Asia tech firms face uneven impact from Middle East conflict, S&P says

Asian technology companies differ in their ability to absorb rising costs linked to the Middle East conflict, with high-end chipmakers better positioned than consumer electronics firms, S&P Global Ratings said in a report released Thursday.

The report, titled “Asia Tech Hardware: Middle East Risks Will Weigh On Supply And Demand,” said strong demand and investment in artificial intelligence data centers are allowing advanced semiconductor companies to raise prices, while electronics makers remain more exposed to cost pressures and weakening demand.

“The rated technology firms in Asia-Pacific generally possess the financial strength to absorb the initial impacts under our base case scenario, which is that the Strait of Hormuz’s effective closure will ease during April,” said credit analyst Cathy Lai.

“A longer-term conflict would pressure the supply chain of the richer tech firms, such as advanced chipmakers, and could hit margins and demand for makers of electronics products, such as smartphones and PCs,” she added.

Segment exposure varies

S&P said the impact of the conflict varies across four key segments: advanced semiconductors, mature semiconductors, consumer electronics and electronics manufacturing services.

Most exposures are indirect but potentially significant, with disruptions to power supply and critical raw materials posing key risks, followed by logistics challenges. Cost increases and demand destruction could become more pronounced if the conflict is prolonged.

“Most advanced semiconductor manufacturing (including memory) occurs in regions that rely on liquefied natural gas and oil imports from Qatar and other Middle Eastern countries for power generation,” Lai said.

Taiwan appears particularly exposed due to tight electricity supply in recent years. Taiwan Semiconductor Manufacturing Co. accounted for about 9% of the island’s total electricity consumption in 2024, a share expected to rise as production of advanced chips increases.

Supply chain risks

The conflict has disrupted the supply of several key raw materials, with helium facing the greatest risk due to its use in semiconductor manufacturing.

S&P said leading chipmakers currently have sufficient helium inventories to mitigate near-term risks and are relatively well positioned to diversify supply.

Under its base case, S&P expects the war’s intensity to peak and disruptions to ease during April, though some impact could persist for months. It forecasts Brent crude to average $92 per barrel in the second quarter and about $80 per barrel in 2026.

In a downside scenario of prolonged conflict, Brent prices could peak at $200 per barrel and average nearly $130 per barrel in 2026.

Demand pressures

In the event of a prolonged conflict, pure-play electronics companies would be hit hardest, S&P said, as weakening demand — particularly in lower-priced consumer segments — adds to rising raw material and logistics costs.

“Companies with fortified supply chains and exposure to the high-growth AI market are likely to maintain their credit profiles, while those reliant on commoditized consumer segments face the biggest hurdles,” Lai said.