Is Lixun Precision and Wentai Technology in a 'war' with Foxconn? How to choose a shielding material supplier?

According to Nikkei News and other sources, Lite On Precision is building a manufacturing park with an area of 285000 square meters in Kunshan City. The manufacturing park covers an area equivalent to 40 football fields, with a total investment of RMB 11 billion. It will start construction as early as next year and can complete the assembly of millions of iPhones.

Source: Nikkei Asia

In addition, Lite On Precision has also rented and renovated a factory nearby, which was originally owned by iPad assembler Compal Electronics. The project will ultimately have 39 production lines.

Apple's' support ', Lite On's' surge'

At present, Luxshare Precision is an assembly supplier for Apple AirPods earphones, iPhone phones, and Apple Watch smartwatches.

On the afternoon of December 8th, Guo Mingchi predicted that Luxshare Precision would be the NPI (New Product Introduction) supplier for Apple's second-generation AR/MR head mounted devices. Lixun Precision will be the exclusive supplier for at least the initial stage of the second-generation products, and Apple's shipment of second-generation AR/MR head mounted devices will significantly increase. Benefiting from the acquisition of several new products and significant growth in NPI and vertical integration business, as well as the recovery of AirPods shipments from the first quarter of 2022, it is expected that Luxshare Precision's growth momentum will accelerate from the first quarter of 2022. In the second half of 2022, the new Apple Watch will include Apple Watch 8, the new Apple Watch SE, and the extreme sports version. Lixun Precision is the supplier for the new product introduction of Apple Watch 8 and extreme sports version.

On December 7th, Luxshare Precision replied on the interactive platform that, AR、VR It is an important product line in consumer electronics, with a layout for both parts and complete machines, and the company is also in negotiations with relevant market customers. Guotai Junan analyzed that the advantages of the trinity of Lixun Precision's complete machines, modules, and core components, as well as its supply chain control, lean management, and cost control capabilities, will help it quickly acquire new products from major customers and become a core hardware supplier. Guo Mingchi said that Luxshare Precision is the winner of Apple's new hardware, but attention should be paid to the risks of delayed production of new products and lower than expected market demand.

Although both Apple and Luxshare Precision declined to comment on the relevant news. However, it is clear that once the above trip is completed, it will break the monopoly of Foxconn and Asustek, competitors in Taiwan, China, on iPhone assembly for many years, which is still of epoch-making significance.

The 'fruit chain' often has a 'point gold' effect. Affected by this news, the stock price of Lite On Precision surged on the same day, perhaps spreading good news for a long time. Compared to its previous low, its stock price has risen significantly in recent times.

It is not difficult to see that in recent years, Apple has intentionally cultivated more partners in its supply chain selection, and Luxshare Precision is one of the lucky ones that has been given special attention. Connectors, cables, motors, wireless charging products developed and produced by Lite On Precision FPC、 Antennas, acoustics, and electronic modules are widely used in multiple fields.

As early as 2011, Lixun Precision was just a small connector supplier in Apple's supply chain. Now, it has grown into the most important parts supplier of Apple in Chinese Mainland, as well as the assembler of AirPods headset series, Apple Watch watch series and iPhone series. It is indeed the fastest growing product portfolio among Apple's many suppliers.

In 2017, Lite On Precision received a series of orders including Apple iPad internal cables, MacBook power cables, Apple Wacth wireless charging/strap, MacBook Type-C, and iPhone adapter heads.

Later on, Luxshare Precision officially became the manufacturer of AirPods, and with Apple's launch of the new noise cancelling Bluetooth earphones AirPods Pro, Luxshare's performance entered a period of explosive growth.

However, the rapid growth of Lite On Precision has also attracted the attention of the United States. At the beginning of this year, the day after the Biden administration took office, it launched a 337 investigation into the Chinese company Lite On Precision. The US International Trade Commission (ITC) decided to launch a 337 investigation into specific electrical connectors and cage components and their products.

Overall, for a long time, companies such as Lite On Precision and Wentai Technology have provided services to some domestic smartphone manufacturers, and now they need to expand their market share and seek new growth opportunities, including targeting Apple's supply chain.

The 'big war' with Foxconn?

On December 22nd, it was reported that Luxshare Precision will invest 1.73 billion US dollars to build a large-scale contract manufacturing plant in Kunshan, China. Its role is to provide contract manufacturing services for Apple and divide orders between Foxconn and Pegatron with Apple's order support.

Why does Apple hand over more orders to Lite On Precision

As mentioned earlier, Luxshare Precision has always had cooperation with Apple. Prior to acquiring Wistron, it was one of the contract manufacturers and obtained the qualification to manufacture complete machines after the acquisition. Of course, relying solely on qualifications will not allow Apple to hand over so many orders to Lite On Precision. The reason for doing so is mainly because Lite On Precision has sufficient strength. Previously obtained parts AirPods After waiting for wearable devices, it has been preparing to obtain whole machine OEM business. In recent years, it has been increasing its investment in research and development, with an annual investment of more than Foxconn. By continuously investing funds, Apple's requirements for contract manufacturing can be fully met. After all, Apple is so profit oriented and would not be foolish enough to provide orders to factories without strength.

In addition to being able to meet Apple's requirements for whole machine outsourcing, a large part of the reason is that Apple intends to reduce its dependence on Foxconn. Apple has long adhered to the concept of not putting eggs in the same basket. Whether it is a component supplier or a contract manufacturer, as long as Apple can ensure product quality, the more "spare tires" there are, the better. Previously, only Foxconn was able to meet its production requirements, so a large number of orders could only be allocated to Foxconn. Now that a new factory can meet production requirements, it will naturally intentionally tilt its orders towards Foxconn.

In addition, Foxconn's reckless operation in building overseas factories has affected Apple's order supply, and Apple also needs to find new contract factories for order allocation.