Can the reference of advanced management experience make Luxshare Precision become the next Foxconn?

In the impression of many people, Foxconn is the "king of foundry", so, have you heard of Luxshare Precision called "Foxconn"? In December 2017, Apple CEO Cook made a special trip to Kunshan to visit Luxshare Precision's AirPods production line in a high-profile manner, which made Luxshare Precision, which has always "refused to be an internet celebrity and made a fortune in silence", gain wide attention from the industry. In 2019, Luxshare Precision, which integrates popular concepts such as Apple + Huawei + 5G + smart speakers + wireless charging, has been highly praised by the market, and has become the leader of the hardware industry. Corporate benchmark.

As the so-called "seeing you for three days is no longer Wu's Amon", in the past three years, Luxshare Precision's performance has grown by leaps and bounds and has been actively deployed. By adopting an integrated growth strategy, Luxshare Precision is no longer the former Luxshare Precision Industry Co., Ltd. . Of course, Foxconn is no longer the Foxconn it used to be. They all look for one direction: technology is the way of survival for a technology company.

It can be said that Luxshare's leap from traditional manufacturing to intelligent manufacturing is a microcosm of the manufacturing industry in the Guangdong-Hong Kong-Macao Greater Bay Area. According to statistics, in the past ten years, in Dongguan, the advanced manufacturing center of the Guangdong-Hong Kong-Macao Greater Bay Area, the export proportion of ODM+OBM products of processing trade enterprises has increased from 40.8% in 2009 to 75.3%; the domestic sales volume has increased from 154.1 billion yuan in 2009 to More than 350 billion yuan; the cumulative number of registered brands exceeded 13,000, 1,973 R&D institutions were established, and 464 high-tech enterprises were established. The brand-new image of "technology and high quality" has entered the global market, which is particularly evident in the field of consumer electronics, such as TWS earphones and smart watches.

01 Made in China needs to stand at both ends of the "smile curve"

Today, if we use the "smile curve" theory to analyze the consumer electronics industry, we will find that upstream companies such as Apple are at the top of the left side of the curve, relying on core technologies , patents obtain relatively high profit margins; while Huawei, Xiaomi and other companies aim at the top of the right side of the curve, and if brand marketing works properly, there will be quite good added value. But more Chinese companies are still in the middle of the smile curve, that is, relying on parts production and processing and assembly to obtain living space.

This also means transformation or change, which has become a problem that OEM companies must face directly. There are two paths for traditional OEM companies to achieve sustainable growth: the first camp takes the initiative to undertake the high-end links of the value chain, and some companies move from OEM to ODM has changed, and others have adopted the growth model of combining OEM and OBM to expand related diversification; the second camp needs to be large OEM, achieve economies of scale, increase production capacity, and develop towards supporting industries. The difference between OEM and ODM lies in who owns the intellectual property rights of the product.

There is a saying in ice hockey: don't go where the ball is, go where the ball will go. Few companies are willing to bet on the future development of the market, and most companies will only chase the existing market.

02 Do what you are best at in your best field

For a long time, Luxshare Precision has far surpassed its R&D strength, supply chain control, manufacturing and quality management levels. Peer, good at providing overall solutions from R&D design, supply chain control and manufacturing. Through the introduction of systematic management processes, integrated product development, integrated supply chain management and other advanced process management changes, the company's processes are updated and rebuilt, management mechanisms are upgraded, and operational efficiency is improved. These prompted Luxshare Precision to gradually climb to the top of the industry.

Luxshare tightly hugs Apple's thighs and becomes an important member of Apple's supply chain. The power of the "top-notch" strategy is demonstrated: when you are ranked fourth or lower in the market, the leader The boss sneezes and you catch pneumonia. And when you become the leading big brother, you can control your own destiny, and the companies ranked after you will have to merge and reorganize when the market is down, which can be seen in Luxshare's sophisticated acquisition trajectory.

