According to multiple people familiar with the matter, Chinese contract manufacturer Luxshare Precision won a large order from Apple to produce high-end iPhone models in China. Luxshare Precision is the main competitor of Foxconn and Pegatron in mainland China.
Since November, Luxshare has been producing a small number of iPhone 14 Pro Max units at its Kunshan factory, northwest of Shanghai, to make up for lost production at Foxconn, two people with direct knowledge of the situation said.
Luxshare Precision is winning more and more business orders from Apple. Previously, the new iPhone Pro was always produced by Foxconn, and now Luxshare Precision has proved that it can independently assemble Apple’s complex equipment.
Apple’s relationship with Chinese manufacturers has grown closer in recent years. AirPods, Macbook assemblers GoerTek and Wingtech have all benefited, while Foxconn has sought to reduce its reliance on China by building factories in India, Vietnam and the United States.
The Foxconn shutdown has created a shortage of iPhones and threatened to snap Apple’s 14 consecutive quarters of revenue growth. Foxconn said this week that the Zhengzhou plant had ramped up production capacity, and had completed 90 percent of its original target in December.
“Foxconn has no bargaining power. Winning the high-end iPhone order is a testament to Luxshare’s precision capabilities to serve a more diverse set of customers,” said Ivan Lam, an analyst at Counterpoint.
Foxconn and Pegatron declined to comment. Apple and Luxshare did not respond to requests for comment.
Apple has been working hard to diversify its supply chain and is no longer completely dependent on Foxconn. But even veteran assemblers who currently make basic iPhones are having a hard time making the latest high-end iPhones.
Luxshare was able to produce high-end iPhones this year thanks to Apple’s heavy investment, employees and experts said. “With Apple’s investment, including increased supply chain management staff, it took Luxshare Precision just a few months to deliver the initial order,” said an Apple employee, who said Foxconn usually takes six months to revamp the production line for the new iPhone models.
Eddie Han, an analyst at market research firm Isaiah Research, said that Apple’s heavy investment in Luxshare Precision is crucial to the mass production of the Pro models.
Founded by former Foxconn employees, Luxshare has been expanding its influence in Apple’s supply chain over the years. The company assembles Apple products such as the AirPods but has never previously won an order for a high-end iPhone model.
Luxshare’s annual revenue has soared from less than $2 billion in 2016 to $24 billion in 2021, and Apple has become the company’s biggest partner. Luxshare’s profit margin fell from 8.6% to 5.1% during that period, suggesting that competition for Apple contracts has become increasingly fierce.
Dragged down by the plunge in global technology stocks, Luxshare Precision’s share price has fallen by 44% in the past year. Foxconn shares fell 22%.