Chinese automaker BYD recently announced a significant development that is poised to enhance its electronics unit.

The company’s electronics arm, BYD Electronic (BE), has successfully secured an agreement with the U.S.-based manufacturer Jabil Inc. to acquire its mobile electronics manufacturing business situated in China.

The deal is valued at a substantial 15.8 billion yuan, equivalent to around $2.2 billion in US currency.

The primary aim of this acquisition is to bolster BYD Electronic’s market presence and offerings. It promises to usher in an expansion of the customer base and an augmentation of the product portfolio.

Particularly, this move is expected to give BE an edge in the sector of smartphone components. The acquisition has strategic implications, as it aligns with BYD’s ambition to tap into the growth opportunities that Jabil has been fostering in this arena.

Jabil Inc., headquartered in Singapore, specializes in producing printed circuit boards and has recently established a unit dedicated to amalgamating its product-manufacturing enterprises located in Chengdu and Wuxi. This unit is now slated for acquisition by BYD Electronic, adding substantial value to the Chinese company’s operations.

The stock market responded with initial uncertainty to this development. Initially, shares in BYD Electronic dipped by as much as 9% on the Hong Kong Stock Exchange. However, the scenario quickly reversed, and the shares managed to rebound, achieving a 0.5% increase by the afternoon. In contrast, the broader market showed a 1.5% surge. Notably, the Hong Kong-listed parent company BYD’s stock also experienced a 0.9% upward trend.

While BYD is widely recognized today for its electric vehicle endeavors, its origins trace back to the sale of electronic components. The company initially ventured into the industry by listing its BE unit on the Hong Kong Stock Exchange in 2007. Over time, BE’s core focus has been centered around vending electronic components for consumer electronics, such as smartphones and laptops. This segment contributed significantly, accounting for over 70% of the total revenue garnered by BYD Electronic in the year 2022.

Observing this development, industry analysts have commented on its implications. Tu Le, the founder of consultancy Sino Auto Insights, highlighted the significance of this move for BYD. Le pointed out that this situation acts as a reminder that BYD’s capabilities extend beyond electric vehicles. The company holds a substantial position in the mobile supply chain, even serving as a supplier to Apple Inc.

Experts at Citi shared their perspective on the deal, suggesting that it encompasses Jabil’s Green Point metal casing operations located in Wuxi. They also speculated that this move could potentially enable BE to further penetrate Apple’s casing supply chain, thereby increasing its market share in this aspect.

As for the financing of this acquisition, it is anticipated that BYD Electronic would need to resort to a combination of loans and equity issuance. However, neither BYD nor BE has yet disclosed the exact details regarding their financial strategy for this venture.

Both BYD Electronic and Jabil have chosen not to provide further comments on this development at this time.

Nevertheless, BYD expressed in an official exchange filing that this acquisition is expected to not only enhance BE’s market share but also to synergize effectively with its existing products.

The ultimate goal is to bolster overall competitiveness and ensure sustainable growth in the long run.

If this deal is successfully finalized, it holds the potential to benefit Jabil Inc. as well. Chief Executive Kenny Wilson emphasized that the definitive agreement would not only empower Jabil to enhance its capital framework but could also lead to incremental share buybacks.

This strategic step aligns with Jabil’s broader vision to channel resources into diverse sectors such as electric vehicles, renewable energy, healthcare, AI-driven cloud data centers, and other emerging markets.

Jabil Circuit, as evident from its website, operates within a variety of industries, including healthcare, telecommunications, and computing. The company focuses on fostering supply-chain intelligence to drive innovation and growth across these sectors.

For BYD, this venture marks yet another milestone in its trajectory. The company’s foray into the automobile industry dates back to 2003 when it acquired the Nanjing-based automaker Qin Chuan.

This acquisition granted BYD a crucial permit for car manufacturing. Over the years, the company has progressively expanded its automotive endeavors, culminating in the launch of its debut car model three years after the initial acquisition.