Apple Encourages Chinese Tech Company To Rival Foxconn, Aims To Foster Competition

Apple Inc. AAPL has advised aggressive Chinese technology firm, Luxshare Precision Industry Co Ltd., to make an investment in a Taiwanese metal casing provider, in order to become a rival to Apple’s longtime supplier, Foxconn.

What Happened

Luxshare has been in negotiations for more than a year with Taiwan-based Catcher Technology, the world’s second-largest manufacturer of metal casings, and the discussions have entered a serious phase, according to Nikkei Asian Review.

If negotiations are successful, it would enable Luxshare to manufacture high-quality metal casings, and also open the door for the company to gain expertise in assembly technology.

Investing in Catcher Technology would allow Luxshare to rival Taiwanese assembly giant Foxconn, which is the world’s largest electronics manufacturer and Cupertino's top supplier. Since the first iPhone was released in 2007, Foxconn alone has accounted for 50% of iPhone production, according to the Review.

Why It Matters

The deal involves Catcher’s facilities in China, the expertise of its staff and management, and business opportunities with Apple. The price under negotiation would make this Luxshare’s largest investment, reported the Review.

Metal casings are crucial to the manufacture of high-end smartphones such as iPhones, and the material used determines how well the device is able to connect wirelessly. Foxconn and Pegatron, its smaller rival, have their own metal casing subsidiaries.

For decades, Catcher has been engaged in the production of light metal technology for electronics, and has been a key supplier to Apple for years.

Luxshare is as yet undecided on whether it will make the investment, as iPhone sales peaked in 2018. An executive-level source told the Review, “Will the iPhone business be as profitable in the next 10 years as it was in the past decade? No one can guarantee the return of this investment.”

Price Action

Apple shares traded 0.77% lower at $309 in the after-hours session on Tuesday. The shares had closed the regular session 1.14% lower at $311.41.