This report does not constitute a rating action.

No one knows exactly where the dust will settle on U.S. tariffs for Asia's tech-manufacturing sector. But it's safe to assume that trade barriers will likely be highest between the U.S. and China. S&P Global Ratings believes 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.

That includes the smartphone makers. Apple and its key suppliers may be the most disrupted, given the production reliance on China. PC makers are also quite exposed to tariff risk. We expect PC and phone makers will pass on the higher cost to customers even if it leads to some demand destruction, especially for consumers who make up 45% of PC sales and most of smartphone sales. Consumers tend to be more price sensitive relative to enterprises.

Advanced chipmakers are less vulnerable, in part because such chipmakers have high bargaining power and have a growing proportion of revenues and profits from AI. For now, U.S.-bound AI servers assembled in Mexico are exempt from new tariffs under the U.S.-Mexico-Canada Agreement (USMCA), which took effect in July 2020.

AI chips, dominated by Nvidia, are also less exposed to trade restriction risk than previously. China's portion of Nvidia's data center revenue is much smaller than before.

PCs And Smartphones Face The Most Disruption Risk

• High input costs (from which tariffs are calculated) and high reliance on China for laptop manufacturing (versus desktops, which are assembled across Asia and Mexico) are key reasons for sensitivities to tariff risks.
• We estimate U.S. PC sales contribute to about 15%-20% of operating profit for each of Dell Technologies Inc., HP Inc., and Lenovo Group Ltd.

PC supply chains are diversifying away from China, mostly to Vietnam

• Dell and HP source most PCs from contract manufacturers (EMS). EMS companies are shifting production such that Dell and HP can source most of their U.S. PCs outside of China. Dell has already shifted the production of U.S.-bound PCs outside of China, while HP is expected to do so by the end of June.
• Shifting PC assembly to the U.S. would not meaningfully offset tariff risks, unless tariffs on PC component imports into the U.S. are exempt from tariffs.
• PC components are sourced from Taiwan (i.e. processors), South Korea (i.e. memories and display panels), and China.

Smartphone Supply Chains Still Heavily Reliant On China

• Apple's smartphone dominance in the U.S. (chart 4) poses a risk given its significant reliance on China production.
• Smartphones account for nearly 50% of Apple's revenue (chart 4a) and U.S. represents nearly a third of its global smartphone shipments (chart 4b).
• However, Apple is shifting its production supply chain to India, which will likely cover most of Apple smartphones shipped to the U.S. by 2026 (chart 4b).
• Vietnam and India account for the bulk of Samsung’s production base (see chart 5b).
• Smartphone production is labor intensive, favoring production in countries with low labor costs such as India and Vietnam. Tariffs on these countries pose further risk for the issuers with significant U.S. smartphone exposure such as Apple and Samsung and their suppliers.

China AI Chip Demand No Longer Meaningful

• Nvidia accounts for most AI chip demand; its revenue exposure to China is relatively small.
• Therefore U.S. chip restrictions to China are unlikely to have meaningful impact on most of Asia's tech issuers.

Taiwan And Mexico Are Major Exporters Of Server Products To The U.S.

• Recent jump in server imports from Mexico and Taiwan are likely attributed to spiking demand for AI servers.
• U.S.-bound servers and motherboards imported from Mexico are covered under USMCA and hence exempt from U.S. tariffs.
• As Taiwan is not covered by free trade agreements, motherboards and servers shipped from Taiwan are at greater risk of tariffs.

Credit Implications For Rated Asia-Pacific Issuers

• We have stable ratings on the major players that rely on Asia-based supply chains. 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.
• However, many issuers are still exposed to other Asian countries such as Vietnam and India. Whether the pause on reciprocal tariffs for these countries will resume are key risks to watch out for.
• Some have enough dominance in their niches to be able to pass on higher costs to their buyers or have enough financial buffer to withstand modest changes in costs due to tariffs. Lenovo, as one example, would only breach our downgrade trigger if its EBITDA slumped by 30%. Finally, these companies sell their products around the globe. The U.S. is a major market but not the only one.

China's Lenovo (BBB/Stable/--) has high but still-manageable tariff risk

• Lenovo faces U.S. tariff risk due to its high supply chain exposure in China and Southeast Asia for PC and smartphones. Servers shipped to the U.S. are mainly assembled in Mexico.
• U.S. PC and smartphones sales accounted for about 12%-15% of the company's EBITDA on our estimates.
• EBITDA decline of over 30% could push leverage near the downgrade trigger of 1.0x downgrade trigger; leverage is currently 0.6x.

Taiwan's Hon Hai (A-/Stable/--) is accelerating global footprint expansion

• Hon Hai is expanding capacity in Mexico, India, Vietnam, and Europe.
• The company is also expanding its new businesses, such as electric vehicles, robotics, and digital health, in Taiwan, the U.S., China, and India.
• Robust growth of AI server revenues will drive more balanced product and client mix.
• We expect Hon Hai to retain an ample financial buffer, providing flexibility to navigate potential cost increases and elevated capital expenditure.

