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Published on : Sep 07, 2015

Taiwan Ratings, a local partner of Standard and Poor’s, has revealed that the rapidly evolving technology sector in China is posing as a threat to its rivals, including Taiwan.  The credit rating agency has mentioned that the manufacturers of mobile devices and flat-panels in other Asian nations are expected to face difficulties with China focussing on developing its own supply chain for the domestic technology sector in an effort to decrease it dependence on imports. Taiwan Ratings has pointed out that the rapid growth of China’s technology sector will kill the prospects of high-tech firms in other Asian countries in the longer term. However, in the next two years, the Asian competitors outside China will not be significantly affected.

Analysts at the rating agency have pointed that the growth of the Chinese technology firms will increase pricing pressure for established Asian competitors. However, the impact on the credit profiles of individual technology firms would depend upon the technology strengths, product differentiation, and business diversity. It has been observed that the hardware brands in China have accounted for higher market share in recent years. These brands are focussing on improving their supply chains and decrease their dependence on foreign companies. 

Low production cost and huge domestic demand will let Chinese brands to flourish in the smartphone market in China. The efforts taken by the Chinese government to boost the growth of the domestic technology firms is being seen as the country’s initiative to develop its own smartphone industry. In the global smartphone market, China’s rise would negatively impact South Korean smartphone makers LG Electronics and Samsung Electronics Co. Taiwan’s key flat-panel manufacturers Innolux Corp. and AU Optronics Corp will also be badly affected if they do not improve on their products compared to their Chinese rivals.