2.1 billion yuan, Lixun acquires Kunshan Shishuo, and Heshuo will fade out of mainland iPhone manufacturing

Source: Xinzhixun

    On December 28th, Apple‘s iPhone foundry, Heshuo, announced that its important subsidiary, Kunshan Shishuo Electronics, which produces iPhones in mainland China, will handle a cash capital increase and introduce funds from Lizhen Precision, a subsidiary of Lixun Group. After the increase is completed, Shishuo will be led by Lixun Group, and Heshuo will relinquish control.

    According to the announcement from Heshuo, the board of directors of Heshuo has decided to handle a cash capital increase for strategic investor Lizhen Precision Manufacturing (Kunshan) Co., Ltd. to subscribe. According to Shishuo‘s plan, the total amount and number of shares to be issued this time will be RMB 2.109 billion. The specific issuance price will still be announced after confirmation of the details related to cash capital increase subscription.

    This is another time that Heshuo Group has faded out of the Apple supply chain, following the sale of its metal casing factory, Kaisheng KY, to Lixun Group. In January 2021, Heshuo and Lixun announced that Lixun would invest RMB 6 billion in Rikai Computer Accessories, a subsidiary of Haisheng. Lixun will hold 50.1% of the shares in Nikkei, while Heshuo‘s ownership of Nikkei will decrease from 100% to 49.9%.

    Heshuo pointed out that after the completion of this cash increase, the indirect shareholding ratio of Heshuo Group in Heshuo will decrease from 100% to 37.5% and lose control; Meanwhile, Shishuo will be led by Lixun Group. Heshuo stated that the main purpose of this capital increase by Heshuo is to optimize its business.

    Regarding the change of Shishuo to be led by Lixun, Heshuo stated that it is mainly in response to the rapid changes in the market and industrial environment. In order to strengthen the production efficiency of regional manufacturing, it is expected to establish a joint venture relationship with strategic investors through this expansion plan, so that Heshuo Group can more effectively allocate resources, achieve regional balance, enhance competitiveness, and maximize shareholder value.

    Heshuo pointed out that the current addition has not changed the current business operation mode of Heshuo, and the evaluation has limited impact on the overall operational status.

    Currently, Heshuo has two iPhone manufacturing factories in mainland China, namely Shanghai Changshuo and Kunshan Shishuo. Among them, Shanghai Changshuo is the main iPhone manufacturing factory, including New Product Introduction (NPI), which produces the latest developed iPhone models in Shanghai; Kunshan Shishuo produces older generation iPhone models.

    This time, the introduction of Asus to Lixun means that Asus will fade out of its mainland iPhone manufacturing business, and Lixun will further strengthen its iPhone OEM business. Even though Heshuo is actively expanding its production capacity in non mainland production bases such as India, it is still difficult to compare its production capacity with mainland factories in the short term.

    At present, Hon Hai is the leader in iPhone OEM business, winning over 50% of orders; Heshuo ranks second, accounting for approximately 20% of orders; Lixun ranks third. With Kunshan Shishuo being taken over by Lixun, Lixun‘s iPhone assembly capacity has significantly increased and may replace Asus as the second largest OEM factory for iPhones.