Chinese electronics manufacturing companies are set to take market share from Taiwanese counterparts such as Foxconn and Pegatron, according to Kirk Yang, CEO of Kirkland Capital. “Chinese companies are getting pretty competitive for iPhone assemblers,” Yang said on CNBC’s “Squawk Box Asia.” “Eventually, you are going to see more and more Chinese companies taking market share away from Taiwanese electronic companies,” he added.
One such Chinese firm is Luxshare, which has reportedly been awarded a contract to produce premium iPhone models in China, and has also been producing a small quantity of the iPhone 14 Pro Max at its Kunshan plant. Luxshare, founded in 2004 by a former Foxconn worker, makes connector cables for the iPhone and MacBook, and also manufactures AirPods.
Geopolitical tensions between China and Taiwan and the US-China tech war have also contributed to the pressure on Taiwanese companies operating on the mainland, with many moving out of China. “A lot of them are moving out of China,” Yang said. This has prompted Apple to diversify its supply chain, as it seeks to reduce its reliance on Chinese manufacturers.
China has already overtaken Taiwan as Apple’s biggest source of suppliers, according to Nikkei Asia. Chinese companies such as Luxshare also have the advantage of being able to hire more easily and secure better tax incentives in Hong Kong. “After local companies learn how to make products in a similar quality, at a cheaper price, they will be taking market share,” Yang said.
Foxconn, Apple’s largest supplier, is facing competition from Luxshare, as well as other Chinese firms. Foxconn, also known as Hon Hai, posted record unaudited revenue in 2022 and reported that output at its iPhone plant in China had “basically returned to normal.” However, its Zhengzhou factory faced Covid restrictions and labor unrest last year, which may have provided an opportunity for Luxshare to increase its production.
Overall, it appears that mainland Chinese companies are well positioned to take market share from Taiwanese manufacturers, as they improve their competitiveness and seek to capitalize on geopolitical and economic factors.