By Greg Gao

Luxshare Precision(立讯精密), a major Apple supply chain partner based in China producing its AirPods earbuds, is increasing the recruitment of workers for its production lines in Jian of southeastern China’s Jiangxi Province. The move is believed to make up for the lost capacity from the Covid-19 lockdown in Shanghai, according to industry observers.

Luxshare’s recruiters said that this round of recruitment of employees in Jiangxi factories is mainly assigned to the plant’s A6 and A7 factories and the working hours are about 11 hours, which means the production line is very busy.

“Currently, except for Foxconn, the factories of Taiwanese Apple suppliers are concentrated in the Yangtze River Delta region and Sichuan Province. The Yangtze River Delta region are affected by the large-scale spread of the Covid-19 epidemic. Therefore, Luxshare’s recruitment efforts at this point may be prepared for the transfer of production capacity.” one industry insider told JW Insights.

Another industry veteran familiar with Apple’s supply chain also told the JW Insights that as Shanghai and adjacent Kunshan, a manufacturing hub where many Taiwanese electronics makers are based, suffered from prolonged lockdown, the most important thing for Apple is production capacity.

Meanwhile, Taiwan-based industry analyst Ming-Chi Kuo tweeted earlier this month that AirPods 3 orders for 2-3Q22 have been cut by more than 30%. Due to the failed product segmentation strategy, demand for AirPods 3 is significantly weaker than for AirPods 2. AirPods Pro may get discontinued after Apple launches AirPods Pro 2 in the second half of 2022 to avoid repeating the same mistake.

There are various signs that the market performance of Apple’s newly launched AirPods 3 is indeed not as good as its predecessors. In addition, the entire consumer electronics market has continued to face a gloomy prospect since the beginning of this year. Apple’s action to cut orders seems reasonable.

The AirPods 3 suffered a significant cut in orders and the main supplier Luxshare Precision expanded production line hiring seem to contradict each other. The JW Insights analyst pointed out that there are two reasons for the AirPods output cut. The first is that the product itself lacks competitiveness. For the majority of TWS headset users, the active noise reduction function is a very important selling point. As the cost decreases, this function has become the “standard” of many brands of TWS headsets. However, the AirPods 3, priced at RMB1399($217), does not support active noise-canceling. 

The second is the sluggish consumer electronics market so far this year. In addition, there are other factors such as the Russia-Ukraine war, the Covid-19 epidemic, and inflation. Apple and its suppliers will have to adjust their future order volumes based on the actual situation.