Luxshare iPhone factory purchase is bad news for Foxconn, Pegatron

AppleInsider · July 20, 2020 3:24PM

The sale of an iPhone factory owned by Wistron to Luxshare may be a long-term problem for rival Apple supply chain partners Hon Hai and Pegatron, JP Morgan reckons, with the purchase likely to help Wistron increase its involvement in iPhone production further.

Apple CEO Tim Cook visiting a Luxshare factory producing AirPods in 2017

On Friday, the board of directors for Wistron agreed to the sale of its iPhone factory in Kunshan, China, and two Chinese subsidiaries, in a deal estimated to cost in the region of $472 million. The purchase, which is anticipated to complete by the end of 2020 pending regulatory approval, is viewed by JP Morgan as a "mild negative" for Hon Hai and Pegatron in the long term.

Luxshare is already a member of Apple's supply chain, assembling AirPods and the Apple Watch, but hasn't had many dealings with iPhones. With the acquisitions of the subsidiaries, and in turn gaining control of the Kushan plant, this provides Luxshare with the opportunity to move deeper into the supply chain, specifically targeting iPhone production.

Deeming the purchase as "not a surprise to the market," the JP Morgan report seen by AppleInsider claims market speculation on the acquisition has circulated for the last two months. In May, there were reports Apple was encouraging Luxshare to make the investment, a deal that would reduce Apple's reliance on Hon Hai subsidiary Foxconn for iPhone assembly.

Luxshare is tipped to ramp up its iPhone assembly business in the first quarter of 2021, with analysts suggesting it is likely to have "limited market shares in new models" but with a greater focus on legacy models. In the short term, it is thought iPhone allocations and pricing will be largely unchanged, but moving to the medium and long-term effects, Luxshare's entry "could incur some market share loss for Pegatron/Hon Hai."

On where Luxshare could move in the future, JP Morgan proposes iPhone casings would be the best course of action, giving the company higher margins. It is estimated the margins for casing production is in the region of 25% or more, while device assembly provides margins at lower than 5%.

For Hon Hai, this would be more trouble as it could cause Foxconn and Luxshare to go into a pricing competition, which would ultimately benefit Apple.

Despite the sale of a key factory, Wistron is still thought to be concentrating on iPhone production, with a greater focus on the iPhone SE and the market in India.

lkrupp · July 20, 2020 5:09PM

This fucking factory is still in China and Apple needs to move away from China ASAP. The UK just abrogated its extradition treaty with Hong Kong, raising the hackles of the totalitarian regime even further. The next retaliation by the communist dictators may include Apple this time around. They could wipe Apple off the face of the earth with the stroke of a pen and there would be nothing anyone could do about it except scream and holler. Or they could hold Apple hostage and the ransom would be allowing Huawei back into western markets.

SpamSandwich · July 20, 2020 5:44PM

lkrupp said:

This fucking factory is still in China and Apple needs to move away from China ASAP. The UK just abrogated its extradition treaty with Hong Kong, raising the hackles of the totalitarian regime even further. The next retaliation by the communist dictators may include Apple this time around. They could wipe Apple off the face of the earth with the stroke of a pen and there would be nothing anyone could do about it except scream and holler. Or they could hold Apple hostage and the ransom would be allowing Huawei back into western markets.

Agree. If Apple has no plans in place just in case everything goes bad in China, they’re not thinking things through.

Xed · July 20, 2020 5:57PM

While not always true, it’s a good general rule and should be accurate in this case: competition is good. I’m glad to see that Apple will have another option for manufacturing.

PS: I wish we could get at least a full page of relevant comments before nationalist bigots take over. Funny how they love to dump on China while always defending Russia’s attacks on the US.

tzeshan · July 20, 2020 8:03PM

lkrupp said:

This fucking factory is still in China and Apple needs to move away from China ASAP. The UK just abrogated its extradition treaty with Hong Kong, raising the hackles of the totalitarian regime even further. The next retaliation by the communist dictators may include Apple this time around. They could wipe Apple off the face of the earth with the stroke of a pen and there would be nothing anyone could do about it except scream and holler. Or they could hold Apple hostage and the ransom would be allowing Huawei back into western markets.

No! United States Department of Commerce is trying to wipe Apple off the face of the earth with the stroke of a pen and there would be nothing anyone could do about it except scream and holler.
https://appleinsider.com/articles/20/07/20/apple-supplier-o-film-tech-accused-of-human-rights-violations-in-china

[Deleted User] · July 20, 2020 9:13PM

lkrupp said:

This fucking factory is still in China and Apple needs to move away from China ASAP. The UK just abrogated its extradition treaty with Hong Kong, raising the hackles of the totalitarian regime even further. The next retaliation by the communist dictators may include Apple this time around. They could wipe Apple off the face of the earth with the stroke of a pen and there would be nothing anyone could do about it except scream and holler. Or they could hold Apple hostage and the ransom would be allowing Huawei back into western markets.

Ugh... you think Foxconn and Pegatron couldn't use other facilities to do assembly? They have them around the world.

https://www.lifewire.com/where-is-the-iphone-made-1999503

flydog · July 20, 2020 9:20PM

lkrupp said:

This fucking factory is still in China and Apple needs to move away from China ASAP. The UK just abrogated its extradition treaty with Hong Kong, raising the hackles of the totalitarian regime even further. The next retaliation by the communist dictators may include Apple this time around. They could wipe Apple off the face of the earth with the stroke of a pen and there would be nothing anyone could do about it except scream and holler. Or they could hold Apple hostage and the ransom would be allowing Huawei back into western markets.

Are you ok?

winston2010 · July 20, 2020 10:44PM

My opinion is that technically Foxconn, Pegatron, and Wistron are all public Taiwanese companies. China CCP in recent years have favored "Chinese" companies with strong ties with the government and do not allow Taiwanese companies to "leave". So I suspect that Taiwanese companies sold factories to Chinese companies, take the money and setting up factories in other countries over time to get around restrictive Chinese policies.

Beats · July 21, 2020 12:18AM

lkrupp said:

This fucking factory is still in China and Apple needs to move away from China ASAP. The UK just abrogated its extradition treaty with Hong Kong, raising the hackles of the totalitarian regime even further. The next retaliation by the communist dictators may include Apple this time around. They could wipe Apple off the face of the earth with the stroke of a pen and there would be nothing anyone could do about it except scream and holler. Or they could hold Apple hostage and the ransom would be allowing Huawei back into western markets.

When Apple Glasses release with a knockoff version for half the price at the same time, you know how this happened.

Also I'm betting most leaks are coming from China.

Luxshare iPhone factory purchase is bad news for Foxconn, Pegatron

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