After two years of investing in Vietnam, who is Luxshare who is “rising like crazy”?

DNVN – Investing in Vietnam since 2019 with a capital of 600 million USD, with 6 factories in Bac Giang and Nghe An, Luxshare Vietnam in 2020 reached about 2 billion USD. It is expected that the 2021 revenue of these factories will be 6.5 billion USD. Luxshare’s “huge” revenue figure makes many people surprised and want to find out who this “big guy” is?

Luxshare – ICT Co., Ltd. headquarters (Van Trung) – where a collective work stoppage of 5,000 workers recently occurred.

What is Luxshare ICT doing in Vietnam?

Luxshare ICT (Vietnam) Co., Ltd. Luxshare ICT is currently one of the world’s leading enterprises in processing and assembling technology products. At a meeting with the Ministry of Information and Communications on the morning of January 27, 2020, Mr. Lin Hung Sheng – Deputy General Director of the company said: Although established in 2016, it was not until 2019 that Luxshare began to expand its investment activities, made in Vietnam. This is a company specializing in manufacturing products for many leading corporations in the world in three fields of information, automobiles and consumer electronics.

Luxshare’s investment capital in Vietnam currently reaches 600 million USD. This enterprise’s activities are mainly at factories in two provinces: Bac Giang (4 factories) and Nghe An (2 factories).

There are currently 45,000 employees working at Luxshare Vietnam, of which about 2,000 experts are foreigners. Luxshare Vietnam’s revenue in 2020 reached about 2 billion USD. It is expected that the 2021 revenue of these factories will be 6.5 billion USD.

Luxshare is planning to establish research centers at the factories themselves. This will be the place to select and train a generation of young Vietnamese engineers to serve the company’s production activities.

“Luxshare wants to invest in Vietnam and contribute more to the development of Vietnam’s economy and society” – Mr. Lin Hung Sheng said.

According to Deputy Minister of Information and Communications Phan Tam: With the expansion of investment in Vietnam, Luxshare will become one of the world’s leading manufacturers in the fields of information, automobiles and consumer electronics.

Vietnam sees its potential and is very determined to develop the ICT industry. Vietnam’s desire is to strongly shift from processing and assembly to research, development and production.

The information that Luxshare will reach a turnover of 6.5 billion USD after only 2 years of investing in Vietnam makes many people curious to find out who Luxshare is?

Mr. Lin Hung Sheng – Deputy General Director of Luxshare ICT Vietnam.

Why does Foxconn consider Luxshare a formidable competitor?

In Vietnam, in mid-September 2020, Luxshare captured the media when more than 5,000 workers at the Apple component factory in Bac Giang went on strike because of poor working conditions, wages, and overtime pay. ensure. When the government of Viet Yen district, Bac Giang, stepped in to resolve the strike, Mr. Lee Cheng-Ju, General Director of Luxshare – ICT had to issue a notice committing to resolve 18 petitions, ensuring the rights of workers.

According to Reuters, although Luxshare is not yet famous internationally, it is the first company in China to assemble iPhones, which is an area dominated by Taiwanese manufacturers.

According to public records, Luxshare is owned by Grace Wang and her younger brother Wang Laisheng. Smaller shareholders include state-owned investment company Centrul Huijin Investment. Luxshare also received more than 1 billion yuan in government support from 2016 to the first half of 2020, nearly half of which came in 2019, according to Reuters.

Luxshare was founded by Grace Wang in 2004. She used to work as a worker at Foxlink, the company of Terry Gou’s younger brother, Foxconn’s boss, in the 1980s. She gradually rose through the ranks here before leaving to open an export company. imported its own components – the predecessor of Luxshare – in the late 1990s.

Luxshare’s position in the Apple supply chain increased thanks to acquisitions of smaller component manufacturers, starting with the production of connection cables for iPhone and MacBook in 2011, followed by audio components and finally Same as AirPods.

Thousands of workers of Luxshare – ICT Company went on strike to demand wages, bonuses and benefits in mid-September 2020.

 

The special department was established in 2019, and is responsible for reviewing Luxshare’s technology, expansion plans, recruitment strategy and whether Luxshare is sponsored by the Chinese government. Currently, Luxshare’s revenue is only 5% of Foxconn.

While the US-China trade war and the Covid-19 epidemic put great pressure on global supply chains, the technology battle between the world’s two largest economic powers forces Beijing to strengthen its efforts to create businesses. Leading domestic technology. Luxshare’s growth trajectory “fits” this Chinese vision. According to a source, it is understandable for China to build its own supply chain and Luxshare is in line with state policy.

