Asia-Pacific Tech Hardware Issuers Grapple With High Inventory And Falling Demand : S&P



Aug 16, 2022 07:40 pm

By Hiral Shah


Rising stock and falling demand. This growing imbalance could create a cash flow and earnings headache for the Asia-Pacific tech hardware issuers we rate. For most, it's not so bad; for a select few, however, such as Lenovo Group Ltd. and Xiaomi Corp., meaningful dips in cash flow could squeeze rating headroom and cloud outlooks.


Makers of PCs and smartphones are likely to experience the weakness first, and it could spread to other technology hardware companies up the supply chain. We forecast global smartphone shipments to decline by 5% this year and PC shipments to fall by 10%.


This is according to a report published by S&P Global Ratings today, titled "Asia-Pacific Tech Hardware Issuers Grapple With High Inventory And Falling Demand."


The report examines trends and risks facing issuers in the region's tech hardware space, including makers of semiconductors, smartphones, and PCs.


In Asia-Pacific, we rate the following tech hardware issuers: Xiaomi Corp. (BBB-/Positive/--), HP Inc. (BBB/Stable/A-2), Dell Technologies Inc. (BBB/Stable/--), Lenovo Group Ltd. (BBB-/Positive/--), Taiwan Semiconductor Manufacturing Co. Ltd. (AA-/Stable/--), and Semiconductor Manufacturing International Corp. (BBB-/Negative/--).


Key Takeaways

• Inventory gluts and declining shipments will create cash flow volatility for the tech hardware issuers that we rate in Asia-Pacific.

• We forecast global smartphone shipments to decline by 5% this year and PC shipments to fall by 10%.

• Most issuers have plenty of rating buffer. A demand downturn, however, could reduce the headroom for positive outlooks of Lenovo and Xiaomi.