Why are Apple’s supply chain partners offering IPOs in Hong Kong?
What a difference a decade makes – iPhone 7 launch at Apple Causeway Bay, Hong Kong.
Apple’s AirPod maker, Luxshare, plans a billion-dollar IPO in Hong Kong as it raises cash with which to finance its global expansion.
It’s not alone, another Apple supplier, Lens Technology, also plans an IPO in Hong Kong next week.
So, why are so many supply chain companies opting to offer up shares in Hong Kong, rather than elsewhere?
Why Hong Kong?
In this case, the move can be summed-up in two words: “Trade War”.
Companies and investors are anxious that the current US administration could simply move to de-list Chinese firms from US markets, which makes a listing in Hong Kong a better long-term choice, given the absolute power held by America’s potentate.
CNBC puts it this way, saying: “Heightened U.S.-China tensions have made Hong Kong a preferred IPO destination for many Chinese firms, over concerns that the Trump administration could order a delisting from U.S. exchanges.”
There’s also the potential for secondary listings to help protect liquidity.
The other side of this particular coin is that as increasingly nativist policies force manufacturers to diversify manufacturing outside of China, those makers will need to find some way to pay the costs of setting up production elsewhere.
Speculate to accumulate
Particularly for technology manufacturers, those costs aren’t cheap, which is why a stable IPO makes sense.
Even if a firm chose to invest that cash in sending some manufacturing to the US, it would need to pay to get there, and the last thing a maker needs is the insecurity of knowing their IPO nest egg could be annihilated with the stroke of a pen.
That’s not good for them, for jobs, or for business.
China seems to understand the need to diversify production locations and the government there is actively encouraging companies to expand globally and diversify their manufacturing locations.
Advantage: HK
Tech firms are particularly drawn to the Hong Kong market, which likes emerging sectors. That market also lets Chinese investors take positions in these firms – these currently account for almost half of Hong Kong’s daily stock turnover, CNBC reports.
Diamantina Leong, PwC Hong Kong Capital Markets Services Partner, said: “Despite ongoing uncertainties, such as geopolitical tensions and trade tariffs, the high level of liquidity in Hong Kong’s banking system is creating favourable conditions for corporate listings and fundraising…
“This highlights Hong Kong’s strengths as an international financial centre and reinforces its standing in global capital markets. Looking ahead, the market is full of opportunities. With supportive policies and ample liquidity, we expect 2025 to be the most active fundraising year for IPOs in the past four years.”
Luxshare sets the scene
That’s the big picture, but when it comes to Luxshare, the attempt to raise a billion through an IPO almost certainly suggests plans to make additional investments in manufacturing outside China.
Apple is Luxshare’s biggest customer with the smaller firm churning out AirPods – but it is also involved in manufacturing another key Apple product the Vision Pro.
Recent reports claim that Apple intends to introduce lower cost Vision Pro devices and a new family of visionOS glasses in 2027. Building the manufacturing ecosystem for which is going to require significant investments, so the IPO may well be a way for Luxshare to achieve the investment capital it needs.
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