Author: Less words
As a "fruit chain" giant, switching from the mobile phone supply chain to the automotive supply chain, Luxshare Precision is trying to completely transform its core customers.
Transformation is like crossing the robbery, can Luxshare Precision successfully survive the robbery?
Luxshare Precision has made a big move into the automotive industry chain
Luxshare Precision is undoubtedly a "fruit chain" giant.
In fact, when entering any industry, Luxshare Precision has shown a strong sense of initiative, such as cutting into the Apple industry chain.
According to public information, in May 2011, the second year after the listing, Luxun Precision (002475. SZ) acquired a 60% stake in Kunshan Liantao Electronics, thus starting to cut into Apple's supply chain, foundry connectors and other precision components.
Source: Luxshare Precision official website
That is, since then, Luxshare Precision and Apple began to bind, step by step to become a "fruit chain" giant. In 2020, Luxshare Precision's revenue from apple, the largest customer, accounted for 69.02%, and even in the first three quarters of 2021, Luxshare Precision's profit sources were mainly Apple headphones and watches.
The increasing pressure from core customers, coupled with the sharp decline in the market value of previous "fruit chain" companies due to being kicked out of the supply chain, makes the market inevitably worried about Luxun Precision.
As everyone knows, Luxshare Precision has been laying out horizontally in the business for many years, and the products developed, manufactured and sold by Luxshare Precision are mainly in the fields of consumer electronics, communications and data centers, automotive electronics and medical treatment. Especially in the automotive field, Luxshare Precision has indeed been laying out for many years.
Continue to "build on" the automotive sector
Luxun Precision announced as early as the annual report, it has been deeply cultivated in the automotive industry for many years, the current business mainly focuses on the vehicle "blood vessel and nervous system" of automotive electrical and intelligent networking, products include low-voltage vehicle wiring harness, special wiring harness, new energy vehicle high-voltage wiring harness and connector, high-speed connector, intelligent electrical box, RSU (roadside unit), vehicle communication unit (TCU) and central gateway.
However, Luxshare Precision, which started with connectors, can be associated with automobiles, which is inseparable from the merger and acquisition activities in the years after the listing.
On the evening of April 9, 2012, Luxshare Precision issued an announcement that it intends to acquire 55% of the equity of Fujian Source Optoelectronics Co., Ltd. (hereinafter referred to as "Source Optoelectronics") for 98 million yuan. It is reported that the business scope of Source Optoelectronics includes the manufacture of automotive electronic devices (automotive engine control systems, body electronic control systems, etc.) and the manufacture of automotive composite wiring harnesses, plastic accessories and other parts.
Through mergers and acquisitions, Luxshare Precision expanded its business to automotive connectors. Today, Source Optoelectronics is a wholly-owned subsidiary of Luxshare Precision, becoming the beginning of its business in the automotive sector. In 2019, 2020 and the first half of 2021, the revenue of Source Optoelectronics was 436 million yuan, 250 million yuan and 152 million yuan, and the net profit was 14.0724 million yuan, 2.9115 million yuan and 7.2746 million yuan, respectively.
After years of deep cultivation, in 2019, 2020 and the first half of 2021, The revenue of Luxshare Precision in automotive-related products was 2.361 billion yuan, 2.844 billion yuan and 1.773 billion yuan, respectively, all of which increased by more than 3% year-on-year.
However, Luxshare Precision seems to be "not satisfied" with these achievements.
On the evening of February 21, 2022, Luxun Precision announced the 2022 non-public issuance of shares, which intends to raise no more than 13.5 billion yuan to no more than 35 specific targets for the construction of precision components product production lines for intelligent mobile terminals, the construction project of product production lines for new energy vehicles, the construction projects of semiconductor advanced packaging and testing product production lines, the construction projects of intelligent vehicle connection system product production lines, and supplementary working capital. Among them, two of them (new energy vehicle high-voltage connection system product production line construction project and intelligent automobile connection system product production line construction project) are used for automobiles, and the total amount of funds to be invested is 2 billion yuan.
Source: Luxshare Precision Announcement
The fixed increase of Luxun Precision is based on the judgment of industry trends, under the important needs of the development of consumer electronics and automotive electronics industry, the construction of the above projects is also conducive to the implementation of the vertical integration supply chain strategy, especially the development of automotive-related businesses.
On the evening of February 11, 10 days before the announcement of the pre-increase plan, Lixun Precision issued an announcement that it signed a strategic cooperation framework agreement with Chery Holdings, Chery Automobile and Chery New Energy (collectively referred to as "Chery Group") in Wuhu, stipulating that Lixun Limited, the controlling shareholder of Lixun Precision, would purchase 19.88% of the equity of Chery Holdings, 7.87% of the equity of Chery Shares and 6.24% of the equity of Chery New Energy held by Qingdao Wudaokou, the largest shareholder of Chery Holdings, for 10.054 billion yuan. After the completion of the transaction, Luxun Limited does not control Chery Holdings, Chery Shares and Chery New Energy. On the basis of this agreement, Luxshare Precision plans to establish a joint venture with Chery New Energy, specializing in the research and development and manufacturing of new energy vehicles, providing cutting-edge R&D design, mass production platform and sea outlet for Lixun Precision's core auto parts business.
