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I understand that dividing a wire into multiple insulated pieces reduce the Eddy Currents, and that reduces the magnetic field inside the wire, which leads to increased skin depth.

But why do they twist these insulated sub-wires? What is the importance of twisting? And how do we decide how much to twist?

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In Litz wire each strand is woven such that it links on average with the same number of flux lines as every other strand meaning each strand will carry close to the same amount of current. If it wasn't woven or twisted the strands in the center would wind up carrying less current than the ones on the outside. Therefore the weave is (ideally) such that each strand spends the same amount of time on the surface of the bundle as every other strand.

There are various types of Litz wire which have different prices, flexibility, shapes, AC resistance, and current carrying capacity.

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