Author: Qian Tongxin Editor in charge: Ning Jiayan
The A-share market opened on Monday, and the stock price of Luxshare Precision once fell by more than 4% after the opening. On Friday, the Taiwan Prosecutor’s Office accused Luxshare Precision of colluding with Kecheng Technology insiders to steal trade secrets to gain access to Apple’s supply chain and filed a public prosecution against 14 former Kecheng Technology employees.
Since the stock price hit a new high of 50 yuan at the beginning of this year, the stock price of Luxshare Precision has fallen by nearly 40% so far this year, and the current total market value is about 230 billion yuan. The decline in stock prices is mainly related to factors such as weak demand in the consumer electronics industry and Apple’s cut of orders.
“It is normal for the stock prices of suppliers with a large proportion of Apple’s business to fluctuate.” An industry insider told the First Financial reporter, “This also reflects that the market is returning to a reasonable valuation.”
In the past few years, Apple’s orders have been the main driving force for the growth of Luxshare Precision’s performance. In 2021, Luxshare Precision began to manufacture the iPhone 13 independently for the first time, breaking the ten-year monopoly of Foxconn and Pegatron in iPhone OEM.
However, Foxconn and Pegatron still account for most of Apple’s iPhone OEM orders. According to data, Apple ships about 200 million iPhones every year, of which nearly 60% are foundry by Foxconn and about 30% by Pegatron.
In order to win more orders from Apple, Luxshare Precision is also actively expanding production. In the summer of 2020, Luxshare Precision acquired an iPhone foundry from Wistron; in December last year, Luxshare Precision invested 11 billion yuan to build a large production base of nearly 300,000 square meters in Kunshan, Jiangsu.
Many Chinese manufacturers, including Luxshare, can not only offer lower prices, but also have a high degree of flexibility to quickly adjust to meet Apple’s requirements. But as the smartphone market becomes saturated, the high reliance on Apple also heightens Luxshare’s risk.
Due to increased investment in business expansion, in 2021, Luxshare Precision’s annual financial report profit will decline for the first time. Judging from the financial report, the consumer electronics business is still the main business of Luxshare, accounting for 87.46% of the total revenue in 2021.
As the new models of Apple’s iPhone 14 are about to be released, the trends of Apple’s supply chain companies have attracted much attention. However, it is reported that Luxshare may only get orders for Apple’s basic iPhone 14 this year, and miss the iPhone 14 Pro. Last year, Luxshare received about 3% of the OEM orders for the iPhone 13 series, and it was the first time to get OEM orders for the high-end iPhone 13 Pro.
Luxshare is also the OEM for Apple’s AirPods and Apple Watch. Luxshare provides chip “system-in-package” (SiP) services for AirPods, which integrates multiple functional chips including processors and memory into one package.
This year, however, Apple is expected to cut AirPods orders for the full year of 2022 by about 10 million units, as global inflation dents consumer demand for electronics. In fact, inflation is affecting the profits of most consumer tech companies, including Apple, which are keeping profits by prioritizing more expensive products.
In the first quarter of this year, Apple’s revenue was US$97.3 billion, and it continued to maintain the highest profit margin among smartphone manufacturers in the world, with a profit of US$25 billion in the first quarter and a gross profit margin of 43.7%. However, Apple’s CFO Maestri said at an earnings call in April that Apple’s profit margins could fall to between 42% and 43% in the quarter ending in June this year.
If Apple focuses on higher-end models and devices, Luxshare Precision, which has missed the iPhone 14 Pro, will also be at a disadvantage. In order to support the market value of hundreds of billions, Luxshare Precision must carry out a more diversified business layout and more diversified, and at the same time, it must also accurately lay out the next outlet.
Earlier this year, Luxshare has entered the field of new energy vehicle R&D and manufacturing, and formed a joint venture with Chery New Energy. However, judging from the 2021 financial report, Luxshare Precision’s automotive business accounts for less than 3% of the overall revenue, and the business volume is still small. Therefore, it is too early to know whether Luxshare Precision will be the OEM for Apple Auto in the future.
“The future trend is that companies with continuous innovation capabilities will have more opportunities.” A person familiar with Apple’s supply chain told Yicai.com, “Companies with new business product import and manufacturing capabilities may be able to meet Apple’s overseas needs. Companies that produce in-demand capabilities and companies that can provide new technologies and new solutions deserve market attention.”
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Related events
- Apple is a bit “unreliable”, and Luxshare Precision is difficult to support a 100 billion valuation2022-07-18
- Luxshare Precision: Net profit in the first half of the year was 3.089 billion yuan, a year-on-year increase of 21.73% 2021-08-25
- Luxshare Precision Joins Apple’s iPhone 13 Series Supply Chain2021-08-08
- Apple is looking for more Chinese suppliers for its new iPhones, sources say
- It is reported that Luxshare Precision will OEM the new iPhone 2021-06-25
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