For a long time, Chinese contract manufacturers, such as Foxconn, Luxshare Precision, and Goertek, have been dubbed "Apple workers." This term, frankly, isn't a pleasant one, as it often implies that Chinese companies are forced to rely on cheap labor to perform low-paying tasks in the consumer electronics and tech product value chains, arguably the world's most lucrative. But things are changing now. In September of this year, a bombshell announcement rocked the tech world: OpenAI, Silicon Valley's most prominent AI giant, had approached China's Luxshare Precision to collaborate on AI hardware. This wasn't a simple contract manufacturing relationship. According to The Information, OpenAI and Luxshare Precision have reached a strategic partnership agreement to jointly develop a consumer AI device, with mass production expected as early as late 2026 or early 2027.
This time, Luxshare Precision is no longer simply a "contract manufacturer," but will work with OpenAI to "jointly define products and participate in software and hardware collaboration." This news is truly significant: it signifies that a large number of Chinese companies, represented by Luxshare Precision, have achieved substantial progress in industrial upgrading. Chinese companies with mastered manufacturing expertise have already gained considerable influence. Luxshare Precision's move is no accident. Since the tariff war began in April of this year, Apple has gradually shifted production to India and Vietnam. Coupled with Apple's increasingly sluggish innovation in recent years, investors have become increasingly aware that the growth of Apple supply chain companies is simply a function of Apple's new product sales multiplied by market share, lacking a rationale for independent growth. If Apple's innovation slows (as seen with the iPhone's slowdown for several generations), the valuations of Apple supply chain companies will immediately come under pressure. This situation raises the question: Can domestic contract manufacturers survive without Apple? Or are there more promising options?
The beginning of transformation: Luxshare Precision's collaboration with OpenAI is just a microcosm of the broader transformation of Apple supply chain companies. In recent years, every Apple supply chain company with a modicum of strength has been desperately seeking new paths forward. Luxshare Precision's transformation over the past few years can be considered one of the most successful examples. Overall, Luxshare Precision's revenue growth is fastest from its new energy vehicle business. Luxshare Precision primarily manufactures wiring harnesses, connectors, charging components, and smart cockpit electronic modules for new energy vehicles—critical components that safely and efficiently connect electricity, signals, and data within the vehicle. Currently, new energy vehicle revenue accounts for 39.47% of Luxshare Precision's revenue, reaching 4.998 billion yuan. The company boasts a formidable automotive client list, including Tesla, CATL, BMW, Mercedes-Benz, and Volkswagen. Goertek has taken a different approach, placing its bets on the VR/AR market. In 2020, Goertek signed an exclusive contract with Meta's Oculus for its next-generation products, securing an order. In 2022, Goertek's smart hardware business, including AR/VR products, accounted for 60% of its revenue, surpassing its acoustic device business for two consecutive years, with revenue increasing by over 90% year-on-year. The most thorough and successful transformation has undoubtedly been achieved by Foxconn Industrial Internet.
This company, which was born out of Foxconn, has now transformed itself into the absolute leader in AI server manufacturing. In the first half of 2024, Foxconn Industrial Internet's net profit reached 12.113 billion yuan, a year-on-year increase of 38.6%. More importantly, through cloud computing business, Foxconn Industrial Internet's revenue exceeded the communications and mobile network equipment business for the first time, becoming a new revenue pillar. On the technical level, Foxconn Industrial Internet is also quite capable. The superfluid liquid cooling solution jointly developed by the company and NVIDIA can meet the heat dissipation requirements of the 1200W power consumption of the Blackwell chip. From product design, key components to system delivery, Foxconn Industrial Internet has established a complete AI server industry chain capability. Xinwangda, which used to make batteries for Apple, has also vigorously transformed into the new energy track in recent years and has become a battery supplier for car companies such as Weilai, Xiaopeng, and Dongfeng. At present, these three companies account for 72% of its installed capacity in 2023. More crucially, Wei, Xiaoli, and Li Auto directly invested in Xinwangda, establishing a deep "customer + shareholder" relationship. Xinwangda achieved this not through storytelling, but through proven performance—244Wh/kg energy density, 50,000 cycle life, and reliable operation at -30°C—to carve out a niche for itself amidst the competition from CATL and BYD. Looking at the transformation cases of these Apple supply chain companies, it's easy to spot a common thread: they've all moved beyond simple contract manufacturers and have begun penetrating into new sectors like new energy vehicles and AI servers.
