Qorvo, the renowned US wireless connectivity chip company, has made a significant move by entering into a definitive agreement with Luxshare Precision Industry Co., Ltd. to divest its assembly and test facilities in Beijing and Dezhou, China. This move, which is expected to be finalized in the first half of 2024, marks a major shift in Qorvo's global manufacturing strategy and reflects the broader trend of American tech companies diversifying their production networks.
Acquisition by Luxshare
Luxshare, a global advanced contract manufacturer and a key assembler for Apple, will acquire Qorvo's operations in Beijing and Dezhou, including the property, plant, equipment, and the existing workforce. Qorvo's CEO, Bob Bruggeworth, emphasizes the historical significance of these facilities in supporting Qorvo's highly integrated advanced cellular products.
Retaining Presence in China
While divesting its assembly and test facilities, Qorvo will retain its sales, engineering, and customer support teams in China. This ensures uninterrupted service to its customers and reflects the company's commitment to the Chinese market. Qorvo's CFO, Grant Brown, highlights that this divestment aligns with the company's efforts to reduce capital intensity and support long-term gross margin objectives.
Post-Transaction Supply Agreement
As part of the deal, Luxshare and Qorvo have also entered into a post-transaction supply agreement. Luxshare will assemble and test Qorvo's mobile phone products, strengthening the strategic partnership between the two companies. This agreement further demonstrates the trend of American tech companies reducing their reliance on China-based production facilities.
Luxshare's Growing Role
Luxshare's recent successes, including securing orders for Apple's Vision Pro mixed-reality headset, highlight the company's growing ambitions and its increasing role in Apple's product manufacturing landscape. Following disruptions at Foxconn's Zhengzhou plant, which led to delays in iPhone 14 series shipments, Apple has decided to shift more work to Luxshare. This further solidifies Luxshare's position as a key player in Apple's manufacturing supply chain.
Reshaping Qorvo's Manufacturing Footprint
For Qorvo, this transaction represents a calculated strategic move that reshapes its manufacturing footprint. While divesting its facilities in China, the company still maintains a valued presence in the country. As the deal progresses, it is expected to have a ripple effect on the global supply chain, contributing to the ongoing production shift from China to emerging manufacturing hubs in Asian countries such as Vietnam and India.
