Wingtech Technology is taking flight. The once little-known Chinese designer of low-end smartphones has become a major contractor for Apple and aspiring semiconductor producer — and the subject of international controversy over its acquisition of U.K.-based chipmaker Newport Wafer Fab.

For Wingtech, that deal is just one of several savvy investments that it’s made in the last five years, as the company seeks to muscle its way into China’s burgeoning chips industry. This week, The Wire takes a closer look at Wingtech Technology: its rapid growth, its evolving business and its investors.

RAPID RISE

Wingtech, based in Jiaxing in the coastal province of Zhejiang, was founded in 2006 by Zhang Xuezheng, an engineer who had worked stints at Dutch chipmaker STMicroelectronics and Chinese telecommunications firm ZTE.

The timing of Wingtech’s launch was fortuitous, with the introduction of the iPhone in 2007 ushering in a new era for smartphones. Zhang seized the opportunity to make the company into a leading smartphone ODM, or original design manufacturer. 

ODMs are companies that design and manufacture products on behalf of a client firm, which then sells the products under their own brand. The likes of Samsung, Huawei and Xiaomi employ ODMs for many of their entry level and mid-range device offerings, where profit margins aren’t as high. This approach is different from an OEM, or original equipment manufacturer such as Foxconn, which manufactures a product that is designed by the client. 

Since 2007, Wingtech has been a leading smartphone ODM, designing and making smartphones for Xiaomi’s Redmi line of low cost devices, as well as Samsung’s Galaxy A-series phones. Wingtech accounted for about one-fifth of the global smartphone ODM market in the first half of 2022, according to Counterpoint Research, a market research firm.

FROM ENTRY LEVEL TO CUTTING EDGE

Since 2019, Wingtech has sought to diversify into more lucrative sectors through a series of strategic acquisitions. Some of these deals have helped turn Wingtech into an important player in the Apple supply chain. In the last year alone, the company has secured orders to provide equipment for Apple products including the Mac Mini desktop computer and older generation MacBooks. 

Wingtech could become an even bigger supplier to Apple following its acquisition of a key subsidiary from Ofilm Group Co., a former iPhone camera module supplier, for $370 million in 2021. Apple had severed ties with Ofilm earlier that year, after allegations came to light about its participation in a government program to forcibly transfer Uyghurs from Xinjiang to other parts of China.¹In July 2020, an Ofilm subsidiary was sanctioned by the U.S. for its alleged link to human rights violations. That subsidiary, Nanchang O-Film Tech, was not once of the subsidiaries acquired by Wingtech.

While Wingtech doesn’t yet supply camera modules to Apple, owning a former supplier could allow it to secure contracts in future, says Ivan Lam, senior research analyst at Hong Kong-based Counterpoint Research. “Being a supplier to Apple is very good training for supply chain players. Its strict rules mean that if you can meet the standards of Apple, you can supply other customers very well already.”

Wingtech’s acquisition of Dutch semiconductor manufacturer Nexperia for $3.6 billion in 2019 was another milestone deal for the company. Nexperia — a spin-off from chipmaking giant NXP Semiconductor, which Wingtech bought from Chinese private equity firm JAC Capital — owns chip-packaging and testing facilities in the southern province of Guangdong, as well as Malaysia and the Philippines. Buying Nexperia has also enabled Wingtech to move into the fast-growing market for automotive chips — one reason for its interest in Newport Wafer Fab, a specialist in such products.

Wingtech’s production line is largely insulated from exposure to the Western sanctions that have hurt more advanced Chinese chipmakers. Automotive chips are relatively simple in design compared to the advanced chips found in smartphones or AI engines, and don’t require much of the cutting edge manufacturing equipment that is subject to Western export controls. 

“Wingtech saw that the ODM business wouldn’t be sustainable in the long term,” says Counterpoint’s Lam. “But its diversification into optical products and the automotive business opens up markets worth billions. I would say it’s in good shape.” The company’s annual revenue jumped three-fold between 2018 and 2021 to about $8 billion last year. 

INVESTORS

These are some of Wingtech’s largest investors. One notable shareholder is Gree Electric Appliances, the Zhuhai-based white goods giant which has also hopes to expand into the chipmaking space. Gree owns about 3 percent of Wingtech and was a co-investor with it in Guangzhou Delta Image Technology, the iPhone camera-making unit acquired from Ofilm last year.²This camera unit was originally founded by Sony of Japan.

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