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Foxconn plans to spin off cable and connector unit

Taiwan’s Hon Hai Precision Industry, better known as Foxconn, has filed documents for an initial public offering of its cable and connector subsidiary on the Hong Kong Stock Exchange, the Wall Street Journal reports.

Sources cited by the paper said the listing of Foxconn Interconnect Technology (FIT) could raise up to US$1 billion, although the final amount hasn’t been decided.

As a contract electronics manufacturer, Foxconn assembles most of Apple’s iPhones and has recently agreed to take over Japanese electronics manufacturer Sharp.

The firm’s activities in the communications infrastructure space are less prominent, forming about 15 per cent of revenues for its connector and cable unit in 2015, according to the draft application. That unit also makes products for use in computers, consumer electronics and automobiles.

According to the prospectus, FIT ranked number one in sales among connector makers in Greater China in 2015, with an 11.7 per cent share of the market, and number five in the world with a 4.2 per cent share, citing a report by consultants Frost & Sullivan.

The rise in cloud computing will stimulate a compound annual growth rate of 11.7 per cent in communications interconnect market over the five years to 2020, which will outpace the growth of the contract manufacturing industry as a whole, according to Frost & Sullivan. Foxconn is keen to tap into this opportunity.

Foxconn’s communications revenues will already make a stepwise increase in 2016, following its acquisition of the optical modules business and related assets of Avago Technologies, which closed in December 2015 and has yet to be included in its financials.

As part of the deal, Avago agreed to license designs and technology to FIT and serve as FIT's exclusive supplier of optical components. In addition, Avago has become the worldwide sales agent for its former optical subsystems product line, selling the modules now being assembled by FIT.

Across all the end markets – including consumer electronics, mobile devices and communications –the company views TE Connectivity, Amphenol and Molex as its primary competitors.

A spokesperson for Foxconn didn't respond to the Journal’s request for comment.

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