Tim Cook can’t make iPhones without this Chinese company and its CEO

Many Apple customers may not be familiar with Luxshare Precision or its leader Grace Wang, but they likely own its handiwork. Along with other Apple contractors, Luxshare manufactures AirPods, the Apple Watch and the recently released iPhone 15, including the top-of-the-line iPhone Pro Max. Luxshare is also the assembler of Apple’s first mixed-reality headset, due to reach consumers next year.

That list of products shows the challenges facing Apple chief Tim Cook in trying to ease back from producing in a U.S. adversary and lean more on nations such as India and Vietnam.

On Wednesday, Cook made a surprise visit to Luxshare’s Apple Watch factory near Shanghai and praised the assembler’s work in making Apple’s most advanced products. In a video posted on social media, Cook smiled and nodded as he spoke to Wang, Luxshare’s chairwoman, and viewed solar panels powering the factory.

“Thank you, Grace and team, for sharing our commitment to protecting the planet," he wrote on social media.

It was a follow-up to a visit Cook paid to another Luxshare factory in 2017 when the relationship was beginning to take off. Cook then praised the supplier’s “phenomenal precision and care" and said, “Chairman Grace Wang has built a culture of excellence."

Apple has been hitting headwinds in China recently as the government orders officials not to use the iPhone or other foreign devices at work and cracks down on foreign apps. Yet most iPhones are still made in the country and it would likely take years to change that.

One reason: Chinese CEOs such as Wang are experts at doing what Apple wants.

Her story is intertwined with that of Taiwan-based Foxconn Technology, which long dominated iPhone assembly at its “iPhone city" in central China. Luxshare started by taking orders that Foxconn couldn’t fulfill and now is eating into Foxconn’s Apple share, according to analysts.

Wang Laichun, who goes by Grace Wang among Westerners, was born in 1967 in a part of southern Guangdong province famous for nurturing entrepreneurs, including Hong Kong tycoon Li Ka-shing. She didn’t attend college, instead going to work in factories as a teenager.

Wang was among the first cohort of workers hired when Foxconn opened a factory in the southern boomtown of Shenzhen in 1988. Starting with rote production work such as manually inserting parts onto circuit boards, Wang spent 10 years at Foxconn and rose to be a team leader.

In 1998, she struck out on her own. With her brother, she set up a factory to make products such as electric cords and the cases of television sets.

Wang admired Foxconn founder Terry Gou and tended to quote him when speaking to employees, especially in the early years, according to Luxshare employees. Foxconn was also Luxshare’s biggest customer, standing one notch above it on the electronics food chain. A Luxshare prospectus in 2010, when it went public, said about half its operating revenue in the previous three years came from Foxconn.

Soon after going public, Wang and her brother, Wang Laisheng, went on an acquisition spree, earning the company the nickname “octopus" due to its many arms grasping for new business lines. One of its new purchases made cables for Apple’s iPad.

According to Luxshare, Wang used her favorite motto to describe the Apple relationship: “Flying with phoenixes will nurture outstanding birds."

After establishing itself as a leader in cables and connectors, Luxshare moved into adjacent products including earphones and camera modules. A 2016 acquisition brought in expertise that helped Luxshare secure orders for AirPods, a product that requires intricate manufacturing skills to pack hundreds of components into a tiny space.

Apple sent engineers to help Luxshare and found that the contractor could make AirPods without losing many to defects. Wang showed her intimate knowledge of Apple products, effortlessly reciting details about MacBook models and their charging interfaces, according to a company account.

“Apple’s stringent requirements have profoundly impacted Luxshare," Wang said during Cook’s 2017 visit. “Over the years, we have closely followed Apple, and this alignment has propelled Luxshare towards growth and prosperity."

Wang is the type of person to pore over the latest proposed specs for USB ports and make sure Luxshare masters them, say people familiar with her approach. Unlike her flamboyant mentor, Foxconn founder Gou, who is currently running for president of Taiwan and built ties with former President Donald Trump, Wang keeps a low public profile.

However, like many Chinese CEOs, she concurrently holds a political post as a member of the Chinese People’s Political Consultative Conference, a national advisory body. Luxshare didn’t respond to requests to make Wang available for an interview.

Another set of acquisitions propelled Luxshare to the top of the Apple supplier ranks. In 2020, it took over iPhone manufacturing facilities in China from Taiwan-based assembler Wistron.

In the past several years, Apple’s Taiwanese suppliers, including Foxconn, have grown unhappy about the low profit margins in their Apple business and the heavy capital investment required, according to people at the suppliers. And, on Apple’s side, the risks of relying too much on one company were highlighted in late 2022 when worker unrest hit Foxconn during the final days of China’s harsh Covid-19 lockdowns.

The answer: more reliance on Luxshare. Last year, Luxshare’s biggest customer accounted for more than 73% of its revenue, according to the company’s annual report, which didn’t name Apple.

That dependency has caused some concern among Luxshare investors because it, too, tends to earn low margins on its assembly business. Net profit was only about 4% of revenue last year. The company said late last week that revenue in the July-September quarter fell 8.5% compared with the same period a year earlier, although profit was up. The stock is off by nearly half from its peak three years ago.

Wang has said Luxshare shouldn’t rely too much on a few large customers and has begun acquiring and investing in suppliers to electric-vehicle makers. She told investors in August that Luxshare aimed to be one of the top global auto-parts suppliers working directly with brand-name carmakers.

Still, the Apple-Luxshare relationship is growing. Luxshare is handling what industry people call “new product introduction" for Apple’s 2024 high-end iPhones, according to Ming-Chi Kuo, an analyst at TF International Securities who follows Apple’s supply chain. The term refers to the process in which Apple works with its assembler to turn its product designs and prototypes into a detailed manufacturing plan. Until now, the role was virtually monopolized by Foxconn.

Luxshare is also helping Apple diversify away from China by investing in additional capacity in Vietnam and India, according to Luxshare documents and people involved in the supply chain. Wang said at a meeting with investors in 2020 that the company wanted Vietnam to account for 30% of its total production, without reducing its China footprint.

Luxshare has also begun preparing to assemble a next-generation version of Apple’s virtual-reality headset, which Kuo estimated could go into mass production in 2027.

Write to Yang Jie at jie.yang@wsj.com