Foxconn’s biggest Chinese rival wins premium iPhone contract

Apple is expected to recruit another manufacturer to produce its premium iPhone models, breaking Foxconn’s grip on production after worker protests over Covid-19 curbs erupted at its Zhengzhou megafactory last year.

The company is poised to sign its first major order with Luxshare Precision, a Chinese competitor to Taiwanese rivals Foxconn and Pegatron, according to three people familiar with the situation.

Luxshare has already produced small quantities of the iPhone 14 Pro Max at its plant in Kunshan, a city northwest of Shanghai, to make up for the loss of production at Foxconn since November last year, two people with direct knowledge of the matter said.

The transferred iPhone 14 Pro order represents a blow to Luxshare, which has been steadily winning an ever-increasing share of Apple’s business. Foxconn had been solely responsible for offering new iPhone Pro models, but Luxshare has finally shown that it can assemble the most sophisticated devices.

Also Read :  Salon Slade launches inside a mobile salon in NYC

Apple’s ties to China have strained in recent years as Chinese contract manufacturers win orders at the expense of Taiwanese partners. Goertek and Wingtech, assemblers of AirPods and MacBooks, have benefited, while Foxconn has tried to reduce its reliance on China by establishing plants in India, Vietnam and the United States.

The disruption at Foxconn has caused a shortage of iPhones and threatens to break Apple’s 14-quarter revenue growth streak. Foxconn said this week that the Zhengzhou factory increased production to meet 90 percent of initial targets in December.

“Foxconn has no bargaining power,” said Ivan Lam, an analyst at Counterpoint. “Placing orders for high-end iPhones is a testament to the [Luxshare] assembly plant, which could open its way to more diverse customers,” said Lam.

Also Read :  India looks to move up tech value chain with iPhone plant deal

Foxconn and Pegatron declined to comment. Apple and Luxshare did not immediately respond to a request for comment.

Apple has been working to diversify its supply chain away from Foxconn. But even for veteran assemblers, who currently make basic iPhone models, it is difficult to produce the latest models.

Luxshare was able to produce the high-end phone this year because of Apple’s significant investment, employees and experts said.

“With Apple’s dedicated investment, including increased staff in supply chain management, Luxshare only took a few months to deliver last-minute orders,” said an Apple employee in China. The employee said Foxconn used to take six months to revamp production lines for new iPhone models.

Isaiah Research analyst Eddie Han said Apple’s “strong” investment in the company was crucial to mass-producing the Pro models.

Also Read :  Warzone Mobile release date and preregistration details

Founded by former Foxconn worker Grace Wang, Luxshare has been expanding its footprint in Apple’s supply chain for years. It collects everything from AirPods to iPhones, but so far, it has struggled to win orders for premium iPhone models.

Luxshare’s annual revenue grew from less than $2 billion in 2016 to $24 billion in 2021 as Apple became the company’s largest partner. In that period, margins declined from 8.6 percent to 5.1 percent, reflecting competition for contracts.

Luxshare’s share price has fallen 44 percent in the past year, dragged down by a global tech rout. Foxconn shares fall 22 percent.

Additional reporting by Gloria Li in Hong Kong and Patrick McGee in San Francisco

Source

Leave a Reply

Your email address will not be published.