Luxshare Precision is providing system-level chip packaging services for Apple AirPods

According to people familiar with the matter, Luxshare and Goertek, two important product assemblers of Apple, have started or are preparing to provide chip packaging services for Apple. The person familiar with the matter said that Luxshare is providing chip "system-in-package" (SiP) services for Apple AirPods wireless headphones. That is, multiple functional chips, including processors and memory chips, are integrated into one package to achieve a basically complete function.

Meanwhile, Goertek is also eyeing the chip assembly business, but has so far won far fewer orders in this regard than Luxshare due to technical difficulties. Today, Luxshare and Goertek play an increasingly important role in Apple's vast supply chain.

For Apple, the addition of two chip assemblers to the supply chain gives Apple greater bargaining power. At the same time, this is also beneficial to the development of the entire semiconductor industry. After all, new manufacturers moving up the value chain and entering the more technology-intensive semiconductor field will help build a completely independent chip industry.

Luxshare is particularly eager to improve its chip skills as it seeks to enter new areas including electric vehicles. To shorten the learning curve for SiP production, Luxshare has been recruiting engineers with chip packaging technology, people familiar with the matter said.

People familiar with the matter said that the production quality of SiP modules of Luxshare Precision and Goertek may not be the highest. However, the two Chinese manufacturers have an advantage that they are responsible for the final assembly of the products. This enables them to provide more cost-effective chip packaging solutions than their competitors, which may help them win more orders in the future.

Luxshare and Goertek are two of China’s most ambitious tech companies. In addition to AirPods, Luxshare is also an assembler of iPhones and Apple Watches, while Goertek is the main manufacturer of Meta’s popular VR (virtual reality) headsets and the second-largest assembler of Sony’s PlayStation 5 gaming console.

In the past few years, the two companies have seen rapid revenue growth, and although Luxshare Precision saw its first ever profit decline in 2021, this was mainly due to factors such as the global chip shortage and rising logistics costs. Last week, Luxshare Precision shareholders approved a 13.5 billion yuan (about $2.1 billion) financing plan to strengthen various technical capabilities. The company said it would invest 950 million yuan in the expansion of its SiP business and chip packaging business.

Goertek has spun off a chip-related division and plans to list it separately. Analysts say it is not surprising that Chinese companies such as Luxshare Precision and Goertek are stepping up their efforts to build semiconductor-related capabilities, as the entire industry, including them, hopes to build a more independent chip supply chain.