Apple has advised one of its Airpod factories in China to make a major investment in a key supplier as the company moves to create an alternative to its longtime Iphone assembler, Taiwan’s Foxconn, according to a Nikkei Asian Review report.

Why it matters: The deal would bring Luxshare-ICT, a lesser-known Chinese assembler of Apple’s Airpods, closer to producing Iphones, grabbing share from Foxconn.

  • Hon Hai Precision Industry, known as Foxconn, is the world’s largest electronics contract manufacturer and a major Iphone assembler. 

Details: Luxshare has been in talks with Taiwan’s Catcher Technology, the world’s second-largest metal casing provider, for more than a year and has recently entered a deeper round of negotiations, according to the Nikkei report, citing a person familiar with the talks.

  • The deal in question covers some of Catcher’s facilities in China, its workforce, and its business opportunities with Apple, the report said.
  • The report cited anonymous sources as saying that Apple is keen to reduce its heavy reliance on Foxconn, which has accounted for more than 50% of iPhone production since 2007.

Context: Luxshare will help Apple produce 3 million to 4 million Airpod units in Vietnam in the second quarter as the California-based tech giant further diversifies its production out of China, according to another Nikkei report published last week.

  • Apple had previously asked suppliers to assess cost implications for shifting 15% to 30% of hardware production out of China at the peak of the trade conflict between the US and China last year.
  • Foxconn recently moved some of its Iphone production lines out of China and has started to produce some Iphone XR units in India.

Read more: Apple partner Foxconn struggles to reopen plants

Writing about semiconductors and telecommunications.