Luxun Precision's move is not to follow the wind outlet to build a car, but to become a "leading manufacturer of auto parts Tier 1" in the medium and long term, and will also cooperate with Chery to do a vehicle ODM. "Tier 1" is a tier 1 supplier, which refers to the supplier with the most right to speak in the automotive industry chain, which not only directly supplies assemblies and modules to the automakers, but also participates in the research and development and design of each other with the depots, and has the highest participation in the vehicle manufacturing process.
Moreover, in the agreement, Lixun Precision and Chery Group also agreed on an exclusive business, and Chery Group cannot cooperate with other automotive foundries casually, which means that under the premise that the joint venture company has the ability to build cars, the company can only produce cars made by Luxun Precision to help other car companies.
The car-making doubts have not yet been solved, but the layout of Luxshare Precision's automotive business has been launched, and perhaps this series of actions is only to "carry forward" the automotive business, which currently accounts for a small proportion of revenue, in response to the market's concerns about its excessive dependence on Apple.
However, can Luxshare Precision succeed?
Despite the continuous growth of related business performance, in 2019, 2020 and the first half of 2021, Luxshare Precision's revenue in automotive-related products did not exceed 4%, far lower than the revenue share of consumer electronics.
That is to say, although under the global trend of new energy vehicles, the development prospects of automotive connectors and other products are broad, the current revenue of Luxshare Precision in this regard has not formed a scale.
Luxshare Precision's Choice Anxiety Disorder: Deep into the "Fruit Chain" or Complete Transformation?
The automobile business has not yet formed a climate, so how should Luxshare Precision, as a "fruit chain" giant, choose it?
Objectively speaking, Luxshare Precision's current situation is due to the result of deep binding with Apple, if you can't get rid of your dependence on Apple, then you can only maintain the status quo ante.
However, even if it is maintained as it is, this is not easy for LiXun Precision. In the past two years, the competitive pressure of Apple's supply chain is also very large, and In addition to undertaking the OEM of related parts, Luxun Precision has also undertaken part of the assembly business of Apple's mobile phones.
On February 21, 2022, some media reported that Luxshare Precision has not yet obtained a trial production order for Apple's next-generation smartphone, which means that Luxshare Precision, which has oemed high-end mobile phones for Apple in 2021, or will not be able to OEM iPhone 14 high-end series. On the same day, Luxun Precision closed at 42.91 yuan / share, down 1.5%.
However, for Luxshare Precision, it is the best result to be able to continue to rely on Apple, because Apple's car project does not know when it will suddenly land. In addition, the cooperation between Luxshare Precision and Apple for more than ten years is not only an important parts foundry company, but also the world's second largest assembly manufacturer of Apple's mobile phones and other products, compared with consumer electronics, the profit margins brought by smart cars to Luxun Precision will undoubtedly be raised to an order of magnitude.
At present, the task of pulling Tesla down the altar is placed on Apple, in 2021, the market only uses an Apple car rumor to make Tesla stock fall sharply, which shows the market's expectations for Apple cars, and with Apple's electronic products, Luxun Precision and a number of other companies have also become unique "fruit chain" enterprises, Apple's mass production of cars will also form a supply chain comparable to Tesla's supply chain, and it is very likely to form a new batch of "fruit chain enterprises".
Therefore, consolidating the main business and expanding other businesses have become the current transformation focus of Luxshare Precision, which aims at smart car-related businesses. Due to the gradual improvement of the degree of intelligence and networking of the automotive industry, the transformation of ICT to the automotive field is not difficult. And Luxshare Precision in consumer electronics and automotive electronics has been exploring for a long time, and now it is an important player in the industry, relying on foundry smart phones, Luxshare Precision has also accumulated a lot of experience, whether the transformation can be smooth as long as it looks at the integration of resources after Luxshare Precision.
It is reported that Luxshare Precision's fundraising to expand automobile-related business is a complement to its original business layout.
Some brokerage research reports said that the automobile has always been the key strategic direction of Luxshare Precision, in 2013 Luxun Precision acquired the German SUK, in 2012 the acquisition of source optoelectronics into the field of automotive electrical and intelligent networking, in 2017 Luxun Limited acquired the German ZF-TRW subsidiary ZF-TRW body control system division. The proposed investment in the high-voltage connection system and intelligent vehicle connection system of new energy vehicles through fundraising is the performance of Lixun Precision's continuous strengthening of endogenous capabilities. This long-term layout is also particularly important for enterprise transformation.
In the face of a complex market situation, can Luxshare Precision succeed in its transformation?
(This article is for reference only and does not constitute investment advice, and you do so at your own risk)