Drucker once said: "For enterprises, the future is very important, and business strategies make enterprises fight for tomorrow." Whether an enterprise chooses a specialization or a diversified management strategy, it must focus on its core competitiveness.

More than 2,200 years ago, the mathematician Archimedes said to the king: "Give me a fulcrum, and I can move the earth." For enterprises, the fulcrum is the key point that the CEO needs to find. How to leverage the industry market? How to embrace big customers? Finding her best field and becoming one of the best in this field, seizing the market and gaining huge profits is what she is good at. Wang Laichun once believed that Foxconn's advanced business philosophy had a great influence on her, and insisted on operating with a set of management models learned at Foxconn.

Luxshare Precision on the one hand optimizes internal fine management to maximize resource efficiency; on the other hand, it increases investment in business development and supporting research and development. Adhere to standardized and automated production, strictly control costs, focus on technology orientation, and gradually realize the leap from traditional manufacturing to intelligent manufacturing.

03 Why Luxshare Precision can win Apple's favor?

We often say a sentence: Blacksmithing also needs its own hardness. This means that in order to gain recognition, strength is essential.

Apple CEO Cook once said to others: "Supply chain management strategy is an important part of the company's strategy. If Apple wants to maintain a leading edge in the industry, it must work hard on supply chain management." In the management of Apple's entire supply chain, Cook has always paid attention to the favorable impact of the long-term scale effect on the entire supply chain system. Luxshare Precision is an important part of Apple's supply chain.

On the one hand, Apple has begun to vigorously support Luxshare Precision. In this way, it can balance the competition among various suppliers and further consolidate Apple's bargaining power. On the other hand, we also need to see Luxshare improve its own capabilities under Apple's high requirements for supply chain manufacturers.

We must also see that the manufacturing industry is becoming servitized year by year. On the one hand, services and recycling will bring a lot of profits. Gerstner spent more than a decade building IBM from a production company to a service company, and most of the products were transferred to suppliers, so that suppliers became part of its "displacement". It seems to be different companies, but it is actually a company and its production facilities. They must be linked together, and the flow of products, information, and capital must be very smooth.

For Apple, the attraction of Luxshare Precision lies in its technical strength. In 2017, Apple's iPhone X adopted the foldable FPC soft board technology to realize the demands of thinner and lighter mobile phones in a highly integrated way. Few people know that Luxshare Precision has contributed to the realization of these design technologies. After a quarter, this Luxshare-ICT unique technology began to be widely adopted by Huawei, Honor, OPPO, vivo and Xiaomi.

In the early years, the industry regarded Luxshare Precision as a simple ODM company, but Luxshare Precision regarded R&D as a killer. Through the observation of the mergers and acquisitions of Luxshare’s industry chain, we found that Luxshare’s R&D is very oriented—relying on the needs of major customers to develop products to reduce risks, and use mergers and acquisitions to achieve vertical integration of the industry, and then reduce costs through large-scale production profit.

04 "Octopus octopus" M&A layout is actually the practice of integrated growth strategy

Based on the idea of "old products, new customers, old customers, new products, old products, new markets", Wang Laichunyi On the one hand, it manages the homepage well, on the other hand, it tries to carry out vertical vertical integration and horizontal business expansion through various acquisitions, build a large precision manufacturing platform, and complete the full coverage of "mechanics, electricity, sound and light". First, through horizontal integration, it will eat competitors in the field of cables and connectors, achieve scale and become an unbeatable leader, and then start vertical integration in the industry, so that Luxshare Precision with a thin foundation and poor foundation can quickly enter a new field.

In 2010, merged with Jiangxi Boshuo, accelerated the integration of connector and cable manufacturing and processing, and completed the integration of the upstream industrial chain.

In 2011, it acquired Kunshan Liantao and Shenzhen Kortong to become suppliers to Apple, Huawei and Emerson.

