Apple encourages Chinese AirPods manufacturer to make iPhones

Apple wants a Chinese partner to rival Taiwan's Foxconn.

What you need to know

• Apple is trying to diversify its supply chain.
• It has urged AirPods supplier Luxshare-ICT to invest in iPhone and MacBook supply.
• Apple reportedly wants a Chinese partner to rival Taiwanese heavyweight Foxconn.

Apple has reportedly urged its Chinese AirPods manufacturer Luxshare-ICT to invest in MacBook and iPhone supply.

As reported by Nikkei Asian Review:

Apple has advised one of its Chinese AirPods assemblers to make a major investment in an iPhone and MacBook metal casing provider, a move the California tech titan hopes will create a formidable alternative to another of its longtime suppliers, Taiwan's Foxconn, multiple sources told the Nikkei Asian Review.

Luxshare-ICT, a fast-rising Chinese tech company known for its aggressive growth strategy, has been in talks with Catcher Technology, the world's second-largest metal casing provider, for more than a year and has recently entered a deeper round of negotiations, said one of the people who is familiar with the situation.

The deal would reportedly push Luxshare to become "the Chinese version of Foxconn" in that it would be a single company spanning the entire electronics supply chain, and would help Luxshare take a piece of the iPhone manufacturing action in the region.

The report says that according to sources, Apple is keen to reduce its reliance on Foxconn, which makes more than 50% of Apple's iPhones. One source was quoted as saying:

"Apple is encouraging Luxshare to make the investment. The rationale is to raise a competitive Chinese assembler to counterbalance the Taiwanese assemblers... The more qualified suppliers Apple has, the more bargaining power it will own."

Not only could a more diverse supply chain reduce the impact of disruption as seen by the COVID-19 pandemic, but more competition within Apple's supply chain for contracts could also see partners offer Apple lower rates to secure business, something that could one day be reflected in slightly more favorable device prices for consumers.

You can read the full report here.

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