Apple is expected to break Foxconn’s production hold and join forces with another manufacturer to produce a premium iPhone model after worker protests against Covid-19 restrictions erupted at its Zhengzhou megafactory last year. I’m here.
The company will sign its first major orders with Taiwanese rival Foxconn and Pegatron’s Chinese competitor Luxshare Precision, according to three people familiar with the matter.
Luxshare is already producing small batches of the iPhone 14 Pro Max at its factory in Kunshan, a city northwest of Shanghai, to make up for production losses at Foxconn since last November, two people with first-hand knowledge of the matter said. official said.
The iPhone 14 Pro’s forwarded order is a coup for Luxshare, which is steadily gaining a share of Apple’s business. Foxconn was solely responsible for offering new iPhone Pro models, but Luxshare has finally proven that it can assemble the most sophisticated devices.
Apple’s relationship with China has grown closer in recent years as Chinese contract manufacturers win orders at the expense of their Taiwanese partners. AirPods and MacBook assemblers Goertek and Wingtech are profiting, and Foxconn is setting up factories in India, Vietnam and the US to reduce its reliance on China.
The turmoil at Foxconn could lead to a shortage of iPhones, breaking Apple’s 14-quarter streak of revenue growth. Foxconn said this week that its Zhengzhou plant has ramped up production to reach 90% of its original target for December.
“Foxconn has no bargaining power,” said Counterpoint analyst Ivan Lam. [Luxshare] An assembly plant could open the door to a more diverse customer base,” said Lam.
Foxconn and Pegatron declined to comment. Apple and Luxshare have not yet responded to requests for comment.
Apple has worked to diversify its supply chain away from Foxconn. However, even the veteran assemblers who currently create the basic models of the iPhone find it difficult to create the latest models.
According to employees and experts, Luxshare was able to produce high-end mobile phones this year thanks to heavy investment from Apple.
“With Apple’s dedicated investments, including increasing supply chain management personnel, it took Luxshare only a few months to place last-minute orders,” said an Apple employee in China. The employee said it typically took Foxconn six months to refresh its production line for new iPhone models.
Isaiah Research analyst Eddie Han says Apple’s “strong” investment in the company is essential for mass production of Pro models.
Founded by former Foxconn employee Grace Wang, Luxshare has expanded its footprint in Apple’s supply chain over the years. She builds everything from AirPods to iPhones, but has struggled to get orders for premium iPhone models.
Luxshare’s annual revenue surged from less than $2 billion in 2016 to $24 billion in 2021, making Apple the company’s largest partner. During that period, the profit margin decreased from 8.6% to 5.1%. This reflects competition for contracts.
Luxshare’s stock has fallen 44% over the past year. Foxconn’s stock is down his 22%.
Additional reporting by Gloria Li from Hong Kong and Patrick McGee from San Francisco