Apple iPhone assemblers Foxconn and Pegatron feel threatened by China-based manufacturer

There are major changes taking place among the three contract manufacturers that assemble the Apple iPhone. Based in Taiwan, Foxconn assembles most iPhone units year-after-year. Last week we told you that Foxconn had started its annual hiring drive that will result in the hiring of nearly one million people to man the assembly lines that will churn out the 2020 5G iPhone 12 devices.

Back in July, we told you that Wistron, another contract manufacturer that assembles the iPhone for Apple in Taiwan, had sold the division that manufactures the device to a company called Luxshare. The latter becomes the first company on China's mainland to turn out Apple's number one product. There are some advantages for Apple by having some handset production done on the mainland. One, factory workers make less money than they do in Taiwan.

Also, the move allows Apple to curry favor with the Chinese government in Beijing; this shouldn't be overlooked with the U.S. and China still at odds and with the Trump administration eager to kick Chinese tech out of the U.S.

The third iPhone assembler, also located in Taiwan, is Pegatron. According to Bloomberg, Pegatron is buying the rest of iPhone casings maker Casetek that it doesn't own. It will then follow up by taking the unit public to raise $1 billion. But the purchase of Casetek is actually a strategic purchase for Pegatron. Both the latter and Foxconn are believed to be concerned by Luxshare's purchase of Wistron's iPhone manufacturing unit. Jeff Pu, an analyst with GF Securities said, "Pegatron is trying to bolster its component business to defend itself against the rise of Luxshare. It may streamline some overlapping business with Casetek." Pegatron seems to feel threatened by Luxshare's acquisition of Wistron's iPhone manufacturing unit. But as it turns out, Pegatron owns .57% of Luxshare which leaves open the possibility that the two could partner up sometime in the future.

Foxconn plans on following Pegatron's strategy by boosting its component business in order to battle competitors. Foxconn Chairman Young Liu said during a quarterly earnings call last week that the company is moving manufacturing capacity out of China and into Southeast Asia and other markets to avoid tariffs on exports to the U.S. The executive said, "No matter if it’s India, Southeast Asia or the Americas, there will be a manufacturing ecosystem in each." Liu told investors that while China will still be an important manufacturing region as far as Foxconn is concerned, the country’s "days as the world's factory are done." Last year he said that if the trade war required Foxconn to move iPhone production out of China if need be. The company has been manufacturing some iPhone models in India via Wistron and Foxconn.

Because the iPhone is considered a luxury device in India, older models had been assembled in the country-that is, until now. Last month, Foxconn started to assemble the iPhone 11 in India making it the first time that a current iPhone model was being shipped from the country. The iPhone units being assembled in India are not subject to any tariffs placed on Chinese exports to the U.S. by the Trump administration. Being locally produced, they are not subject to India's 22% tax on devices imported into the country. And they qualify for the Make in India program which allows Indian manufacturers to sell their products anywhere as long as they are made in India.

This minor shakeup shouldn't have any effect on the 5G 2020 iPhone 12 family. The latest rumor has which will be released a few weeks later than normal due to the pandemic. The iPhone 12 and iPhone 12 Max are expected to be available to pre-order on October 2nd and ship exactly one week later. The iPhone 12 Pro and iPhone 12 Pro Max could be ready for pre-orders on October 16th and ship on October 23rd.