Source: Die Cutting Network

It is expected that BYD Electronics' revenue from Huawei will increase by 50% to 60% in 2019; Foxconn insiders said that orders from Huawei in May and June soared.

After Huawei issued a lawyer's letter to Flextronics asking for compensation of “hundreds of millions of yuan”, the reporter learned from the supply chain on August 12 that orders including mobile phones and notebooks are being rapidly flown from other manufacturers to Flextronics.

Flextronics is the first EMS (Electronic Manufacturing Service) manufacturer in the United States, and is currently the world's second largest electronics OEM after Foxconn. In contract services for Huawei, including foundry Smart phones and 5G base stations and other products. In 2018, Flextronics received about $2.5 billion in revenue from Huawei. After being "kicked out" by Huawei, Flextronics' factory in Changsha Wangcheng Economic Development Zone has been discontinued.

"Some laptop and tablet projects have been transferred to us, and mobile projects are also being discussed, but we are currently unable to cope with too much capacity." Wentai Technology, an insider told reporters that India, Indonesia and Wuxi have been added. The factory is gradually expanding its production capacity. According to the reporter, Longqi Technology and Guanghong Technology also undertake some of Huawei's mobile phone OEM business.

In the report released by the organization, Foxconn and BYD are the biggest beneficiaries of Huawei's orders. Guosen Securities (Hong Kong) said that as the main supplier of Huawei P and Mate series, it is expected that BYD Electronics' revenue from Huawei will increase by 50% to 60% in 2019. According to BYD Electronics' 2018 annual report, Huawei orders occupy its position. More than 30% of total income. Foxconn told reporters that “no comment on single customers and products”, but insiders said that orders from Huawei in May and June soared.

At the Huawei Global Developers Conference, Yu Chengdong, head of Huawei's consumer business, told reporters that despite the external influence, the overall sales of smartphones this year is expected to be around 240 million.

$2.5 billion order diversion


"We are deeply sorry about the recent trade situation that has a strong relationship with our important customer Huawei. Although Huawei's demand for our services has been rapidly decreasing, we still hope and expect the two sides to continue constructive cooperation in the future. "On August 8, Flextronics China issued an open letter on the official Weibo to respond to the "detention of Huawei supplies."


A few days before Flextronics responded, Huawei sent a letter to the company asking him to pay “100 million yuan” for losses, such as lost work, material waste, and equipment replacement. The lawyer wrote that after Washington issued a Huawei ban in May this year, Flextronics’ Chinese subsidiary “disregarded Chinese law” and refused to return Huawei’s production equipment, raw materials and semi-finished products at its Zhuhai plant, worth about 400 million yuan. Renminbi.


Flextronics insiders told the media that some of the equipment was detained because Huawei had defaulted on its more than one billion accounts payable. However, a Huawei supplier who did not want to be named said to reporters: "Huawei's account period is relatively long among customers, but it is an excuse to detain customer equipment for this reason."


"We can't understand why their Chinese factory confiscated our goods, which is an over-interpretation of the US ban," said Guo Fulin, director of Huawei's international media affairs department.


At present, Huawei has removed Flextronics from the supply chain system, and the latest quarterly financial report shows that Flextronics achieved revenue of approximately US$6.2 billion in the quarter, down 3% year-on-year; net profit was approximately US$45 million, compared with US$116 million in the same period last year. The ratio is significantly reduced by 61.2%. The reporter learned that last year, Flextronics received about $2.5 billion in revenue from Huawei, and this part of the order has begun to flow to other foundries.


On July 26, due to the increase in orders by Huawei, Foxconn was affected by the news of the transfer of the production line. Fu Zhikang (02038.HK)'s share price soared. According to media reports, the overall output value of Foxconn Shenzhen Longhua and Guanlan Park increased by 12% in the second quarter. In the first half of the year, Foxconn's production value for the lens and module of the customer increased by 94% annually. From May to June, the output of the whole machine and machine components increased by more than 15%.


For the above news, Foxconn told reporters that it is impossible to comment on a single customer, but it can be seen that Foxconn is closely cooperating with Huawei in the mobile phone business.


In India, for example, Yang Shucheng, secretary general of the Indian Chinese Mobile Phone Enterprise Association, told reporters that Huawei’s mobile phone OEM business in India is mainly undertaken by Flextronics and Foxconn. After Flextronics entered the blacklist, orders will be assembled to Foxconn and Guanghong. Transfer. "Guanghong Technology and Huawei's cooperation in addition to mobile phone, tablet and other terminal consumer products, as well as Huawei's communications equipment field EMS foundry." Yang Shucheng told reporters.


And BYD Electronics will undertake Huawei's mobile phone OEM business in Hunan. According to industry and commerce data, on June 11, Changsha BYD Electronics Co., Ltd. was incorporated, and its main business is the manufacture of smart devices and the manufacture of smart consumer devices.


Self-built factory VS foundry factory


In addition to the adjustment of mobile phone OEM business orders, Huawei's pace in mobile phone self-built factories is also accelerating.


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


Luis Paulino, a professor at the School of Philosophy and Science at São Paulo State University in Brazil and an expert on China issues, said in an interview with Xinhua News Agency that there is no reason for Brazil to reject Huawei. He said that almost all telecommunications companies in Brazil are currently upgrading their network technologies. Especially in many large 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 reason for attracting Huawei to set up a local factory is that the Brazilian smartphone market is still growing rapidly.


According to the reporter, Brazil in South America is the fourth largest smartphone market in the world. According to IDC analysis, the sales of Brazilian smartphones will increase by 18% in 2019, reaching 24.5 billion US dollars. The smartphone business will become Brazil's information and communication. The main growth areas of the technology industry.


Yan Zhanmeng, research director of Counterpoint Greater China, told reporters that the South American market that Brazil belongs to is an emerging market with a relatively large market space and a very high market demand. There are about 40 to 50 million sales space every year. "This market is big enough to mean that the cake is enough to eat. Brazil is also a country that is still growing in a few large markets." Yan Zhanmeng told reporters.


He said that the highest-selling mobile phone in Brazil is Samsung, but Huawei ranks second. And because Brazil imposes heavy taxes on imported mobile phones, many smartphone manufacturers choose to set up factories in Brazil. With the growth of Huawei's mobile phone sales in Brazil, it is expected to set up factories. “The local factory has helped solve logistics, IT systems and security, and Brazil is an open market, which is more suitable for big brand development channels.”


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


After removing Flextronics from the supply chain list, whether Huawei will speed up the pace of self-built factories, Yan Zhanmeng said that "it is possible", but from the perspective of Huawei's global mobile phone supply chain system, the choice of foundry cooperation is still the mainstream. "This time, the establishment of a factory in Brazil is mainly a tax consideration." An insider told Huawei.


At the previous developer conference, Yu Chengdong told reporters: "(The work of Flextronics will definitely have an impact on Huawei), and partners should not do this. This practice is also harmful to themselves." But in the view of Yu Chengdong, currently Huawei's more important task is to fill in the vulnerabilities of the Windows ecosystem and the Android ecosystem.


"In the past, we were trying to make a small amount of money. Now we are trying to beat the United States. We must have great ambitions, accommodate the talents of the world, and fight together." Huawei founder Ren Zhengfei handed over "a lot of holes in the CBG department on July 31." The rotten Il 2 aircraft "at the handover ceremony of the battle flag said that the ecological construction is not a matter of overnight, and we must be prepared for the "Long March".