The reason Apple chooses Luxshare

Apple is said to have gradually shifted from Foxconn to Chinese manufacturer Luxshare in order to cut costs and "benefit Beijing".

Luxshare founder Grace Wang (centre) and Apple CEO Tim Cook at Luxshare factory in Shanghai 2017. Photo: Nikkei

In early December, The Information reported that, in 216, Apple signed a secret agreement, estimated to be worth $ 275 billion, to have stable business in China. On December 29, this site continued to issue a new detailed report, showing that Apple is willing to shift orders from longtime partners to companies in the mainland.

Apple currently depends on many Taiwanese companies. Their assembly partners include Foxconn, Wistron and Pegatron. Meanwhile, TSMC is in charge of manufacturing the chips used on its products.

However, a new report reveals, since the $275 billion deal was signed, Apple has begun shifting to ordering assembly for more China-based supply chain partners. In 2017, the company withdrew some orders from Foxconn and delivered them to Luxshare. As a result, Luxshare's position is enhanced on the supply chain. Before that, the Chinese company was only responsible for assembling a few small finished products and handling the packaging.

"The turning point came to Luxshare in 2017, when it received an order to assemble AirPods. Before that, Apple mainly signed a contract with Inventec - based in Taiwan - to produce this headset. AirPods are also an assembly contract. The first major Luxshare made for Apple, putting them ahead of previous partners specializing in handling, packaging and shipping finished goods," the report reads.

Apple's move to shift more of its business to companies in mainland China is part of a commitment that Apple CEO Tim Cook has made to the Chinese government. In particular, Apple ensures to expand the domestic technology industry, create advanced production technologies, use many components from suppliers in this country, give priority to signing contracts with local software companies. , direct investment in Chinese technology companies... Apple also embarked on research with universities and trained skilled human resources for this country.

The report says that over the past 10 years, Apple has sent engineers to work with various companies based in China, helping them learn how to assemble their products. The iPhone company is also "deeply aware" that it needs to maintain a certain reputation in China, especially since the country generates 20% of revenue and is the company's second-largest market after the US.

However, Apple also knows that replacing Foxconn with Luxshare for iPhone production is a risky step, because the US-China trade relationship is still volatile. But in the end, they still put their trust in Luxshare.

China wants Apple to support companies like Luxshare

According to The Information, in a memorandum of understanding that Cook signed with China's National Development and Reform Commission, Apple received certain exemptions from domestic regulations. In return, the company will help China develop "the most advanced manufacturing technologies".

In 2020, Reuters said Luxshare had rapid growth and the Chinese government had a big impact behind. "China is pushing to build its own supply chain, and Luxshare is in line with state policy," a source revealed at the time.

Luxshare, based in Dongguan, is the fastest-growing contract manufacturer among Apple's suppliers in terms of product portfolio. The company went from being a small supplier in Apple's supply chain in 2011 to becoming the most important supplier and assembler of components in China for its AirPods, Apple Watch and iPhone 13 line of headphones. In addition, the company also has factories located in Vietnam and India, mainly manufacturing components and assembling AirPods.

Recently, Luxshare built a complex equivalent to 40 football fields in Con Son with the goal of assembling millions of iPhones next year. According to Nikkei Asia, the scale of the project not only shows Luxshare's ambitions with Apple, but also shows the strength of the Chinese government in turning local businesses into a leading outsourcing destination.

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