Luxshare Precision: Not affected by the Sino-US trade war, related products are transferred to Vietnam for production

In its reply announcement regarding the annual report inquiry letter, Luxshare Precision mentioned that although the company's current overseas operating income accounts for nearly 90%, most of the products affected by the Sino-US trade friction have now been transferred to its Vietnamese subsidiary for production, and it is predicted that the direct impact of this matter on the company will be limited.

It is understood that Luxshare Precision's current product forms are mainly components and modules, and the back-end mainly corresponds to domestic system assembly plants, which complete the product assembly and then ship it. Therefore, the US's imposition of tariffs on Chinese products has limited direct impact on the company, and those mainly affected are manufacturers who directly export finished products to the United States.

Luxshare Precision's financial report shows that in 2018, only less than 1.4 billion yuan of the company's products were included in the US tax list. The remaining products were not directly affected by the Sino-US trade friction, and most of the affected products have been transferred to the Vietnamese subsidiary for production. Some products have also negotiated prices with customers. At the same time, China's adjustment of import tariffs on the United States has little impact on the company, mainly involving some imported test equipment, and the impact is expected to be no more than 1 million US dollars.

Not long ago, Luxshare Precision introduced in a research activity that the company has established a factory in Vietnam, and its current capacity utilization rate is about 80%; it has also planned to invest in the construction of a second factory in Vietnam, which is expected to be put into operation in the first half of next year.

In addition, the company has established a subsidiary in India in early 2019, which is expected to be put into operation before the end of 2019. In order to maximize operating benefits, the Indian factory will not only serve local customers, but also export to other countries. Among them, Vietnam has a relatively mature investment environment. It has been the back garden of Made in China for a long time, and the running-in period has passed, while India is in the running-in stage. The local market demand in India is large, mainly in the mid- and low-end markets, while for companies capable of multinational operations, there are fewer mid- and low-end businesses.

Over the years, Luxshare Precision's performance in the field of consumer connectors has been fully recognized and acknowledged by the industry. However, based on the saturation of demand for consumer electronics interconnect products, interface standardization, and wireless connection transmission of consumer electronics, the company shifted its interconnect product layout to communications, automotive, industrial, medical and other markets many years ago. As the communication environment in these markets is upgraded, the technical threshold and demand for products in these markets will continue to upgrade and expand.

Luxshare Precision said that with the realization of relevant planning and layout, the company's product categories have been enriched, its own risk resistance capabilities have been continuously enhanced, and its internal business management and intelligent manufacturing levels have been continuously improved; it has effectively reduced the impact of external factors such as sales fluctuations in individual markets and customers and unstable economic environment, achieved steady development in various business areas, and the company's overall profitability has been continuously improved.