An emerging high-tech sector in China is posing a growing threat to its rivals, including Taiwan, according to Taiwan Ratings (中華信評), a local partner of Standard & Poor’s.
In particular, the credit ratings agency said, mobile device and flat-panel makers in other Asian countries are expected to face higher hurdles erected by China, which has devoted itself to cultivating its own supply chain for the country’s high-tech sector in a bid to lower dependence on imports.
Taiwan Ratings said that the rapid growth of China’s technology industry does not bode well for the prospects of high-tech firms in other countries in Asia in the long term, although Asian competitors outside China are not expected to feel a significant pinch over the next two years.
“We expect the growth of Chinese technology firms to increase pricing pressure for established competitors in Asia,” Taiwan Ratings analyst Raymond Hsu (許智清) said in the report.
“However, the impact on the credit profiles of individual companies would depend on the level of their product differentiation, technological strengths and business diversity,” he said.
Taiwan Ratings said that Chinese hardware brands have received a boost in their visibility by securing a higher market share in recent years, while these suppliers are looking to imrpove their own supply chains and lower their external influences.
Hsu said that China is preparing to develop its own smartphone industry, adding that Chinese brands benefit from relatively low production costs and a huge domestic demand.
In the wake of China’s more visible presence in the global smartphone market, South Korea’s Samsung Electronics Co and LG Electronics Inc are likely to witness their market shares falling and profitability gradually eroding, Hsu said.
Taiwan Ratings manager Hsu Li-te (許立德) said that Taiwan’s leading flat-panel makers — AU Optronics Corp (友達光電) and Innolux Corp (群創) — are likely to see sales and their bottom lines affected if they fail to improve product differentiation from their Chinese rivals.
However, Taiwan Ratings said that Taiwan Semiconductor Manufacturing Co (台積電) and Samsung could maintain their lead over their Chinese counterparts in the semiconductor industry over the next three to five years, despite Beijing’s efforts to grow its own IC sector.
In addition, China’s IC design firms are unlikely to threaten Taiwanese rivals any time soon, as Chinese suppliers’ technology is still behind in in this area, Taiwan Ratings said.
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