Foxconn has suffered the threat –
Foxconn, the world’s largest contract electronics manufacturer, has set up a task force to fend off the growing influence of Chinese electronics maker LuxShare Ict recently. Foxconn believes that LuxShareIct poses a grave threat to its dominant position.
Foxconn has set up a task force
The project is launched by the founder of Foxconn named Terry Gou, the target is LuxShare-Ict that based in China mainland. The task force was set up last year, has been investigating LuxShare-Ict sophisticated technology, expansion plans, and recruitment strategies.
Though little known in the international market, LuxShare Ict is expected to become the first iPhone manufacturer based in China mainland. Until now, the iPhone manufacturer business has dominated by manufacturers in Taiwan.
LuxShareIct market share increased rapidly
The revenues of LuxShare-Ict now for only about 5 percent of Foxconn’s revenues. “LuxShare-Ict is bound to grow, it’s just a question of how fast,” said one person familiar with the matter. “For China, it makes sense to build its supply chain, and its sophisticated development is consistent with national policy.”
The chairman of LuxShare Ict is a former employee of China’s Taiwan Apple supplier, Foxlink Group. In July, LuxShare-Ict acquired two small Factories in China owned by Wistron Group, a Taiwan-based contract iPhone maker. Previously, LuxShare Ict mainly manufactured AirPods for Apple.
People familiar with the matter said Foxconn itself viewed LuxShare Ict as a “formidable competitor” and had been studying it extensively to “knock it out”.
According to public records, LuxShare Ict is controlled by Chairman Wang Laichun and her brother Wang Laisheng, as well as the central Huijin Asset Management Co. and China Securities Finance Corp. Statistics show that from 2016 to the first half of 2020, LuxShare Ict received more than 1 billion yuan ($148.8 million) in government subsidies. Besides, more than half of the government subsidies were in 2019.
Foxconn said in a statement: “The working group described in the report is’ not based on facts’ and has not ‘met to discuss this matter. ‘And the management team hasn’t taken any extraordinary steps.” LuxShare-Ict and Apple have so far declined to comment on the report.
LuxShare-Ict was founded by Wang Laichun in 2004. She said in an interview in July that she was a former employee of Foxlink, a Company based in Taiwan, China. By acquiring smaller component makers, LuxShare Ict gained access to Apple’s supply chain. In 2011, LuxShare Ict acquired Lanto Electronics, a Dongguan company, and began making connectors for iPhones and MacBooks. The company then moved on to making acoustic components for the iPhone, and finally contract manufacturing AirPods.
LuxShare-Ict revenue grew as it moved up Apple’s value chain — reaching 62.5 billion yuan in 2019, up 75% from a year earlier. Although its revenues are only about 5 percent of Foxconn’s, its market capitalization is now about $20bn higher than Foxconn’s $39bn as investors bet on the company’s prospects. According to statistics, about 58 percent of LuxShare Ict’s revenue now comes from Apple.
In July, LuxShare-Ict acquired Wistron’s Kunshan contract manufacturer of the iPhone. According to Fubon Research, the deal will give LuxShare Ict up to 30 percent of iPhone contract work over the next five years.
Foxconn faced a serious brain drain
LuxShare Ict has also been active in poaching workers from Foxconn, according to a person familiar with the company. In one case, LuxShareIct was reported to have provided 500,000 yuan (about $75,000) in cash in advance as a relocation subsidy for a senior Foxconn employee to move his family from Taiwan to the Chinese mainland.
David Collins, a manufacturing consultant based in Taipei and Kunshan, said that the Chinese company’s recognition of Foxconn’s traditional position, coupled with its intention to shift production lines, made it a perfect time to poached people. “Foxconn’s share price is down about 50 percent from two years ago, and they see an opportunity,” Mr. Collins said.