Pegatron Corp. Chairman, Tung Tzu-hsien, claims his firm will begin supplying electric vehicle company Tesla with electronics components, reports DigiTimes. Industry insiders told the publication the Taiwanese manufacturer would make central control system parts for the automaker’s Model 3 sedans.
Pegatron is one of the few companies contracted by Apple to assemble its iPhones.
How Pegatron Benefits from Joining Tesla’s Supply Chain
From Pegatron’s perspective, the best thing about joining Tesla’s supply chain is the potential long-term value of the partnership.
The electric car company recently became the world’s most valuable auto manufacturer because of the remarkable popularity of its offerings. Consumer interest in the corporation’s current products is so strong, even the coronavirus pandemic could not halt its sales momentum. Moreover, the firm’s Cybertruck, which will enter production next year, has received more than 500,000 preorders.
Tesla’s healthy financial picture and strong prospects indicate its component vendors will receive a consistent stream of orders for years to come. Also, the Model 3 is far and away the company’s most popular offering. Therefore, the firm logically spends significant capital in keeping its parts in stock at its production facilities.
That means adding Tesla to its client list could have a transformative impact on Pegatron’s business.
A Smart Long-Term Growth Strategy
Currently, Pegatron is doing very well for itself. The company reportedly generated NT$105.61 billion ($3.61 billion) in revenue last month, up 7.3 percent year-over-year. However, the firm has recently taken steps to expand its business significantly in the long-term.
Last month, the company announced it would spend nearly half a billion dollars to buy Casetech Holdings. By taking the manufacturer under its umbrella, the firm gained a wealth of technological resources. Also, since Casetech has a contract to construct Apple’s iPad, Pegatron deepened its relationship with the client responsible for half of its revenue.
In addition, the Taiwanese corporation announced plans to build a new iPhone plant in India. Subsequently, Bloomberg reported the firm would take part in the South Asian republic’s $6.6 billion electronics manufacturing subsidy program. That means the company will expand its core product output with lower than usual overhead costs.
In just a few months, Pegatron’s leadership landed a major new customer and enhanced its most important business relationship. By doing so, the firm has put itself on a path to improve its revenue generation in the long-term.
If it continues, that kind of forward-looking planning will make Pegatron one of the global electronic components sector’s key players.