations to India and Vietnam, where it helps Apple manufacture components and assemble AirPods, and even get involved in semiconductor assembly, helping Apple package and test the chips used in its wireless headsets.
Jeff Pu, a senior technology analyst at Haitong Securities, told Nikkei Asia that Chinese technology manufacturers such as Luxshare Precision and Wingtech have long served domestic smartphone manufacturers such as Xiaomi, OPPO, and vivo. Now they need to expand their market share and seek new growth opportunities. , Including targeting Apple’s supply chain.
“Many Chinese manufacturers, including Luxshare Precision, can not only offer lower prices, but are also highly flexible and can be flexibly adjusted to meet Apple’s requirements. [Apple’s chief executive] Tim Cook takes it very seriously. .. They were one of the first to establish a manufacturing plant in Southeast Asia to help Apple diversify its production to avoid US tariffs,” Pu said, referring to the tariffs imposed by former President Donald Trump on Chinese goods. “Not to mention. They must have received good government support when building a new factory in China. “
Pu said that Foxconn is still the undisputed leader in manufacturing capacity and operation management, and has been the main partner of Apple’s new products, but Chinese manufacturers such as Luxshare Precision have reached a level-in terms of technology and finance. In terms of performance, it can directly compete with other smaller suppliers such as Pegatron and Wistron.
Apple declined to comment for this article. Luxshare Precision and Wingtech did not respond to Nikkei Asia’s requests for comment.
A version of this article First published by Nikkei Asia on December 22, 2021. ©2021 Nikkei Inc. All rights reserved
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