Kunshan City Government

Dec 22, 2021

Chinese assembler is making aggressive bid to expand in Apple supply chain. Luxshare Precision Industry is building a massive manufacturing complex in eastern China as it aims—with Apple’s blessing—to break the decadelong hold that Taiwanese rivals Foxconn and Pegatron have on iPhone assembly. Luxshare, China’s most prominent player in the Apple supply chain, is building a 285,000 square meter manufacturing park in the Chinese city of Kunshan, with a total investment of RMB 11 billion (USD 1.72 billion). The sprawling site—covering an area the size of 40 football fields—will churn out millions of iPhones as early as next year. The sheer scale of the project is a sign not only of Luxshare’s ambitions, but also of Apple’s growing reliance on Chinese suppliers, a trend that could reshape the global tech supply chain in the long run. Wingtech, another rising Chinese tech manufacturing powerhouse, recently entered Apple’s supply chain and won orders to make the Mac mini and Apple TV, multiple sources familiar with the matter said. Apple also  added BOE Technology  to its list of premium display suppliers for new iPhones this year. In addition to the new complex, Luxshare has also leased and remodeled an adjacent facility that was previously owned by iPad assembler Compal Electronics, according to company filings and government environmental assessment papers seen by Nikkei Asia. Graph by Nikkei Asia. Luxshare is set to complete the first phase of its new complex around the middle of 2022, according to the construction floor plan and government documents obtained by Nikkei Asia. Armed with the new facility, the Chinese supplier aims to significantly increase its share of iPhone assembly, from about 6.5 million units in 2021 to between 12 million and 15 million units by as early as next year, people briefed on the matter told Nikkei Asia. Luxshare currently builds iPhones in another facility in Kunshan that it bought from Taiwan’s Wistron in the summer of 2020. Apple ships around 200 million iPhones a year, with Foxconn assembling nearly 60% of those and Pegatron around 30%. “I went on a business trip nearby and saw Luxshare’s new manufacturing complex. I am shocked by the scale of the complex and the possible capacity it could build for iPhones,” an Apple supplier executive told Nikkei Asia. “The day it threatens Foxconn and Pegatron might arrive earlier than people’s estimate judging from the progress of the new facility.” An executive at another Apple supplier said that although this has been the first year for Luxshare to officially build new iPhones on its own, the company’s assembly performance rate is improving faster than expected and industry peers should not underestimate it. Luxshare and the Kunshan City Government held a groundbreaking ceremony in late October. Now, a steady stream of cranes and excavators move in and out of the construction site throughout the day. Thousands of workers have been brought in to speed up construction, several on-site workers told Nikkei Asia. “There are around 2,000 to 3,000 workers on site. The building we are working on will be four floors and we have been asked to finish construction of the factory before the end of this year,” one of the on-site workers told Nikkei in early December. “We are currently building the second floor and the schedule is very tight, so we are working overtime every day.” Another worker told Nikkei Asia they know this is a facility for smartphone manufacturing and said they have been asked to complete phase one around April next year. The total investment for the project has reached RMB 11 billion, including leasing and remodeling the old Compal facility, and it could generate sales of more than RMB 100 billion, according to government announcements and documents. It will eventually have a total of 39 production lines. The Kunshan City government said it took three days to approve the record-breaking high-tech investment and grant four important licenses, including the construction license, adding that the schedule for construction has been pushed forward by two months from the original plan. RELATED ARTICLE