Beijing, August 28, 2023 (Reuters) – Chinese automaker BYD (SZ:002594) announced a significant development on Monday, revealing that its electronics subsidiary has successfully reached an agreement with the U.S.-based manufacturer Jabil Inc. to purchase its mobility business in China for a staggering 15.8 billion yuan ($2.2 billion).
The deal marks a strategic move for BYD Electronics (BE) as it seeks to broaden its customer base, diversify its product portfolio, and bolster its presence in the smartphone components sector. This decision aligns with the company’s vision to tap into the potential growth opportunities within the mobility industry, which Jabil has been exploring.
Jabil Circuit (NYSE:JBL), headquartered in Singapore and renowned for its expertise in manufacturing printed circuit boards, recently established a dedicated unit for product manufacturing in Chengdu and Wuxi. This unit is now set to be transferred to the Chinese conglomerate.
The stock of BYD Electronic experienced a brief dip of up to 9% in Hong Kong during Monday’s trading session. However, the losses were swiftly reversed, and the stock saw an upswing of 1.4% by the midday break. Concurrently, the Hong Kong-listed shares of BYD’s parent company, BYD, exhibited a rise of 2.2%.
Although BYD is presently most recognized for its contributions to the electric vehicle sector, its origins trace back to the sale of electronic components. Back in 2007, the BE unit of BYD was listed on the Hong Kong Stock Exchange.
The core focus of BE’s operations has predominantly revolved around the sale of electronic components for consumer electronics, including smartphones and laptops. This particular segment accounted for over 70% of BE’s total revenue in the year 2022.
Tu Le, the founder of Sino Auto Insights, pointed out, “For BYD, I think it’s a reminder that they do more than just dominate in EVs.” He emphasized that BYD’s involvement extends further up the mobile supply chain, highlighting their role as a supplier to tech giant Apple (NASDAQ:AAPL).
BYD, in an official filing to the exchange, stated that the acquisition would not only bolster BE’s market share of products but also foster synergies with its existing offerings. This move is anticipated to augment overall competitiveness and secure long-term sustainable growth.
Jabil, on its part, expressed that upon the successful completion of the deal, the definitive agreement would empower the company to fortify its shareholder-centric capital framework. Chief Executive Kenny Wilson noted that this could potentially lead to incremental share buybacks.
Furthermore, the transaction is expected to grant Jabil the opportunity to channel more investments into various sectors, including electric vehicles, renewable energy, healthcare, AI cloud data centers, and other emerging markets.
Jabil Circuit has a broad scope of collaborations across sectors such as healthcare, telecommunications, computing, and storage. Their objective is to enhance supply chain intelligence, as indicated on their official website.
BYD’s initial foray into the automotive industry dates back to 2003 when the company acquired the Nanjing-based automaker Qin Chuan, which held a crucial permit for car manufacturing. This pivotal move paved the way for the launch of BYD’s inaugural car model three years later.
($1 = 7.2890 Chinese yuan)
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