- Fitch Ratings says the coronavirus outbreak may have lingering effect on U.S. technology companies
Market news
18 February 2020
Fitch Ratings says the coronavirus outbreak may have lingering effect on U.S. technology companies
- Fitch Ratings says the coronavirus (COVID-19) outbreak may have a lingering effect on the U.S. technology companies, given:
- Chinese-centric supply chains,
- meaningful Chinese revenue exposure,
- uncertainty regarding when the virus will peak,
- Chinese suppliers that are still not operating at full capacity,
- the inability to quickly change suppliers;
- Sees the near-term revenue weakness caused by supply chain disruptions and reduced demand in China as a likely outcome;
- Suggests that the trade policy uncertainty and U.S. relations with major Chinese corporations such as Huawei may have already affected supply chain strategies across the technology sector, while COVID-19 adds additional risks to the technology sector's China-centric supply chains;
- If Chinese manufacturing activities normalize in the next one to two weeks, the effect will be transitory; but if the situation drags into March and April, the effect could be more disruptive for the sector;
- Notes that hardware companies, in general, are more exposed than software companies to the situation in China because of lengthy complex supply chains involving semiconductors and other components produced across various geographies in Asia;
- Upstream semiconductor companies with plants in China, however, may be less affected as production is more automated and less labor-intensive than downstream electronic manufacturer services (EMS) and original design manufacturers with plants in China.
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