In particular, the APAC tech sector has greater exposure to these issues, due to the region being the main assembly centre for the world’s technology hardware and the dominant manufacturer of most of the sector supply chain’s component parts.
“Consumer technology hardware items are typically discretionary purchases, easily deferred if consumers’ confidence wanes or their spending slows. We expect the US to be a tough market for consumer technology products this year,” writes the report.
On April 8, Fitch already revised the outlooks on the US retail and consumer products sectors to “deteriorating” from “neutral”, after noting that some companies with exposure to discretionary categories have already experienced negative rating actions.
Despite this, the report adds that most Fitch-rated US retailers and consumer product companies have sufficient rating headroom, which should support their ratings stability through the current volatility.
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In the situation of APAC technology hardware businesses in other major markets are not faring much better.
The report notes: “We forecast consumer spending growth in the eurozone, Japan and the UK, will be weak, at 1%, 0.7% and 0.9%, respectively, in 2025. Our forecast for consumer spending growth in China is relatively robust for 2025, at 3.3%, but this is still below the 4.3% we had projected in December 2024.”
Fitch-rated APAC technology hardware companies will be less affected than most non-rated APAC peers and competitors, as their rated entities are generally larger, more diversified and have greater financial flexibility.
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However, within the agency’s rated portfolio, Renesas and LG Electronics have the lowest rating headroom.
“The outlook for different segments within the APAC semiconductor sector continues to diverge. We expect artificial intelligence (AI) related demand will remain strong, but non-AI demand will be weak, with greater exposure to the likely tariff-related fall-off in demand for consumer electronics,” notes Fitch.
For the semiconductor industry, which faces ongoing supply chain challenges, production timelines and cost structures could be affected throughout 2025.
On the Chinese internet sub-segment, Fitch has a “neutral” outlook, as the agency expects the internet majors’ strong business profiles, robust margins and large net cash positions to support credit profiles, although performance could diverge further.
The report writes: “This is partly because we believe the mix of challenges and growth opportunities facing the market – including weak consumer spending, intense competition, and further deployment of AI across internet services – will have an uneven impact on the majors’ operational performance.”
Finally, the outlook for the Indian IT services sub-segment has remained “neutral”, as Fitch expects revenue and earnings before interest, taxes, depreciation and amoritsation (ebidta) growth to stay positive, despite the slowdown in global economic growth and more cautious customer spending on external IT services caused by tariff uncertainty.
