Luxshare to acquire key iPhone plant in China in $300M deal with Pegatron

Apple’s key Chinese manufacturing partner Luxshare Precision Industry Co is set to gain control of an iPhone assembly site run by a Taiwanese rival, as the US tech giant fosters ties with mainland China-based suppliers to improve relations with Beijing.

Luxshare is set to buy a 62.5 per cent stake in Pegatron Corp’s unit in Kunshan, China’s most affluent county in eastern Jiangsu province, for about 2.1 billion yuan (US$300 million), according to an exchange filing by the Taiwanese firm on Thursday. Taipei-based Pegatron currently assembles iPhones at its Kunshan campus and another site in Shanghai.

The acquisition is expected to give Luxshare, which is also known as Luxshare-ICT, a better chance at competing with Foxconn Technology Group, Apple’s primary contract manufacturing partner.

Formally known as Hon Hai Precision Industry, Foxconn is the world’s largest electronics contract manufacturer and makes about 70 per cent of all iPhones, with the bulk assembled at its main production site in Zhengzhou, capital of central Henan province.

Shares of Luxshare rose more than 4.5 per cent in early Friday trading in Shenzhen, while Pegatron shares fell as much as 4.4 per cent in Taipei. Hon Hai shares were little changed.

Apple has been cultivating Chinese suppliers, including Luxshare, to help boost its standing in Beijing.

The Cupertino, California-based company relies on the Greater China region for about 20 per cent of its total sales, prompting chief executive Tim Cook to say in March that the company’s relationship with the world’s second-largest economy is a symbiotic one.

Luxshare’s prominence within the Apple supply chain has risen swiftly in recent years. It now makes a range of products for the US customer, including iPhones, iPod, Apple Watch and mixed-reality headset Vision Pro.

In October, Cook visited a Luxshare plant and praised the Chinese company’s commitment to help Apple reduce carbon emissions.

Yet as Apple cultivates mainland Chinese suppliers at the expense of Taiwanese contract manufacturers, it is also shifting some production away from the region amid tensions between Washington and Beijing. Apple is now relying on Foxconn and Pegatron to expand its manufacturing footprint in India. South China Morning Post