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Luxshare, one of Apple Inc’s biggest Chinese component and finished products manufacturer, is shifting its investment to Vietnam, after it failed to expand in India due to political tensions between the
two countries.
After several failed attempts to expand its operations in India for nearly three years, Luxshare, Apple’s main supplier for AirPods and an upcoming supplier for iPhones, has decided to shift a new investment of $330 million to the northern province of Bac Giang in Vietnam. The licence for the investment was cleared last week by the Vietnam government. This raises its total investment in Vietnam to $504 million.
The move comes at a time when Apple Inc has been able to bring Indian companies like the Tatas into its supply value chain. The Tatas recently acquired contract assembler Wistron, moving from being just a supplier of enclosures for the iPhone.
Luxshare did not respond to queries in this regard and neither did Apple Inc.
The Chinese company, founded by Wang Laichun, a former factory worker in Foxconn, Luxshare established its office in India in 2019. It agreed to buy a defunct plant in Tamil Nadu from mobile phone maker Motorola in 2020 for which it signed an agreement with the Tamil Nadu government and promised to invest Rs 750 crore for making components for Apple Inc.
But the strained relations between India and China stymied its plan to make fresh investments in the country. Its foreign direct investment (FDI) clearance did not come through either.
Sources aware of the development say that Luxshare executives were refused visas on multiple occasions in the last one year. In 2023 a limited window opened up for Chinese companies in which 14 firms, including Luxshare, were given an initial clearance, provided they went for joint ventures. This did not help either.
That things were not going in the right direction was clear when the company in May reportedly said that it would only invest in India provided it had sufficient guarantees on the country’s business environment.
Founded in 2004, Luxshare was listed in the Shenzhen Stock Exchange in 2010 and is now giving Foxconn a run for its money when it comes to the deals it is striking with Apple Inc. It is already regarded as one of the top technology assemblers in China and its big feat was bagging the manufacturing contract for Apple’s soon-to-be-launched Mixed Reality Vision Pro handset unveiled in September this year.
Its new investment in the 72-acre facility in Vietnam will produce cables for smartphones, communication equipment, touch phones, smart positioning tags and smart watches, according to a statement issued by the Vietnamese government. The facility will be ready in two years.
Last year, BYD, another big supplier for Apple in China, after making several attempts to expand their operations in India, met with the same fate as Luxshare.
BYD attempted to build an iPad assembly line in India in February 2021, and before that, had tried to participate in the smartphone production-linked incentive scheme (PLI) in 2020. Post the Galwan incident between India and China, it faced rejections when it tried to expand its operations in the country. Eventually, BYD too decided to shift its iPad manufacturing to Vietnam.
In May 2023, it announced an investment of $183.7 million, including lines specialising in manufacturing electronic components as part of its total investment of $269 million in Vietnam.
It has become increasingly clear to Apple Inc that its Chinese vendors will find it difficult to expand in India, or even form joint ventures, which was an option floated for a short period of time in 2022. Apple has, therefore, turned to companies such as the Tatas, not only for manufacturing components for the iPhone, but also for making the iPhone itself.
Apple is now likely to build its domestic supply chain using Taiwanese companies (mostly Foxconn), Japanese and Korean suppliers, where possible, and also bring Indian companies on board. Given the gap in technological knowhow, capital availability and cost of capital, this is likely to be a slower-than-expected progress. However, it may accelerate Indian companies joining Apple’s global supply chain over the next three years.
In the last financial year, Apple turned out to be the flagship company in India’s smartphone PLI scheme, producing over $7 billion worth iPhones and exporting iPhones valued at a factory price of nearly $5 billion.
