More on the mainland According to an investment fund manager, Chinese electronics manufacturers are poised to eat into market share held by Taiwanese rivals such as Foxconn and Pegatron.

“Chinese companies are getting pretty competitive for iPhone assemblers. China is doing quite well in pretty much everything, except semiconductors,” Kirk Yang, chairman and CEO of Kirkland Capital, told CNBC’s “Squawk Box Asia” Friday.

“So that’s why eventually, you are going to see more and more Chinese companies taking market share away from Taiwanese electronic companies,” Yang added.

Foxconn, also known as Hon Hai, Apple’s largest supplier, is facing competition from China’s Luxshare, which was reportedly awarded a contract to produce premium iPhone models in China.

This comes after Foxconn reported record unaudited revenue in 2022 and said output at its Chinese iPhone plant had “basically returned to normal.”

According to the Financial Times, Luxshare has been producing a small quantity of the iPhone 14 Pro Max model at its Kunshan plant while Foxconn’s Zhengzhou factory faced Covid restrictions and labor unrest last year.

Luxshare, founded in 2004 by a former Foxconn employee, manufactures connector cables for the iPhone and MacBook, as well as AirPods.

Yang added that due to geopolitical tensions between China and Taiwan, Taiwanese companies on the mainland have come under a lot of pressure in the last five years. “A lot of them are leaving China,” Yang explained.

That’s why Apple needs to diversify, he says, adding that the US-China tech war is causing companies to flee mainland China even faster.

Furthermore, Chinese firms such as Luxshare benefit from the Hong Kong advantage, according to Yang.

“They can probably hire people [more easily than non-Chinese companies] and get better tax incentives. After local companies learn how to make products in a similar quality, at a cheaper price, they will be taking market share.”

Nikkei Asia reported in mid-2021 that mainland China had surpassed Taiwan to become Apple’s largest supplier.

(Adapted from CNBC.com)