Tech giant Apple (NASDAQ:AAPL) is set to sign a contract with China-based Luxshare Precision, a key rival of the company’s Taiwanese supplier Foxconn, to produce its premium iPhone models, the Financial Times reported.
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Luxshare became an Apple supplier in 2011 and has rapidly advanced in Apple’s value chain from making connector cables for iPhones and Macbooks to producing AirPods. The new contract for premium iPhones comes after Foxconn halted production at its Zhengzhou plant following worker unrest due to stringent COVID-19 restrictions.
Luxshare has reportedly been producing “small amounts” of the iPhone 14 Pro Max since November 2022 at its Kunshan plant in China to compensate for Foxconn’s lost production.
On Thursday, Luxshare responded to media reports about Apple urging suppliers to slash production and assured that the “cooperation between the company and existing customers is taking place normally.” The company also replied to a recent Taiwanese media report that stated that Luxshare was the biggest victim of Apple’s output cuts. “There are no special changes or impact to the relevant business of the company,” said Luxshare in a statement.
The disruption at Foxconn has significantly hurt Apple’s iPhone sales in the crucial December quarter. Foxconn has now ramped up its production at the Zhengzhou plant to about 90% of the expected peak capacity. Nonetheless, Apple is under pressure to diversify its supply chain to additional countries outside China, like India and Vietnam.
Is Apple a Buy, Sell, or Hold?
Despite the ongoing supply chain issues, Apple scores Wall Street’s Strong Buy consensus rating based on 22 Buys and five Holds. The average AAPL stock price target of $176.70 implies nearly 40% upside potential.
