Last Tuesday's,devaluation of the yuan by the government of China is a credit negative for technology companies with significant operations in China, such as Apple Inc., says Moody's.
According to Moody's, the devaluation increases the cost of Apple's iPhones and iPads in the local market. That's a problem because Greater China is now Apple’s second largest market behind the Americas, accounting for more than 20% of total sales for the quarter ended 27 June,and it is the primary source of the company’s growth.
But an even bigger problem, says Moody's, is that China’s economy will not rebound, despite the extraordinary efforts the government is pursuing to restart rapid growth.
At the same time, Apple and other electronics original equipment manufacturers will seek to benefit from the lower cost of products that are assembled in China, although there will be a lag effect because most of the manufacturing and assembly arrangements are denominated in US dollars.
-RW
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