KEY HIGHLIGHTS
- Qorvo Sells Factories in China: US chip company Qorvo to sell two Chinese factories to Luxshare Precision, signaling American tech firms scaling down operations in China.
- Luxshare’s Expansion: Luxshare, key iPhone assembler, acquires Qorvo’s assembly operations, showcasing its ambition to expand its manufacturing business.
- Long-Term Supply Agreement: Luxshare to take over Qorvo’s mobile phone product factories, entering a long-term supply agreement to assemble and test products for Qorvo.
- Changing Global Supply Chains: Reflects the trend of US tech companies reducing reliance on China-based production facilities, adapting to evolving geopolitical and economic factors.
- Luxshare’s Role in Apple’s Supply Chain: Luxshare, a crucial part of Apple’s China manufacturing supply chain, is currently the primary supplier for AirPods and iPhone 14 models, demonstrating its significant role in Apple’s production.
- Impact of Worker Clashes: Luxshare’s role expanded after worker clashes at Foxconn, Apple’s main subcontractor, leading to delayed iPhone 14 shipments and influencing the decision to shift more work to Luxshare.
- Qorvo and Apple Connection: Qorvo, counting Apple as a major customer, with Apple contributing 37% of Qorvo’s total revenue for the fiscal year ended April 2023.
Qorvo’s Strategic Divestment in China
US-based Qorvo, a prominent wireless connectivity chip company resulting from the 2014 merger of RF Micro Devices and TriQuint Semiconductor, has made the strategic decision to divest two of its manufacturing facilities in China. This move is part of a broader trend where American tech firms are reevaluating and downsizing their operations within the country.
The agreement involves the sale of Qorvo’s integrated circuit assembly operations located in Beijing and Dezhou, an eastern city in the Shandong province, to Luxshare Precision Industry Co., a major Chinese contract manufacturer known for its role in assembling iPhones. Luxshare will acquire not only the operations but also the associated assets, including property, plant, equipment, and the existing workforce. Meanwhile, Qorvo intends to maintain its sales, engineering, and customer support teams in China to sustain its commitment to serving customers, although specific financial terms of the deal were not disclosed.
The facilities being transferred to Luxshare are primarily responsible for handling Qorvo’s advanced mobile phone products. Following the anticipated completion of the transaction in the first half of 2024, Qorvo and Luxshare will establish a long-term supply agreement. Under this arrangement, Luxshare will take on the assembly and testing of the specified products for the US chip firm.
This divestiture aligns with the ongoing trend of reshaping global supply chains, as many American tech companies seek to reduce their dependence on manufacturing facilities located in China. Beyond this, the transaction highlights Luxshare’s expanding ambitions in the manufacturing sector.
Luxshare’s Evolution and Growing Role in Apple’s Supply Chain
Luxshare, originating almost two decades ago as a computer cable assembler in Dongguan city, has evolved into a crucial component of Apple’s China manufacturing supply chain. The company is currently the primary supplier for Apple’s AirPods and was entrusted with the production of iPhone 14 models after disruptions at the Zhengzhou plant of Apple’s main subcontractor, Foxconn Technology Group, during China’s Covid-19 restrictions last year.
The delay in iPhone 14 shipments impacted Apple’s revenues, prompting a strategic shift to Luxshare and an accelerated diversification of production to countries such as Vietnam and India. Luxshare’s success continued with winning orders to assemble Apple’s highly anticipated Vision Pro mixed-reality headset.
Notably, both Qorvo and Luxshare count Apple as a significant customer. For Qorvo, Apple constitutes approximately 37 percent of its total revenue for the fiscal year ending April 2023, emphasizing the interconnectedness of these companies within the broader technology ecosystem.
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Source(s): SCMP
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