The multinational technology giant Apple is accelerating the withdrawal of production capacity from China, and the shares of Chinese companies related to Apple’s supply chain (commonly known as the “fruit chain”) have been falling continuously, with the shares of the “fruit chain” leader Lixun Precision falling 37% so far this year, and the market value evaporating close to 1.5 billion yuan, The market value has evaporated nearly 150 billion yuan.
On March 22, Lixson Precision fell more than 8% during the trading session and closed down 1.95% at noon, leading to the weakness of Apple’s industrial chain stocks. Last week, Lixson Precision fell by more than 12%.
At the beginning of January, the stock price of Lixson Precision once exceeded 63 yuan, and fell to 32.81 yuan on March 22, with a cumulative drop of 37% and evaporation of 147.2 billion yuan in market value.
Lixun Precision’s revenue in recent years mainly comes from Apple AirPods wireless headphones, and the contribution of this product to its performance is currently weakening.
According to well-known Apple analyst Guo Ming𫓹 of Tianfeng Securities, Lixun Precision’s AirPods shipments will decline in 2021, lowering its 2021 AirPods shipment forecast by 30% to 35%, or 75 million to 80 million units.
The Securities Times reported on March 22 that Apple’s industry chain is facing dramatic consolidation with outbound relocation, order restructuring and order cutting. According to the wind Apple Index, the index has fallen 11% since the beginning of this year, and on the evening of March 16, after Ovation disclosed that it would be removed from Apple’s supply list, the risk to Apple’s industrial chain companies has increased.
Lixun Precision is a typical institutional holding stock, and was the second largest stock in terms of market capitalization in the second quarter of last year for public funds. By the fourth quarter of last year, Lixun Precision was significantly reduced by public funds, with the amount of position reduction reaching 14.2 billion yuan.
In addition, in December last year, Amphenol filed a petition with the U.S. International Trade Commission (ITC), accusing Lixin Precision and its subsidiary Dongguan Lixin Precision and five other companies of infringing its patent rights, requesting the issuance of a limited exclusion order and an injunction. Soon after, the U.S. International Trade Commission formally launched a 337 investigation against Lixun Precision.
On January 24 this year, Lixun Precision issued an announcement explaining that this 337 investigation would not have a substantial impact on the company’s current production and operation, but the market still chose to sell off its shares. Flush shows that in the last 20 trading days, the net outflow of northbound funds from Lixun Precision was 635 million yuan.
Apple accelerates moving production capacity out of China
Apple is now accelerating its production capacity out of China and shifting production to Vietnam and India.
Citing sources, Nikkei Asia reported on January 27 that iPad production will begin in Vietnam as early as the middle of this year, and iPhone production will increase in India.
India will be the second largest production base for Apple’s latest iphone 12 series, the company’s first 5G smartphone, and its second most iconic device.
Apple will also add capacity for smart speakers, headphones and computers in Southeast Asia as part of its ongoing diversification strategy.
Apple has already moved some production of its desktop Mac mini to Malaysia and will also move some production of the MacBook to Vietnam this year, sources said.
One supply chain manager said Apple plans to expand its ability to produce a variety of core products such as iPhones, iPads, MacBooks and AirPods in new locations, primarily in Southeast Asian countries, which would have been difficult to imagine two years ago.
Apple suppliers have been working hard to match Apple’s demand for a diverse production base. For example, Foxconn, a major Apple supplier, injected $270 million late last year to set up a subsidiary in Vietnam, and Luxshare Precision Industry, a newly formed iPhone assembler and major supplier of AirPods, is expanding production capacity for the HomePod mini in northern Vietnam to address supply constraints for the popular device.
Reducing production dependence on China is now a trend among global tech giants, and Apple’s move is just one component of that trend.
In 2019, Apple has asked several suppliers to study the cost implications of moving 15 to 30 percent of production for a large number of product lines out of China.
In 2020, some production of AirPods Pro, AirPods Max and HomePod mini is shifted from China to Vietnam, and iPhone 11 is produced in India starting in 2020.
Rising labor costs in China, long-standing trade tensions between Washington and Beijing, and a pandemic of the Chinese Communist virus (neo-coronavirus) plague that has severely disrupted supply chains, have raised awareness of the risks of over-dependence on China. In addition, the U.S. government has launched a “supply chain restructuring” campaign urging technology suppliers to leave China.
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