Taiwan's TSMC (AA-/Stable/--) AI is key driver, China exposure likely manageable

• About 70% of Taiwan Semiconductor Manufacturing Corp.'s revenue is from U.S. customers, primarily in servers and smartphone segments.
• The company's capacity will likely remain highly concentrated in Taiwan over the next two years.
• TSMC's strong leadership in process technology particularly for AI chips helps mitigate the impact of tariffs on its profitability and cash flow.

China's Xiaomi (BBB/Stable/--) has limited geopolitical risks--for now

• Xiaomi does not have direct exposure to U.S. consumer market.
• Smartphone chips are unlikely to be a target of U.S. export restrictions; Xiaomi's smartphone chips are mainly fabricated in Taiwan and hence, not subject to China's tariff on the U.S. goods.
• Electric vehicles could face tariff risks, but Xiaomi has no plans to export its electric vehicles before 2027.

Korea's SK Hynix (BBB/Stable/--) is in good position to pass on tariff costs

• High-bandwidth memories (HBM) are sent to TSMC for packing into graphics processing units (GPUs). GPUs bound for Mexico are likely to have limited tariff implications for now.
• Indirect tariff impact likely to be passed on to customers given SK Hynix's dominant position within HBMs.
• Strong growth in HBMs should strength SK Hynix's credit measures over next two years.

For Korea's Samsung Electronics (AA-/Stable/--), tariffs struggle will weigh

• The U.S. market accounts for a material portion of Samsung's premium smartphones, and a decline in demand stemming from tariffs will likely hurt Samsung's operating performance.
• The company will likely continue to lag market leader SK Hynix in the high-margin HBM segment.
• Continued losses at its foundry & system LSI adds pressure to the company's stagnant semiconductor profitability.

Japan's Sony Group (A/Stable/A-1) has tariff buffer in non-hardware revenues

• The U.S. accounts for about 30% of Sony's revenues; however, a significant portion the profits attached to such revenues are attributed to non-hardware related revenues (i.e., game software and music and movie contents), and hence less exposed to tariffs.
• Collectively, game (including game hardware), music, and pictures account for about 60% of EBITDA.
• Image sensors (about 25% of EBITDA) have meaningful exposure to U.S. smartphone market and entertainment technology (about 15% of EBITDA), mainly television sets and cameras, has some exposure to U.S. as well.

Japan's Renesas Electronics (BBB/Stable/A-2): Tariffs could add downside pressure

• The U.S. accounts for about 10% of Renesas' revenue; however, U.S. exposure could be higher considering Japan and Asia auto exports into U.S. semiconductors for the auto industry account for about 50% of Renesas' revenue.
• Slowing economic growth in China and Asia (50% of revenues) could also have some indirect impact on Renesas' auto and industrial related revenues in these regions.
• Given increased leverage from large acquisitions, we believe that a delayed recovery in earnings due to the indirect effects of tariff increases could keep leverage elevated, thereby increasing downward pressure on creditworthiness.

Japan's Kioxia Holdings (BB+/Stable/--): Tariffs could raise leverage

• About 50% of Kioxia’s revenues are NAND and solid-state drives (SSD) products for smart devices and PCs. Such end-products have larger exposure to U.S.-China tariff risk.
• In FY2023, U.S. customers such as Apple (21% of revenue) and Dell (9% of revenue) are a significant portion of its revenues.
• Kioxia has limited rating headroom, raising risks that tariffs could push leverage higher.

Other contributors to this report include Anne Kuo, Ji Cheong, Hiroshi Nagashima, and research assistants Sam Lee and Jenny Chan.

Related Research

Sector related reports

• Tech Titans Tack Through Trade Turbulence, May 8, 2025
• Why Isn't AI Shaking Up Smartphone And PC Markets?, Feb. 5, 2025
• Proposed Tariffs Could Hurt The Global Tech Sector If Levied Too Long, Feb. 4, 2025
• Industry Credit Outlook 2025: Technology, Jan. 14, 2025
• Solid IT Demand Bodes Well For Technology Credits In 2025, Jan. 8, 2025
• How Would China Fare Under 60% U.S. Tariffs?, Nov. 17, 2024
• Handbook On Geopolitical Risk In Asia-Pacific Tech, Oct. 16, 2024
• The Shifting Of China Tech Supply Chains: The Hard Part Starts, Sep 02, 2024

Issuer-specific reports:

• Xiaomi Corp., June 1, 2025
• Lenovo Group Ltd., May 28, 2025
• Kioxia Holdings Assigned 'BB+' Rating; Outlook Stable, May 27, 2025
• Sony Group Corporation, April 14, 2025
• Renesas Electronics Corp., April 11, 2025

• Hon Hai Precision Industry Co. Ltd., Jan. 17, 2025
• SK Hynix Inc., Dec. 2, 2024
• Samsung Electronics Co. Ltd., Aug. 28, 2024

Primary Contact:	Clifford Waits Kurz, CFA, Hong Kong 852-2533-3534; clifford.kurz@spglobal.com
Secondary Contacts:	Cathy Lai, Hong Kong 852-2533-3569; cathy.lai@spglobal.com
	Aras Poon, Hong Kong 852-2532-8069; aras.poon@spglobal.com