In 2012, the acquisition of Fujian Yuanguang entered the field of automotive wiring harness assembly, and at the same time, it undertook orders from Japan's Sumitomo; entered the FPC field through the acquisition of Zhuhai win-win; controlled Taiwan Baode to strengthen board-end connectors and RF connections R&D and manufacturing of appliance products.

In 2013, it acquired the German company SuK and entered the supply chain of first-tier car manufacturers such as BMW and Mercedes-Benz.

In 2014, it launched the wireless charging business around AppleWatch and became the core supplier of AppleWatch wireless charging module.

In 2017, it became the exclusive supplier of AirPower's wireless charging Tx coils.

In 2018, it became the main wireless charging Rx coil supplier for iPhone.

In 2019, sit tight for AirPods.

In April 2015, Luxshare increased its holdings in Xuande, Taiwan three times, enriching the capabilities of the Type-C connector market, and obtained a large number of leading technological achievements through research and development. Now it has become the main supplier of Type-C connectors in the world.

In 2015, Luxshare Precision entered into and promoted the rapid growth of the electro-acoustic business in the smartphone acoustics market through the integration of Suzhou Meite, Huizhou Meilu and Shanghai Meilu. Through the layout of the acoustic field, Luxshare's precision acoustic components have successfully penetrated Apple's Mac, iPad and iPhone.

In March 2018, Lijing Innovation, a subsidiary of Luxshare Precision, acquired Lite-On's camera module CCM division, officially entering the optical field and complementing the precision manufacturing platform sector.

Integrated growth strategy

Integrated growth strategy refers to the use of the direct relationship in the socialized production chain to expand the business scope and scale, and to implement vertical production, production and sales. or a horizontally integrated strategy.

By adopting a horizontal integration strategy, enterprises can effectively achieve economies of scale and quickly acquire complementary resources and capabilities. In addition, through acquisition or cooperation, enterprises can effectively establish a fixed relationship with customers, curb the expansion intention of competitors, and maintain their own competitive position and competitive advantage.

In economics, the business layout that occupies several links along the industrial chain is called vertical integration. The original intention of vertical integration is to establish a strong large-scale production capacity to obtain higher returns, and to obtain direct feedback from various market information through a strategy oriented to the sales terminal, so as to promote continuous product improvement and cost reduction. A way to gain a competitive advantage.

The implementation of the vertical integration strategy can control the key input resources and sales channels in one's own hands, so as to prevent new entrants in the industry and prevent competitors from entering the business field of the enterprise.

Luxshare's strategy is to first integrate horizontally, eat up its competitors in the cable and connector field, become the leader, and then carry out vertical integration in the industry. Basically, every acquisition can make Luxshare quickly entered a new field, from connectors to soft boards, acoustic components, to camera modules. It is precisely because of this model of diversification and expansion that it is almost the same as that of Foxconn back then. Many people bluntly said: Luxshare is copying Foxconn's model, from purely supplying components and brewing to the assembly of complete machine products.

For OEM/ODM enterprises in the middle and upper reaches of the supply chain, cost-competitiveness will be a relatively intuitive way of competition. Luxshare builds cost advantages in three directions: vertical integration, involvement in the industrial chain Downstream, reducing the cost of components; horizontal integration, product diversification, forming synergies; economies of scope, sharing intelligent manufacturing management experience, and also benefiting from sales channels, brand building, and recycling services.

It is its scientific research that supports Luxshare Precision to become stronger. Over the years, as an industry-leading technology-based manufacturing enterprise, Luxshare Precision has shown a rising trend in its investment in R&D technology. The number of R&D personnel increased from 1,685 in 2014 to 7,263 in 2018. The proportion of R&D personnel has increased year by year and is now nearly 10%. The proportion of R&D expenses to revenue continued to rise, from 5.5% to 7.0% from 2014 to 2018, ranking among the best in the industry and firmly in the first echelon. Let's look at Foxconn, the teacher of Luxshare Precision, known as the "Whampoa Military Academy" in China's intellectual property industry, and is transforming into a high-tech R&D manufacturer. How far is Luxshare Precision from Foxconn?