The logic behind this is simple. While manufacturing is an industry that emphasizes standards, leading companies in each niche market possess their own unique "processes." When these processes reach peak performance, they transcend mere "cheap labor" and expand across a wide range of related industries, becoming essential "solutions" for the industry. The "real gold" forged in contract manufacturing: When it comes to the unique "processes" honed through contract manufacturing, Foxconn Industrial Internet is a prime example. In the AI era, Foxconn Industrial Internet (FII) provides far more than just hardware assembly. It offers a one-stop solution encompassing design, R&D, manufacturing, and even advanced thermal technologies like liquid cooling. As early as 2015, FII partnered with Alibaba to develop immersion liquid cooling (also known as "immersion cooling") products. Their fourth-generation AI servers currently utilize both water and air cooling technologies. The immersion cabinets achieve a Power Use Effectiveness (PUE) of 1.03, with values closer to 1 indicating higher efficiency. Traditional air-cooled data centers typically achieve PUEs above 1.5. By 2023, FII's AI server shipments will account for nearly 40% of global shipments, placing it firmly in the top tier internationally for liquid-cooled models. This integrated capability, from design, manufacturing, to delivery, is unmatched by many pure liquid cooling technology companies, such as GRC in the US and Submer in the UK. At this point, some may wonder:
How did these Apple supply chain companies make the leap from making mobile phone parts to manufacturing cars and AI servers? Can technology be easily swapped? The answer is not necessarily true. There's a very interesting logic behind this "technology transfer." Let's first discuss the core: precision manufacturing technology. Take Luxshare Precision, for example. They originally made connectors—those small parts that plug into mobile phones. Don't underestimate these things; they involve a lot of skills: micron-level precision, guaranteed to last tens of thousands of plug-in and unplug cycles, high and low temperature resistance, and electromagnetic interference resistance... These skills all embody the essence of "precision." But think about it another way: don't the charging ports and battery connectors in new energy vehicles face the same demands? In fact, the requirements are even higher—car connectors are expected to last for over a decade, while mobile phones only last three to five years at most. So, Luxshare Precision's entry into the automotive market is essentially upgrading its "mobile phone-grade" precision manufacturing technology to "automotive-grade" levels. The technical path is the same, only the standards are more stringent. The example of Foxconn Industrial Internet is even more interesting. As we all know, iPhones are getting thinner and thinner, but their processors are getting more powerful. This poses a major problem: heat dissipation. How can heat be efficiently dissipated in such a small space? To address this issue, Foxconn Industrial Internet (FII) has invested heavily in researching various heat dissipation technologies: thermal conductive materials, heat dissipation structure design, and heat pipe technology. In the AI era, AI servers have far greater cooling requirements than iPhones. Nvidia's H100 chip consumes 700W of power, and the new Blackwell chip reaches 1200W. This is equivalent to the heat generated by hundreds of iPhones concentrated in a single tiny chip. However, the technical principles are the same: the goal is to quickly transfer heat away from the source. FII's accumulated experience in thermal conductive material formulations, heat dissipation structure design, and even its understanding of air flow can all be utilized. The only difference is the upgrade from milliwatts to kilowatts, and from air cooling to liquid cooling.
Furthermore, Apple's notoriously stringent product quality standards—"zero defects" and "full traceability"—have long been fundamental to Apple supply chain companies. The quality management system developed as a result has become their key strength. Therefore, the core reason for these Apple supply chain companies' successful transformation lies not in their mastery of specific product manufacturing technologies, but rather a universal "precision manufacturing methodology." This is the true value earned day after day on the production line. While Apple supply chain companies have partially transitioned from manufacturing to intelligent manufacturing, leveraging the skills and knowledge accumulated through their previous contract manufacturing experience, simply "breaking away from Apple" is only the first step to survival. The real path forward lies in finding a new role. If these companies simply focus on switching major clients (e.g., from Apple to Tesla), they're still stuck in their old ways and will never be able to achieve independence. Furthermore, given the current Sino-US tensions, this structure, where all major clients are from mainland China, is inherently fraught with uncertainty. Therefore, the true potential for these former Apple supply chain companies lies in transitioning from "OEM parts" to "system definition."
