Hangzhou Cable to acquire Fuchunjiang Photoelectric
06 Jun 2017
Region:Asia (China), Topic:Corporate, Market & Product:Communications (Single Mode Fibre), End Use (Cable Materials supply)
China's metallic cable producer, Hangzhou Cable Company is to acquire Fuchunjiang Photoelectric Company, an optical cable manufacturer.
Hangzhou Cable said it will invest a total of RMB 900 million ($132 million), which will be used to buy 100% shares of Fuchunjiang Photoelectric and build an integrated fibre unit with a capacity of 5 million F-km per annum.
Hangzhou Cable is listed on the Shanghai Stock Exchange and is the core enterprise of privately-owned Fuchunjiang Communication Group Company. The latter is also the parent enterprise for Fuchunjiang Photoelectric. The Sun family headed by Qingyan Sun hold a majority stake in both Hangzhou Cable and Fuchunjiang Photoelectric.
The acquisition would consolidate the group's energy and communication cable operations. Hangzhou Cable's main products include, amongst others, power cables up to 220kV, large-section large-span series aluminium alloy conductors, special cables, overhead wires, overhead cables, wires for electrical equipment, rubber sleeve cables and mining cables.
Fuchunjiang currently has the capacity to make 2.5 million F-km of optical cable. In October 2016, Fuchunjiang and Hengtong Optic-Electric Company signed a long term cooperation agreement under which Hengtong will provide Fuchunjiang with drawing technology, drawing facilities and supply it with all of its preform requirements over a 10-year period.
Following the takeover, Hangzhou Cable plans to build an integrated fibre unit with the capacity to make 5 million F-km fibre and 150 tonnes of preform per annum. This acquisition aims to establish an integrated "Preform-Fibre-Cable" chain.
Yuya Pan, senior analyst, Wire & Cable, CRU said: "This acquisition along with the integrated fibre project will undoubtedly enhance Hangzhou cable's market position in China's optical fibre industry.
Domestic optical cable manufacturers have benefited from China's accelerated fibre-to-the-home deployments and 4G network expansion. The downside has been that a lack of preform capacity has led to tight fibre supply. This has led cable manufacturers to build their own upstream facilities or secure their raw materials via long term supply agreements with major preform producers.
However, setting up a preform facility is not so easy due to stringent chemical controls that have to be adhered to during the preform production process. As one of the largest preform producers in China, Hengtong will provide technology support to Hangzhou Cable's preform and fibre projects. Also, large-effective area fibres will be a stepping stone to the next generation of high-speed transmission equipment. CRU understands Hengtong is taking a leading role in developing G.654 fibre with large effective area and ultra-low loss (ULL). As such, the new fibre plant is likely to focus on this specific type of fibre".
Contributor:Yuya Pan, Senior Consultant, Wire and Cable, CRU