Foxconn Industrial Internet Co. Ltd.

The stable outlook on Fii reflects the outlook on Hon Hai Group and our view that Fii will maintain its core status within the next 12-24 months. Our stable outlook on Hon Hai reflects our expectation that the group could moderately restore its profit margin over the next one to two years and sustain its return on capital (ROC) at 13%-16%. We also believe Hon Hai can generate significant FOCF and sustain a net cash position on an adjusted basis over the period. We could downgrade Fii if we lower our rating on Hon Hai. This could happen if Hon Hai's profitability, as measured by ROC, falls below 12%, possibly because of a weakening market position. It could also happen

...Foxconn Industrial Internet Co. Ltd. (Fii) is a core subsidiary of Hon Hai Precision Industry Co. Ltd.. (A-/Stable, Hon Hai Group). We equalize our rating on Fii with that of Hon Hai Group based on Fii's importance and financial contribution. Hon Hai Group holds about 84% of Fii and controls the board. In addition to sharing the Foxconn brand, Fii owns four major business lines under Hon Hai Group and accounted for more than 50% of the group's EBITDA in 2020. More specifically, the company's production of high-precision mechanical parts is a key profit generator of the group and contributes meaningfully to the group's relationship with key smartphone customers. Fii's cloud server and telecommunication-equipment businesses are also closely aligned with the group's long-term strategy surrounding 5G and cloud computing....

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