S&P Says Tech Firm Ratings to Weather Shift Away From China

(Bloomberg) -- Credit ratings on the world’s top technology companies are likely to withstand moving production away from China as Beijing-Washington tensions escalate, according to S&P Global Ratings.

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It will likely be costly and disruptive, but the twelve global tech companies tracked by the ratings firm — including Apple Inc., Taiwan Semiconductor Manufacturing Co., and Samsung Electronics Co. — can survive the downside to their credit profiles stemming from a shift away from Beijing over the next three to five years, S&P analysts said.

“Most tech firms under our rating portfolio have financial resources and managerial expertise to manage their supply-chain recalibration within current ratings,” analysts led by Hins Li wrote in a report dated Wednesday.

The shift away from China would be “moderately negative” for ratings of the S&P-rated tech companies and there’s a risk of eroding the goodwill among Chinese customers.

Companies dispersing manufacturing activity to other locales won’t be as efficient as utilizing giant factories in China, which maximize economies of scale and draw on established supplier networks, infrastructure, and talent, the analysts said.

“Some companies may retain redundant capacity in China in case they encounter production hiccups while ramping up new sites,” they wrote.

Still, more diversified supply chains would allow companies to manage the policy and concentration risk that was exposed by pandemic-induced supply outages.

S&P-rated tech companies, including Dell Technologies Inc., Hon Hai Precision Industry Co., Sony Group Corp., and Canon Inc., did not respond immediately to requests for comment.

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