The novel scenario of assembling for iPhone Foxconn and Pegatron take steady pace with order to strive for transformation

Source: PCB Shop
Last updated: 2020/07/29

Luxshare Precision, a mainland-invested plant, is planning to acquire the Kunshan factory of Wistron. This should officially break down the myth that Taiwanese factories can hold firmly with the assembly chain for iPhone. In the face of Apple's strong support towards Luxshare, Foxconn, Pegatron and others, aside from keeping the assembly and expanding their component business, they are also actively deploying new companies. Foxconn has, based on the strategy of "3 + 3", focused on implementing itself in fields such as semiconductor, AI, and digital health; while Pegatron is moving closer to automotive electronics and leaning to those lifestyle products that would directly face terminal-end consumers.

        As Wistron had announced about its sale of subsidiaries as Wistron (Kunshan), Wistron Investment (Jiangsu), and related businesses to Luxshare Precision, it signals not only the withdrawal of Wistron from the manufacturing business of iPhone in China but also indicates that the competition between the red supply chain with assembly plants of Taiwan should be stepping up into a brand new era of even higher intensity.

        In the short term, the market share of assembly plants for the iPhone will turn into the scene of "one giant and three small dwarfs," that is, Foxconn will still maintain its position as the largest assembly plant, with the rest being Pegatron, Luxshare, and Wistron. Nonetheless, the proportion of assembly by Luxshare should, with deliberate support and reinforcement from Apple, become greater and more significant in the future.

        Because the significant customer, Apple, ceases to be faithful, Taiwanese manufacturing plants should, apart from actively holding on with its existing orders as they utilize its manufacturing flexibility and quality to stabilize the market share, also focus on expanding its components of the group to penetrate iPhone supply chains to increase their overall profits.

        This is also the key reason why Foxconn can maintain itself as the most significant iPhone assembly plant so far. For the time being, the reinvested plants by Foxconn include the manufacturing plant of phone cases as Foxconn Technology, PCB plant as Zhen Ding-KY, touch module plant as GIS-KY, FIT-Foxconn (FIT), and the Japanese plant, Kantatsu; all of them are involved with the manufacturing tasks of  iPhone. As for Pegatron Group, its IC substrate maker, Kinsus, and phone-case plant, Casetek-KY, are also found on the supplier list of Apple. P. 1
 

        As Apple is becoming less favorable with profit-making, in recent years, Taiwanese manufacturing plants have been working actively to transform, hoping to eliminate the situation of being dominated with operations from a single customer. Among them, Wistron had made such a breakthrough in the market of server data centers through Wiwynn. Given the steady growth of revenue from Wiwynn in these years, it has helped provide Wistron with greater confidence to fade out of the manufacturing of iPhone in China.

        After taking office as the chairman of Foxconn, Liu Yang-wei has repeatedly called upon the group to operate through "3+3" measures with new industries and new technologies, including electric vehicles, semiconductors, robotics, digital health, AI, 5G/6G, and other layouts to drive the overall transformation of the group. In such a way, the goal is to increase the gross profit margins from the current 6% to 10% by 2025.

       To reduce the risk of operation that is solely based on a single product and customer, Pegatron Group has actively expanded its business diversification seeing that the assembly business for iPhone has accounted for more than 50% of its revenue. In recent years, it has grown the assembly business for Microsoft and Google, with product lines covering laptops, and smart speakers. (News source: Economic Daily News)

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