Vietnam, India key markets to watch as tariffs likely disrupt tech market in Asia: S&P

Vietnam and India are key markets to watch outside of China as tariffs are likely disrupting the tech market in Asia, said S&P Global Ratings in a report 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 example, he observed, Vietnam and India were countries of choice for the assembly of smartphones and PCs, given their low labour costs. Tariffs on these countries could heighten the risk across the technology supply chain for these products,’‘ he said.

While shifting supply chains would be costly, many have already diversified their production enough to offset some of the tariff risk related to China, Mr. Kurz added.

Apple and its key suppliers may be the most disrupted, given their production reliance on China, however, India now accounts for nearly a fifth of all final assembly before shipment to the U.S., as per the document.

“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 further said, advanced chipmakers were less vulnerable, in part because such chipmakers have high bargaining power and have a growing proportion of revenue and profit from AI. AI chipmakers were also less exposed to China’s chip restriction risk.

“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.