Bangkok--15 Oct--Moody's Moody's Investors Service maintains astable rating outlook for the Asian technology and semiconductor sector,although credit risks vary within this highly diverse industry. "Market demand is expected to remain strong, with a number of popular newproducts driving sales, and companies have helped foster a measure ofmarket stability by diversifying and becoming more consumer driven,"Moody's says in a new report. Authored by Moody's Analysts Ken Chan and Wonnie Chu, the reportdiscusses the outlook for ratings in the technology and semiconductorindustry in Asia (ex-Japan). Moody's rates ten companies in the sector,mostly in the semiconductor and dynamic random access memory (DRAM)industries. The continued erosion of average selling prices (ASP), in tandem withrising raw material costs, presents a significant challenge for thesector, according to the report. "In this environment, it is importantfor companies to protect margins and sustain profitability by cuttingcosts, maintaining scale, and continuing to move up the value chain,"says Chan. "To achieve these goals and stay competitive, companies have expandedcapacity, but this approach is not without risk, given that only a fewcompanies in the sector are free cash flow positive, and higher productvolumes can depress prices," he adds. "The sustainability of research and development (R&D) spending is anothersource of uncertainty in the current cost environment, and the steps thatcompanies have begun to take to rationalize spending have spurred anincrease in joint-venture activity," Chu says. "Another trend that bears watching is the emergence of joint-technologydevelopment and cost-sharing arrangements, which are now commonplace,and have allowed some companies to save on R&D, reduce risk and encouragealliances," she says. The report, part of the Moody's Industry Snapshot series which offersuccinct and incisive looks at specific sectors, is entitled 'IndustrySnapshot: Asia Technology and Semiconductor Sector,' and can be found atwww.moodys.com.