Analysts refer to China’s “red supply chain,” where local businesses combine with government funding to increase product production for Apple and other global brands. In a September 2020 report, Taiwan’s Institute of Market Information and Consulting stated that the risk of being replaced by Taiwanese manufacturers continues to increase in the face of the rise of “red supply chains”. “.

Luxshare acquired Wistron’s two smaller factories in China in July 2020. Previously, Luxshare was most famous for its role in assembling AirPods for Apple. One of the sources called Luxshare a “terrifying opponent” of Foxconn, causing Foxconn to conduct comprehensive research to “completely destroy” the opponent.

Luxshare revenue also increased accordingly, of which in 2019 reached 62.5 billion yuan, an increase of 75% compared to 2018. Apple contributed 58% of the company’s revenue.

The acquisition of Wistron’s iPhone factory could help Luxshare win a contract to produce 30% of iPhones in the next 5 years.

Wistron’s acquisition of the iPhone factory is the company’s most important deal ever. It can help Luxshare win up to 30% of iPhone production contracts within the next 5 years.

Luxshare revenue has increased 5 times to 62.09 billion yuan within 5 years after being trusted by Apple and many big technology names such as Microsoft, Google, Amazon, HP and Dell. The company’s market value also increased sharply, to about 375.1 billion yuan.

Cutting off the Taiwanese partner’s dominance in the iPhone production chain

An official in the iPhone supply chain revealed: “Even Young Liu (Chairman of Foxconn) also paid attention to Luxshare stock price fluctuations. Their market value has surpassed Foxconn’s.”

When Luxshare signed a 3.3 billion yuan contract to buy an iPhone factory in China from Wistron, the smallest company in the trio of Taiwanese iPhone assemblers, after Foxconn and Pegatron. Although it still supplies iPhone components, this is the first time Luxshare has taken on the more complex task of assembling the entire phone. The event also put an end to the dominance of Taiwanese partners in iPhone production.

Luxshare does not stop here. They are negotiating further deals with other technology suppliers and may reach an agreement in the next few months, according to Nikkei sources. One of them is a supplier of metal frames for iPhones. It will help expand Luxshare’s presence and deepen its relationship with Apple. Currently, Apple contributes more than 50% of Luxshare’s revenue.

Luxshare is considered a “little Foxconn” because like Foxconn, a company founded by Terry Gou in 1974, Luxshare expanded its operations through investing in many different component manufacturers, especially in the Apple supply chain. from connectors to camera modules and audio components, to diversify the product portfolio and form a deeper connection with Apple.

Before participating in iPhone assembly, Luxshare supplied many components such as vibration motors, speakers, wireless charging modules, and camera modules. They also provide the main module to enable Bluetooth connectivity in the AirPods Pro headphones.

This was the key to Foxconn’s success, helping them to have tighter control over the supply chain and become more competitive. People who know about Luxshare say they are like annoying “flies”, buzzing around Foxconn everywhere, from Southeast Asia to India. Luxshare wants to do everything Foxconn is doing and wants to do what Foxconn is weak at.

The first time Luxshare appeared on Apple’s top 200 supplier list was in 2013 as a connector supplier. In 2017, they became an assembler of AirPods and in 2019, Apple Watch. Currently, after acquiring Wistron’s factory, Luxshare will start with a small quantity of iPhones from 2021 before entering large-scale production in 2022, according to Nikkei.

The increasingly stronger association with Apple suggests that Luxshare meets the company’s strict standards for product quality and efficiency. Besides the advantage of government subsidies, Luxshare also benefits from the high P/E index of the capital market, helping them easily access money to invest and acquire competitors.

In addition, Luxshare also recruits many talents from different businesses in the chain. For example, Luxshare board secretary David Huang is a veteran at Foxconn, and another Foxconn network leader also joined Luxshare in 2019 and became the “core” of the antenna department.

However, Luxshare forms a completely different corporate culture from Foxconn. Foxconn is often compared to an army, where senior leaders are reprimanded by Mr. Gou or have to stand in meetings if they make mistakes. The current Foxconn chairman follows a more casual style.

Meanwhile, according to sources, Luxshare’s management team is relatively young. They encouraged employees to contribute ideas in a WeChat group with hundreds of participants, including the management team. This helps them feel respected, as if they are at the heart of the company. A source revealed that Ms. Wang sometimes visits employees, sees what they are discussing and even offers them coffee.

However, observers say Luxshare cannot dethrone Foxconn soon. It is unclear how Luxshare’s advantages will be affected if it expands outside of China without government subsidies. Thanks to the strength built up over many years and the huge production scale, no company in the world can easily replace Foxconn.They will still play a big role in the electronics supply chain in the future.