Foxconn is concerned that Chinese-based rival Luxshare is being supported by the Chinese government
Another one of Reuters’ sources called Luxshare a “formidable opponent”, and said Foxconn has been researching Luxshare with a goal to “defeat it completely.” And there are reasons for Foxconn to worry about Chinese government involvement in Luxshare. The latter has received the equivalent of about $150 million in government subsidies from 2016 through the first half of this year. $75 million of that total was received last year alone.
Foxconn has denied that Reuters’ story is correct and said that reports about a task force at Foxconn are “not grounded in facts” and that there were “no meetings or any other contact. There have also been no other extraordinary actions taken by the management team.” Luxshare declined to comment and Apple would not respond to Reuters’ request for a statement. As Luxshare moved up Apple’s supply chain, revenue rose along the way. Last year it grossed the equivalent of $9.35 billion, a year-over-year hike of 75%. Interestingly, while Luxshare grosses only 5% of Foxconn’s top line, it’s market capitalization is $59 billion compared to $39 billion for Foxconn. And Morningstar says that that 58% of Luxshare’s revenue is derived from Apple.
This is a perfect time for Luxshare to attempt a coup against Foxconn. Manufacturing consultant David Collins says that Foxconn’s move away from China provides Luxshare with the opportunity to make a move against Foxconn. Collins notes that “Foxconn’s share price is down roughly 50% from two years ago. They see blood in the water.” And Luxshare has started to poach Foxconn for employees. In one situation cited by Reuters, the company offered a bit more than $75,000 cash to a Foxconn executive so that he could move his family from Taiwan to China.