The acquisition of certain electronics manufacturing services from Wingtech Technology by Luxshare Precision Industry Co.,Ltd. (002475.SZ) has hit another snag, with the company receiving a penalty for completing the transaction before filing the required regulatory notification.
This development follows a separate, ongoing legal dispute between the two companies over a different part of the same broader acquisition deal. Luxshare has been actively pursuing mergers and acquisitions to diversify its business away from its heavy reliance on a key client, but these moves have yielded limited success so far, with its largest customer still accounting for over half of its revenue.
A closer examination reveals that the quality of assets acquired in these deals has been mixed, with some targets operating at a loss or being technically insolvent. Furthermore, market concerns have been raised over the company's repeated purchases of loss-making assets from an affiliated firm.
Deal Turns Sour, Leading to Penalty and Court Battle
On May 27, China's State Administration for Market Regulation announced that Luxshare had been fined 900,000 yuan for failing to properly notify authorities in advance about a concentration of undertakings related to its acquisition of certain Wingtech business units.
The case dates back to January 23, 2025, when a wholly-owned Luxshare subsidiary acquired 100% equity in three Wingtech companies for 616 million yuan and settled their liabilities totaling 1.081 billion yuan. The ownership changes for all three companies were registered by January 27.
According to the administrative penalty decision, Luxshare proactively reported the potentially non-compliant transaction to regulators on February 17, 2025. Following an investigation launched on September 5, authorities confirmed the violation of pre-merger notification rules under the Anti-Monopoly Law and imposed the fine.
Subsequent to this transaction, the two parties proceeded with a second, larger phase of the deal. In May 2025, Luxshare spent 4.389 billion yuan to acquire equity and business assets related to product integration from nine Wingtech subsidiaries, including Shenzhen Wingtech and Hong Kong Wingtech. By October of that year, all assets except those related to Wingtech India had been successfully transferred and consolidated into Luxshare's financial statements.
The Indian assets became the major point of contention, escalating the dispute into a legal battle. In January 2026, Luxshare announced it was terminating the transaction for the Indian assets due to obstacles including asset seizures and freezes preventing the transfer of ownership. The company demanded the return of 153 million yuan already paid.
After Wingtech India failed to refund the payment, Luxshare initiated arbitration with the Singapore International Arbitration Centre, seeking termination of the agreement and repayment with interest. Wingtech, however, contends that the business assets in India were effectively transferred and that only land ownership paperwork remains pending. It has filed a counterclaim demanding Luxshare fulfill the contract, pay the remaining 160 million yuan, and compensate for losses. The latest updates indicate the arbitration is still in the process of forming the tribunal.
Acquired Assets Show Weakness, Major Client Reliance Persists
Luxshare has consistently used acquisitions to expand its operations. From purchasing Kunshan Shishuo in 2023 to grow its phone assembly business and acquiring a Qorvo packaging and testing plant to enter the RF front-end market, to buying Leoni AG in 2024 to bolster automotive electronics, and the series of Wingtech deals in 2025, the company has been pushing into areas beyond consumer electronics, now covering multiple sectors.
Industry observers note that this acquisition spree is aimed at building a more diversified business to reduce dependence on its core client, Apple. As part of the Apple supply chain, Luxshare's consumer electronics segment is deeply tied to the tech giant, with revenue from its largest customer once exceeding 70% of its total, a concentration that has long drawn market criticism.
The consolidation of Leoni did significantly boost revenue from the automotive electronics segment to 39.255 billion yuan in 2025, raising its contribution to total revenue from 5.12% in 2024 to 11.81%. However, the gross margin for this business declined by 0.35 percentage points to 15.75%.
Despite the growth in automotive electronics, consumer electronics remains the dominant segment, generating 264.266 billion yuan in revenue in 2025, accounting for 79.52% of the total. Revenue from the largest customer was 188.381 billion yuan, representing 56.68% of total revenue and still constituting more than half.
Amid this rapid expansion, the quality of acquired assets has been inconsistent, with some targets being loss-making or insolvent. For instance, Leoni, acquired for 4.1 billion yuan in 2024, was previously unprofitable. Among the nine companies acquired from Wingtech in 2025, four were also operating at a loss.
Financial data shows that in 2024, Huangshi Wingtech, Kunming Winyao, Shenzhen Wingtech, and Kunming Wenxun reported net losses of 646 million yuan, 255 million yuan, 54.2066 million yuan, and 865 million yuan, respectively. By the end of 2024, Huangshi Wingtech and Kunming Winyao had negative net assets of -333 million yuan and -237 million yuan, indicating technical insolvency.
Adding to the concerns, Luxshare faced market scrutiny last year for acquiring a loss-making asset from Shenzhen Changelight Co., Ltd. In June 2025, Changelight proposed to transfer its 100% stake in Anhui Xinguang to Luxshare. Anhui Xinguang, a provider of smart energy solutions, was in poor financial health, posting a net loss of 6.4038 million yuan and negative net assets of -8.1219 million yuan for the first four months of 2025.
This transaction constituted a connected transaction, as Wang Yayuan, a shareholder owning more than 5% and a director of Changelight, is the daughter of Wang Laisheng, one of Luxshare's actual controllers and its vice chairman. This was not the first time Luxshare took on a loss-making asset from Changelight; in 2024, a Luxshare subsidiary acquired another unprofitable Changelight company, Dongguan Changelight. These repeated transactions have led to suspicions that Luxshare might be providing financial support to the affiliated firm.
In a related development, Luxshare formally resubmitted an application for a Hong Kong listing in February of this year, seeking a dual listing on the A-share and H-share markets. The move is seen as a way to broaden its capital market financing channels to support overseas expansion and new technology R&D.
This push for a Hong Kong listing comes as the company faces short-term debt pressure. As of the end of March 2026, the company held 70.326 billion yuan in cash and cash equivalents, while its short-term borrowings stood at 81.034 billion yuan, meaning its available cash is insufficient to cover its short-term debt obligations.
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