Whereas Alphabet Inc. GOOGL GOOG — report after the closing bell on Tuesday — Meta Platforms Inc METAand Netflix Inc. NFLX do not generate significant revenues from China, Microsoft Corporation MSFT — also signaling after the closing bell – Is it that.
Many American companies depend on China as an important market for their products, as a source of production, or both. This makes them vulnerable to an economic slowdown in China, strict COVID-19 lockdowns and a broader assessment of supply chains that are dependent on china.
International companies have been investing in China for many years, building manufacturing ecosystems and businesses to serve the country’s growing middle class.
For instance, Apple Inc. AAPLone of the companies most exposed to China, generates 18% of its turnover and 85% of its manufacturing there.
While China contributes about 1% to Amazon.com, Inc. AMZN turnover, 37% of its salespeople and 75% of its products come from China.
The strength of the dollar this year relative to other APAC (Asia-Pacific) regions has led to exchange rate headwinds for US tech companies.
What can we expect from US companies this quarter?
Regarding its latest quarter, Microsoft blamed lower-than-expected earnings on events in China and Russia, including the prolonged COVID-19 lockdowns and the latter’s dispute over Ukraine.
“Extended production shutdowns in China” resulted in a $300 million hit, the company said in its latest earnings release.
This time around, we might hear the same discussion of headwinds for big tech in China, with the added downside of the strong dollar making currencies more expensive.
Stay up to date with all things China here.
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