While the semiconductor industry as a whole will maintain above average credit metrics, with low financial leverage and positive cash generation, we believe a second consecutive year of falling revenue and an uncertain business environment will exacerbate risks for five specific profiles of companies operating in the wider electronics industry:

• Second-tier chipmakers with an asset-heavy business model engaged in an unsustainable investment race.
• Chinese electronic product assembly specialists, which are losing clients as companies are shifting their sourcing strategies away from China.
• U.S. and Chinese semiconductor and electronic product companies, which are facing additional trade restrictions that hurt sales and profits.
• South Korean chipmakers, which rely heavily on key Japanese chemicals used in semiconductor manufacturing as tensions between the two countries are escalating.
• U.S. electronics retailers that are looking to preserve their market shares in a declining market and facing new tariffs on electronics goods coming in December 2019.