Luxshare to Take Over Some Production at Apple’s Largest Shanghai Foundry
Affected by cuts in Apple product orders and various other factors, GNDC, the tech giant’s largest foundry in Shanghai, suspended recruitment of new employees in October, resulting in many factories and production lines standing idle. Luxshare Precision, an Apple supplier located in Shenzhen, was reported to be in negotiations regarding the takeover of certain factories. GNDC is expected to resume recruitment on November 23.
GNDC is a subsidiary of Pegatron, which operates in the same tier as Foxconn and is one of the two major assemblers of Apple products. One GNDC employee said that the Shanghai factory is too large, and that products made by each site are different. Luxshare Precision has purchased several of these factories.
Several workers said that GNDC’s production line mainly manufactures iPhones, but in recent months, there have been very few orders, and some employees, especially hourly workers, are leaving their jobs. Many GNDC employees resigned to work in Foxconn’s factory in Zhengzhou, Henan Province, which is recruiting for a high salary.
In August and September, employees at GNDC’s Shanghai factory worked 80 overtime hours each month. But the sales volume of iPhone 14 has failed to increase, and the factory now plans to change some production lines for the iPhone 13. At present, in addition to the Apple notebook production line, there are production lines making the iPhone 11. Relatively speaking, the iPhone11 has the best sales volume, surpassing both the iPhone 13 and iPhone 14.
Luxshare Precision’s stock price increased sharply after becoming a key manufacturer of Apple products. In January 2017, its market value was still around 40 billion yuan ($5.59 billion), and it reached 440 billion yuan in 2020. In just three or four years, its market value has increased tenfold.
Looking back at the development path of Luxshare Precision, it has frequently sought to acquire other firms to expand its production capacity. Regarding its supply to Apple, the most prominent cases from the past two years were in 2020, when it spent 3.3 billion yuan to acquire two subsidiaries of original design manufacturer Wistron, becoming Apple’s third-largest mobile phone manufacturer. Also, in 2021, the firm spent a further 6.6 billion yuan to acquire four subsidiaries of Pegatron.
Apple needs to conduct on-site inspections by various teams across technology, engineering, design and quality at the factories of supply chain enterprises. GNDC has mature factories and equipment, which can save a great deal of time and costs for Luxshare Precision.
Luxshare Precision’s annual report shows that sales revenue from its largest customer accounted for an increasing proportion of total revenue, rising rapidly from 55.4% in 2019 to 74.1% in 2021. Although Luxshare Precision did not explicitly disclose who this customer is, it is generally believed that it is Apple.
News emerged recently that Luxshare Precision is expected to cover AirPods Pro 2 orders lost by GoerTek to become their exclusive assembler, but this has not been officially confirmed by either Apple or Luxshare Precision.
SEE ALSO: GoerTek Loses Apple’s AirPods Pro 2 Order Due to Quality Problems
Meanwhile, Luxshare Precision is reducing its dependence on Apple through diversification. In 2011, it began to make automotive electronics. In February 2022, it announced its cooperation with Chery to develop an original design manufacturer business and become a first-class global supplier of auto parts.