On June 5, 2025, the State Administration for Market Regulation officially and unconditionally approved Luxshare Precision to acquire part of the consumer electronics system integration business of Wingtech Technology for 4.389 billion yuan. This transaction not only affects the nerves of the capital market, but also has the potential to profoundly reshape the global ODM industry landscape. Behind the transaction, there is the rebalancing of the global industrial chain, the game of technical routes and the transformation of corporate strategy. Next, China Exportsemi will come to you to take a look.
Ⅰ Complementary Resources: Strength Meets Weakness
As a leading enterprise in China's precision manufacturing, Luxshare Precision's business covers consumer electronics, automotive, communications, industrial and medical fields. In the first half of 2024, Luxshare will achieve revenue of 103.6 billion yuan, of which 82.6% comes from the consumer electronics business, and Apple is its largest customer, contributing 75% of revenue. Not only is AirPods the first largest foundry, Luxshare is also the second largest iPhone assembly plant, and the exclusive OEM of Vision Pro headsets.
Wingtech Technology was born in 1993 and is an A-share listed company, with business covering semiconductors and product integration. In the global mobile phone ODM market, it once stood with Huaqin and Longqi, occupying about 70% of the market share. However, the product integration business has continued to lose money in recent years, with a loss of 447 million yuan in 2023, and it will expand to 967 million yuan in the first three quarters of 2024, with a gross profit margin of only 3.8%. At the same time, due to geopolitical influences, it was included in the US entity list, resulting in a significant loss of ODM customers.
Ⅱ The motivation for the acquisition of Luxshare Precision: to cut Apple's dependence and make up for Android's shortcomings
Luxshare's move is intended to break its high dependence on Apple. In recent years, "fruit chain" companies have generally faced the risk of excessive customer concentration, and once Apple adjusts its supply strategy, Luxshare may face significant fluctuations in revenue. Through the acquisition of Wingtech's consumer electronics ODM business, Luxshare can quickly introduce customer resources from Xiaomi, OPPO, Samsung and other Android camps.
According to Omdia's forecast, after the completion of the acquisition, Luxshare is expected to increase its annual revenue in the Android ecosystem by more than 40 billion yuan. More importantly, Luxshare has not only obtained perfect system integration manufacturing capabilities, but also absorbed a large number of experienced R&D and management teams. This "time-for-market" approach will help it quickly make up for its technical and production shortcomings in Android system terminal integration.
Ⅲ Strategic divestiture of Wingtech Technology: stop loss and move, focusing on the main channel of semiconductors
For Wingtech, the sale of the loss-making ODM business is a "hemostasis" behavior and a strategic focus.
Due to the continued impact of geopolitics, Wingtech's product integration business has been difficult to maintain. In contrast, its semiconductor business has developed rapidly, achieving revenue of 10.9 billion yuan in the third quarter of 2024, accounting for about 20% of total revenue, with a gross profit margin of 37% and a net profit margin of 16%, far exceeding the group average. Wingtech chose to survive with a broken arm, by divesting assets in exchange for funds, resources and policy space, and concentrating on the layout of automotive-grade semiconductors, especially in the fields of power devices and CMOS image sensors.
In addition, the cash flow of 4.389 billion yuan from the transaction will also greatly alleviate its financial pressure. According to the disclosure, Wingtech's short-term borrowings in the first three quarters of 2024 were as high as 9.286 billion yuan, and the asset-liability ratio climbed to 68%. The repatriation of funds will help to repay debts and improve asset structure.
Figure: Luxshare Precision acquired Wingtech for 4.389 billion yuan
Ⅳ The reshuffle of the industry pattern: from "three-legged" to "strong and strong"?
This transaction will have a profound impact on the global ODM industry landscape. Previously, Huaqin, Longqi and Wingtech basically ranked at the head of the mobile phone ODM market. However, with the withdrawal of Wingtech from part of its business and the strong entry of Luxshare, the situation of "three-legged" is quietly changing.
According to Omdia's latest research, in 2024, Huaqin will account for about 33% of global mobile phone ODM shipments, Longqi will account for 27%, and Wingtech will account for about 10%. If Luxshare Precision can successfully integrate Wingtech's business, it is expected to directly climb to the top three in the industry, and with its manufacturing technology, cost control and scale advantages, it will pose a huge challenge to existing players.
This change will bring about a threefold change:
1. More balanced customer structure: brand manufacturers will have more choices and no longer highly dependent on individual ODMs;
2. The threshold of competition is raised: manufacturers with system integration + precision manufacturing integration capabilities will occupy a greater advantage;
3. Concentration of resources to the head: Small and medium-sized ODM manufacturers may face the risk of being marginalized or integrated.
Ⅴ The challenge of integration and synergy: can the hand of capital hold the heart of technology?
Although it may seem like a strong combination, the premise of a successful acquisition is that "integration is in place and synergy works". For Luxshare, the biggest challenge is how to integrate Wingtech's business assets, management culture and R&D team.
Specific challenges include:
* Integration of organizational structure: There are differences between the two companies in terms of management system, decision-making process, and business positioning;
* R&D path coordination: Luxshare focuses on vertical manufacturing, while Wingtech focuses more on product definition and design;
* Customer relationship management: to transfer the trust and orders of Wingtech's original customers, it takes a certain amount of time to verify;
* Profitability improvement: At present, Wingtech's ODM business is still in a loss-making state, and whether it can quickly turn losses into profits will determine the integration effect.
However, synergies should not be overlooked. Luxshare has deep technical precipitation in structural parts, connectors, module integration, etc., while Wingtech has accumulated deep experience in mobile terminal design and Android platform. The two complement each other and are expected to open up new opportunities in the fields of next-generation terminals such as foldable devices, AI mobile phones, and IoT modules.
Ⅵ Financial and strategic assessment: the balance between risk and return
For Luxshare, the consideration of 4.389 billion yuan is not heavy under its annual revenue of more than 200 billion yuan in 2024. In the past three years, its net profit has maintained a compound growth rate of more than 15%, and its cash flow is stable. However, the short-term financial pressures cannot be ignored, including M&A costs, integration investments, and possible loss amortization.
The logic of long-term returns is as follows:
* Enhance the diversification of customer structure and reduce the risk of a single customer;
* Open up the Android ecological chain and enter the overseas ODM market;
* Expand multiple terminal forms such as AIoT and wearable devices to provide a second curve for future revenue growth.
Ⅶ Summary and outlook: The "midfield war" of the industry has just begun
Luxshare Precision's acquisition of Wingtech Technology's consumer electronics system integration business is a typical market-oriented game of "asset restructuring + strategic upgrading". For Luxshare, this is a key step to get rid of the "fruit chain dependence" and build a diversified customer matrix; For Wingtech, it is a decisive choice to divest inefficient assets and focus on the semiconductor track.
For the global ODM industry, this transaction may become the starting point of the industry reshuffle in the next 3-5 years: from scale to technology, from low-price competition to value cooperation, from winning by volume to differentiated development.
Highlights include:
* Can Luxshare integrate Wingtech's business to stop losses in the short term and grow in the long term?
* Can Wingtech become a first-tier chip supplier in China with its semiconductor business?
* How do Huaqin and Longqi deal with this "post-Wingtech era" competition?
Who's making and who's losing? In the short term, it may be a matter of taking what each needs from what it needs, but in the long run, it is the speed of integration, the strength of technology and the strategic foresight that determine whether to win or lose. The future ODM battle has just begun.
