Fitch Downgrades APAC Tech Sector Outlook To 'Deteriorating'

BusinessToday

10-06-2025

Fitch Ratings has revised its 2025 outlook for the Asia-Pacific (APAC) technology sector from 'neutral' to 'deteriorating', signaling increased downside risks primarily driven by the escalating global tariff environment. The ratings agency warns that tariffs are expected to directly hurt demand for hardware and trigger wider economic slowdowns due to reduced consumer confidence and spending globally.
According to Fitch, the APAC tech sector is particularly vulnerable given its central role as the world's primary assembly hub for technology hardware and the dominant manufacturer of critical component parts across the supply chain.
Consumer technology hardware, often a discretionary purchase, is highly susceptible to shifts in consumer confidence and spending habits. Fitch anticipates the United States will present a challenging market for consumer technology products this year, following its earlier revision of the US retail and consumer products sectors' outlooks to 'deteriorating' in April 2025. While some companies exposed to discretionary categories have already faced negative rating actions, most Fitch-rated US retailers and consumer product companies are believed to possess sufficient rating headroom to withstand current volatility.
Beyond the US, APAC technology hardware businesses are also facing tough conditions in other major markets. Fitch forecasts weak consumer spending growth in 2025 for the eurozone (1%), Japan (0.7%), and the UK (0.9%). Although China's consumer spending growth forecast for 2025 remains relatively robust at 3.3%, this is still a downward revision from the 4.3% projected in December 2024.
Within Fitch's rated portfolio, APAC technology hardware companies are generally expected to fare better than their non-rated peers due to their larger size, greater diversification, and enhanced financial flexibility. However, Renesas (BBB/Stable) and LG Electronics (BBB/Stable) have been identified as having the lowest rating headroom within this group.
Divergent Trends Within Semiconductors and Internet Segments:
The outlook for different segments within the APAC semiconductor sector continues to diverge. Fitch anticipates strong demand related to Artificial Intelligence (AI) will persist, but warns that non-AI demand will be weak, particularly due to the likely tariff-related fall-off in demand for consumer electronics. The semiconductor industry also faces ongoing supply chain challenges that could impact production timelines and cost structures throughout 2025.
For the Chinese internet sub-segment, Fitch maintains a 'neutral' outlook for 2025. The agency expects major internet companies' strong business profiles, robust margins, and substantial net cash positions to support their credit profiles. However, their performance may diverge further due to an uneven impact from weak consumer spending, intense competition, and the increased deployment of AI across internet services.
Lastly, the outlook for the Indian IT services sub-segment remains 'neutral'. While revenue growth is expected to be affected by the slowdown in global economic growth driven by tariff uncertainty and more cautious customer spending on external IT services, Fitch still forecasts positive revenue and EBITDA growth for the segment. Related