(ChinaIT.com) According to Nikkei Asia, Luxshare Precision is building System-on-Chip Package (SiP) for Apple's AirPod earbuds.
Sources said that Goertek is also focusing on the chip assembly business, but due to technical difficulties, the orders obtained in this regard so far are far less than that of Luxun Precision.
For Apple, it has two more chip packagers in its supply chain, which gives the California tech giant more bargaining power.
Luxshare Precision and Goertek are playing an increasingly important role in Apple's vast supply chain. They were the first to respond to the call for diversification of their production sites, moving AirPod production to northern Vietnam as early as 2019. Now Luxshare Precision is also helping to build chip assembly capabilities there, further supporting Apple's initiatives to build a more complete supply chain in Vietnam.
Luxshare Precision is particularly eager to improve its chip technology as it looks to expand into new areas including electric vehicles. To shorten the learning curve for SiP production, the company has been hiring engineers with chip packaging technology from Universal Scientific Industries (USI), a subsidiary of ASE Tech Holding in Taiwan, the world's largest provider of chip packaging and test services, the sources said.
People familiar with the matter said that the production quality of SiP modules of Luxshare Precision and Goertek has some gaps with companies such as USI and Amkor in the United States. However, the advantage of Chinese players is that they are responsible for the final assembly of the product. This allows them to offer chip packaging solutions that are more cost-effective than their competitors and can help them get more orders in the future.
Chip assembly, also known as chip packaging, is the final step in semiconductor manufacturing, in which a single chip is placed in a separate enclosure or electronic module before being mounted onto a printed circuit board.
Luxshare Precision's chip packaging is not as advanced as the chip packaging technology of top chip manufacturers such as Samsung, Intel and TSMC, but it still requires a lot of technical knowledge.
Chip packaging itself is becoming a key area in the race for more powerful chips.
ASE recently formed a consortium with Intel, Samsung, TSMC, and Qualcomm to establish an industry standard for chip packaging to help develop more powerful electronic devices.
Meanwhile, Luxshare Precision and Goertek are two of the most ambitious technology companies on the mainland. In addition to AirPods, Luxshare Precision became a major assembler of the iPhone and Apple Watch, while Goertek was a major manufacturer of Meta popular VR headsets and surpassed Pegatron to become the second largest assembler of the Sony PlayStation 5.
Although Luxshare Precision achieved its first-ever profit decline in 2021, the company has seen rapid revenue growth over the past few years, which the company attributed to a global chip shortage, increased logistics costs and product development expenses.
Shareholders at Luxshare Precision approved a plan last week to raise 13.5 billion yuan ($2.1 billion) to help it ramp up its broad capabilities. The company said it will invest 950 million yuan in the expansion of SiP business and chip packaging business.
Before the new independent division was scheduled to list on the Shenzhen Stock Exchange, Goertek had already spun off a chip-related division. Wingtech Technology, China's largest smartphone assembler, also entered the semiconductor industry in 2019 with the acquisition of chipmaker Nexperia and Newport Wafer Fab, britain's largest chipmaker.
"It is not surprising to see Chinese companies such as Luxshare Precision and Goertek ramp up semiconductor-related capacity building, as the establishment of self-reliant chip supply chains by Chinese technology suppliers has become a national movement in the face of geopolitical uncertainty," Qiu Shifang, a senior supply chain analyst at the Taiwan Institute of Economic Research in Taiwan, told Nikkei Asia.
Analysts added that the unprecedented global chip shortage also highlights the importance of controlling chip supply in a wide range of next-generation applications, including electric vehicles.
"In addition, given that electric vehicles will consume more chips than conventional fuel vehicles, strengthening chip capabilities will also help Luxshare Precision expand its presence in the booming electric vehicle industry," Chiu noted, noting that Luxshare Precision recently announced that it will become a partner in partnership with Chery Group to produce electric vehicles for other automakers.
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