China's push for semicon self-reliance will propel tech growth, competition

Growth in the semiconductor industry growth would support China's tech progress.

KUALA LUMPUR: Moody’s Investors Service views China’s (A1 stable) potential jump in investment to achieve a 70% self-sufficiency ratio in semiconductors by 2025 could boost its tech growth.

Moody's said on Monday however, achieving semiconductor self-reliance for China likely will be long and challenging, and could have far-reaching credit impacts on the sovereign, domestic companies and international manufacturers.

“Global chip shortages and trade tensions reveal the large gap in China’s domestic supply and demand for these products,” says Lillian Li, a Moody’s vice president and senior credit officer.

Li said China is the biggest consumer of semiconductors globally; yet its production is far below that of the US (Aaa stable), Korea (Aa2 stable) and Taiwan, China (Aa3positive).

Growth in the semiconductor industry growth would support China's tech progress.

Moody's said the industry plan could benefit the sovereign’s credit quality, if advanced tech development occurs and mitigates strategic vulnerabilities.

Likewise, the industry's productivity and growth potential could increase over the longer term, strengthening the sovereign's credit quality.

However, Moody's said risks remain regarding potential overcapacity and investment inefficiency.

China's plans could lead to rapid expansion and over-investment in certain types of semiconductors.

At the macro level,over-investment could lead to capital inefficiency and resource misallocation, as well as hurt long-term potential growth.

At the company level, aggressive expansion could reduce financial viability and increase credit risks, while efficiency could decline and costs could rise.

The rating agency said smaller Chinese producers would be most exposed to credit risks from overcapacity in the medium-term, given likely government support for large companies due to the sector’s strategic importance.

Meanwhile, competitive risks for certain non-Chinese manufacturers will intensify over time,potentially adding credit pressure to these global businesses, it said.
Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 46
Cxense type: free
User access status: 3
Join our Telegram channel to get our Evening Alerts and breaking news highlights

Next In Business News

CPO futures expected to trend lower on profit-taking next week
Britain looking at temporary measures to alleviate trucker shortage
'Loss and pain': Families testify at Dutch MH17 trial
Oil hits highest in almost 3 years as supply tightens
GLOBAL MARKETS-S&P 500 edges up, European shares slump amid Evergrande fears, US yields rise
Banking on wealth management
Short Position - Opcom, La Nina, Taxing
Going for growth
Sapura Energy in race against time
Ge-Shen hopeful of growth amid challenges

Stories You'll Enjoy