Apple Inc has reached out to Chinese manufacturing firm Luxshare to develop its upcoming augmented reality (AR) smart glasses, Nikkei Asia reported on Thursday.
Luxshare is rising in the ranks of Chinese industry. According to five anonymous sources familiar with the matter, the company recently acquired China’s AR powerhouse in Shanghai, which Taiwanese firm Pegatron previously owned.
The decision is the first for the MacBook and iPhone maker since choosing China to supply an inaugural device. It also indicates a major achievement for Chinese suppliers as Apple previously supported Taiwanese firms.
In the recent past, Apple backed Taiwan’s Foxconn for its first-generational products. However, the shift indicates an olive branch to Chinese businesses following increasing tensions with the United States.
The COVID-19 pandemic and heavy crackdowns on infection spikes have also affected supply chain operations.
Reasons to Choose China’s Luxshare for AR Device
According to a supply chain exec familiar with the matter, speaking to Nikkei Asia, Pegatron remained a longstanding manufacturer for Apple’s iPhone and the first to supply Apple’s AR products.
Despite this, relations between the two companies soured after Pegatron pulled out of Apple’s AR device plans. Pegatron later shifted focus to automotive and server devices.
This has allowed Luxshare to enter Apple’s supply chain and boost business deals with the Cupertino-based tech giant, according to four people speaking to Nikkei Asia. The company has significantly increased its presence with the US tech firm, manufacturing its iPhones, AirPods, and Apple Watches, the report added.
Apple Chief Executive Tim Cook visited the Luxshare manufacturing facility in December 2017 to meet with workers and executives. The Apple exec aimed to discuss meeting his company’s requirement for Airpods and later, discussed his support for Luxshare with Chairwoman Grace Wang.
At the time, Cook said Apple had no plans to shift production lines to India, Southeast Asia, or other low-cost locations.
In a statement at the time, Cook explained,
“We’re not doing that. Manufacturing our products requires deep engineering skills, flexible supply chain management, and exceptional quality standards. We won’t be shifting production for the sake of lowering costs”
Conversely, Foxconn will build a further second-generation, cheaper AR device, the four people explained. Additionally, Foxconn wold focus on “automating mass production and improving production performance to help Apple lower overall costs,” the report read, citing two sources.
Furthermore, Taiwan Semiconductor Manufacturing Co and Sony Japan develop AR micro-OLED displays for Apple, namely for its upcoming mixed reality (MR) headset.
The Price is Right?
According to industry analysts cited by the report, rising costs related to Apple’s micro-OLED displays and processors could push the costs of the device up to $3,000 to $5,000 USD.
According to an executive familiar with the developments speaking to Nikkei Asia,
“Apple’s first generation of AR devices will be extremely expensive, and really only can attract those passionate tech geeks or premium customers. But Apple hopes to push the price down in the second generation of devices, which is in parallel development, to a more affordable price, like a high-end Mac computer, and hopes to attract a bigger user base”
The news comes after Apple scrapped its AR smart glasses project indefinitely to focus on a high and mid-tier set of MR headsets. Other factors include a host of technical issues, prompting the delay.
Bloomberg initially revealed the news in its report, citing sources familiar with the matter. Additional updates indicate that the current expected device could feature a price of $3,000 USD, with a cheaper version at $1,500.
The news comes just a day after Meta Platforms reportedly entered talks with Chinese tech giant Tencent Holdings. Negotiations are taking place to determine whether the Meta can sell its Quest product lineup of headsets in mainland China via a potentially new agreement.