In the Apple era, Apple supply chain companies were "hanging on a single phone." But in today's increasingly important era of AI, manufacturing needs are fragmented: there are startups developing AI glasses, laboratories developing humanoid robots, and local governments building edge data centers... They all require reliable, flexible manufacturing partners capable of small batches and rapid iteration. If Apple supply chain companies can package the entire suite of capabilities they used to serve Apple—supply chain, quality control, and automation—into "Manufacturing as a Service" (MaaS), they could become the "water, electricity, and gas" for AI hardware innovation. Just as TSMC doesn't make phones, but its chip manufacturing underpins the entire semiconductor ecosystem, future Apple supply chain leaders may not make cars or robots, but all AI hardware will be inseparable from it. This "Manufacturing as a Service" model bears a strong resemblance to the traditional SaaS model. SaaS, standing for "Software as a Service," literally translates to "software as a service." Think of the apps on your phone. Take Didi Chuxing: In the past, hailing a ride meant either manually hailing one on the street or calling a taxi company. Now, just open your phone and tap it. In the past, if you wanted takeout, you had to call the restaurant for delivery. Now, if you want Sichuan cuisine or hot pot, you can just open Meituan and order it with a few taps. "Manufacturing as a Service" (MaaS) simply means transforming complex "factory management" into a simple, easy-to-use program like a mobile app. This transforms Apple supply chain companies from "OEMs" into "intelligent manufacturing service providers." They're no longer simply selling physical labor; they're creating an "industrial Meituan Takeout"—allowing any business to access world-class manufacturing services anytime, anywhere, just like ordering takeout. Moreover, this concept is no longer just wishful thinking; it's already being demonstrated in real-world cases. A prime example is Foxconn's "MIH Electric Vehicle Open Platform." MIH (Mobility in Harmony) is Foxconn's open ecosystem for electric vehicles, encompassing "hardware, software, and supply chain," launched in 2020. Its core logic is simple: "You have a brand, algorithms, and users, but can't build a car? No problem. We'll provide you with the chassis, three-electric system, electronic architecture, supply chain, and even help you find a contract manufacturer—all you have to do is define the product." This essentially packages Foxconn's decades of experience serving Apple, Dell, and Cisco, encompassing vehicle-level integration capabilities, global supply chains, automated production lines, and quality control systems, into a single "electric vehicle manufacturing operating system." Currently, over 1,900 companies have joined the MIH Alliance, including Qualcomm, Nvidia, Arm, and CATL. Even Fisker in the United States and Thailand's national electric vehicle program are using this platform to develop models. In the AI era, if these Apple supply chain companies leverage the data and knowledge they've amassed over the years into various "industrial apps," a single process solution could simultaneously serve thousands of factories; new process optimizations could be distributed to all customers via "cloud updates"; and every factory's production data could be used to train AI models, optimizing process standards across the industry.
This allows contract manufacturers to leap from the bottom of the value chain to the top, transforming from "contract manufacturers" into "intelligent manufacturing platforms." They then hold onto these software-based patents and reverse-license them to brands, collecting platform and patent fees. Some might argue that with the widespread adoption of robots and automated factories, China's demographic dividend and cheap labor advantages will eventually disappear. At that point, AI and automation will gradually close the global manufacturing gap. However, this idea of relying on "automation" to conquer the world clearly underestimates the complexity of manufacturing. The reason is that while manual labor can be replaced by machines, valuable knowledge and experience are the industry's treasures, which even AI cannot replace. Manufacturing is indeed an industry that values standards, but these are "customer-given standards," not "standards of how they are achieved." Apple's requirements for its Chinese contract manufacturers are indeed clear: "Total earphone thickness 5.3mm, ±0.05mm tolerance, IPX4 waterproof rating, Bluetooth latency <80ms..." But the question is, how can you actually manufacture products that meet these requirements? The answer is: it all depends on the contract manufacturers' own "trial and error," assembling and understanding. This is called industry know-how—without decades of deep industry experience, you simply can't master it. This knowledge is ingrained in the minds of veterans, hidden in process documentation, and etched into equipment specifications. And this is precisely the greatest asset that Chinese companies have in becoming "intelligent manufacturing platforms" in the AI era.
The laws of nature are clear, and change is inevitable. In this era of great change, only those companies that can turn "crisis" into "opportunity" will be able to buck the trend. Luxshare Precision has gone from being an Apple component supplier to a partner of OpenAI; Foxconn Industrial Internet has gone from being an iPhone OEM to a leading AI server manufacturer; Goertek has gone from being a traditional acoustic component manufacturer to a major player in the VR/AR field... Ten years ago, without Apple, China's OEMs would have been in mourning. But now, even without Apple, China's OEMs are on their own growth trajectory.
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