Luxshare’s acquisition of the IPhone plant of Wistron in Kunshan: Foxconn, is likely to face greater competition

On Friday, Wistron’s board agreed to sell its iPhone plant in Kunshan and two Chinese subsidiaries to Luxshare for about $472m. JP Morgan expects the acquisition to be completed by the end of 2020 after regulatory approval. However, for HongHai, the parent company of Foxconn, and Pegatron, Apple’s main supply chain partners, the acquisition may have been a “minor hit” to it.

Lixun's acquisition of the IPhone plant in Weicheng Kunshan, Foxconn, is likely to face greater competition with Husu.

Luxshare is currently focusing on apple Watch smartwatches and AirPods wireless headsets, and is expected to further increase its participation in iPhone production in the future through the acquisition of the Kunshan iPhone factory (and two subsidiaries) of Wistron.

Media were not surprised by the months-long story, which was reported in May that Apple had encouraged Luxshare to invest to reduce the company’s reliance on Foxconn’s iPhone assembly business.

Analysts say the company plans to expand its iPhone assembly business in the first quarter of 2021, or to have a limited share of contract work in new models, but with more focus on older models.

In the short term, the balance of Apple’s supply chain won’t change much. But in the medium to long term, it may get a share of Foxconn and Pegatron.

JPMorgan also looks ahead to the future, saying the iPhone case would be a better option. Because the profit on equipment assembly is generally less than 5%, the margin around the accessories is at least 25%.

For HongHai, Foxconn may be involved in more price competition, but Apple will clearly be the biggest winner. As for Wistron, despite the sale of the Kunshan plant, the company may be more focused on entry-level models such as the iPhone SE and the emerging Indian market.