Flextronics was kicked out of the supply chain. Foxconn and BYD picked Huaweis order

 Flextronics was kicked out of the supply chain. Foxconn and BYD picked Huaweis order

[In 2018, Flextronics earned about $2.5 billion in revenue from Huawei. After being kicked out of the supply chain by Huawei, its factory in Wangcheng Economic Development Zone, Changsha, was shut down.

After Huawei sent a lawyers letter to Weichuangli asking for compensation of hundreds of millions of yuan, the first financial reporter learned from the supply chain on August 12 that orders including mobile phones and notebooks are rapidly flowing from Weichuangli to other manufacturers.

Some notebook and tablet projects have been transferred to us, and the mobile phone project is also under discussion, but our current capacity is not enough to take over too much. Wentai Technologies insider told reporters that India, Indonesia and Wuxi factories have been added, and production capacity is gradually expanding. According to the reporters understanding, Longqi Science and Technology and Guanghong Science and Technology also undertook part of Huaweis mobile phone industry business.

Foxconn and BYD are the biggest beneficiaries of Huaweis orders, according to the agencys report. Guoxin Securities (Hong Kong) said that as the main supplier of Huawei P and Mate series, BYD Electronicss revenue from Huawei will grow by 50% to 60% in 2019. According to BYD Electronicss annual report of 2018, Huawei orders account for more than 30% of its total revenue. Foxconn told reporters that it did not comment on a single customer or product, but insiders said orders from China surged in May and June.

Yu Chengdong, head of Huaweis consumer business, told reporters at the Huawei Global Developers Conference that despite the peripheral impact, the overall sales of smartphones this year are still expected to be around 240 million.

We deeply regret that the recent trade situation has greatly affected our relationship with Huawei, an important customer. Although Huaweis demand for our services has declined rapidly, we still hope and look forward to continued constructive cooperation between the two sides in the future. On August 8, Flextronics China issued an open letter in its official microblog in response to the seizure of Huawei materials.

In the days before Flextronics responded, Huawei had sent a lawyer letter to the company asking for compensation for hundreds of millions of yuan, involving loss of income, waste of materials and replacement of equipment. The lawyer wrote that after Washington issued the Huawei ban in May this year, the Chinese subsidiary of Flextronics ignored Chinese law and refused to return Huaweis production equipment, raw materials and semi-finished products at its Zhuhai plant, worth about 400 million yuan.

We cant understand why their Chinese factories confiscated our goods, which is an over-interpretation of the US ban. Guo Fulin, Minister of International Media Affairs of Huawei, said.

At present, Huawei has removed Viacom from the supply chain system, and the latest quarterly results show that Viacom achieved revenue of about $6.2 billion, down 3% from a year ago; net profit of about $45 million, down 61.2% from $116 million in the same period last year. Reporters learned that last year, Flextronics earned about $2.5 billion in revenue from Huawei, and now this part of the order has begun to flow to other generations of factories.

On July 26, Fujikang (02038.HK) shares rose sharply as Huawei increased its order volume and Foxconn received the news of an expansion of its production line. According to media reports, the overall output value of Longhua and Guanlan Parks in Shenzhen, Foxconn, reached 12% annually in the second quarter. In the first half of the year, Foxconns lens and module-related output value for this customer increased by 94% annually, and from May to June, its total output for this customer and its components increased by 15% annually.

Take India as an example, Yang Shucheng, secretary-general of the China-funded Mobile Phone Enterprises Association of India, told reporters that Huaweis mobile phone agency business in India is mainly undertaken by Flextronics and Foxconn. After Flextronics is blacklisted, orders will be transferred to such assembly plants as Foxconn and Guanghong. Guanghong Technology and Huaweis cooperation not only in mobile phones, tablets and other terminal consumer products, but also in the field of Huawei communications equipment EMS agent. Yang Shucheng told reporters.

And BYD Electronics may undertake Huaweis mobile phone agency business in Hunan. Business data show that on June 11, Changsha BYD Electronics Co., Ltd. was registered and established. Its main business is intelligent equipment manufacturing, intelligent consumer equipment manufacturing and so on.

Self-built factory VS OEM factory

According to local media reports in Brazil, Huawei plans to invest $800 million to build a mobile phone factory in Sao Paulo, Brazil, in the next three years, and intends to manufacture 5G smartphones in the new factory for the South American market. In May this year, Huawei launched the P30 series of mobile phones locally in Brazil, and hired Brazilian employees to manage the business.

Louis Paulino, a professor at the School of Philosophy and Science at Sao Paulo State University in Brazil and an expert on China, said in an interview with Xinhua that Brazil had no reason to reject Huawei. He said that almost all telecommunications companies in Brazil are now upgrading their network technology. Especially in many big cities in Brazil, 5G technology will become an important tool to improve urban management and provide more convenience and security for citizens.

In addition, another attraction for Huawei to set up factories locally is that Brazils smartphone market is still growing rapidly.

According to reporters, Brazil, located in South America, is the fourth largest smartphone market in the world. According to IDCs analysis, Brazilian smartphone sales will grow by 18% in 2019, reaching 24.5 billion US dollars. Smartphone business will become the main growth area of Brazilian information and communication technology industry.

He said that Samsung is currently the most popular mobile phone in Brazil, but Huawei ranks second. Because Brazil imposes heavy taxes on imported mobile phones, many smartphone manufacturers choose to set up factories in Brazil. With the growth of Huawei mobile phone sales in Brazil, it is also expected to set up factories. Local factories are helpful for logistics, IT systems and security, and Brazil is an open market, more suitable for large brand development channels.

At present, Samsung and LG all set up factories in Brazil to produce mobile phones.

Yan Zhanmeng said it was possible for Huawei to accelerate the pace of building its own factories after it kicked out of the supply chain list. However, from the perspective of Huaweis global mobile phone supply chain system, it is still the mainstream way to choose factory-on-behalf cooperation. Tax considerations are the main reason for Brazil to set up factories this time. Huawei insiders told reporters.

In the past, we were trying to make a little money, but now we are trying to defeat the United States. We must be ambitious, accommodate talents from all over the world and fight together. Ren Zhengfei, founder of Huawei, said at the banner handover ceremony of the CBG departments Ronyl 2 Aircraft on July 31 that ecological construction is not a matter of overnight, and that preparations for the Long March should be made.