As tariffs are probably upsetting the Asian tech sector, Vietnam and India are important areas to keep an eye on outside of China, according to a research from S&P Global Ratings titled ‘Tariff Disruption In Asia Tech: Vietnam And India Are Key Markets To Watch Outside Of China.”
“Most companies have plans to expand production outside of China. Understanding where production is shifting to elsewhere in Asia was important to predicting the consequences of reciprocal tariffs on countries outside of China,’‘ said Clifford Kurz, Credit Analyst at S&P Global Ratings.
For instance, he said that because of their cheap labor rates, Vietnam and India were preferred locations for the manufacturing of PCs and cellphones. He warned that imposing tariffs on these nations may increase the risk for these items throughout the technological supply chain.
According to Mr. Kurz, many companies have already sufficiently diversified their manufacturing to somewhat counter the tariff risk associated with China, even if changing supply chains would be expensive.
Given their reliance on Chinese manufacture, Apple and its major suppliers could be the most affected, but according to the report, India currently handles over a fifth of all final assembly before shipping to the United States.
“No one knows exactly where the dust will settle on U.S. tariffs for Asia’s tech-manufacturing sector. But trade barriers will very likely be the highest between the U.S. and China,’‘ it cautioned adding, “The most vulnerable companies are those with the largest reliance on China’s integrated technology production infrastructure and the U.S. as a major end market.”
It went on to say that sophisticated chipmakers were less at risk, partly due to their strong negotiating positions and increasing share of AI-related sales and profit. Additionally, AI chip manufacturers were less vulnerable to China’s semiconductor restrictions.
“While shifting supply chains will be costly, many have already diversified their production enough to offset some of the tariff risk related to China. Or at least enough such that the U.S. market can be supplied by non-China production,” said Mr. Kurz.
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