Samsung Elec rolling back smartphone output by 10% vs target amid slowing global econ

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The world’s largest smartphone vendor Samsung Electronics Co. joined its rival of premium handsets Apple in adjusting down output for this year on slowing demand from global-wide high inflation and uncertainties from Russia-Ukraine war.

The Korean electronics giant will roll back premium flagships as well as budget phones, whereas Apple is mostly adjusting down the entry-level models.

It has informed parts suppliers of cutting back annual output to 280 million units from 310 million units, according to a source from a Samsung Electronics supplier on Thursday. Shinhan Investment’s recent report also showed Samsung Electronics adjusted down this year’s smartphone output forecast by 10 percent to 270 million units.

Samsung has raised output target to above 300,000 units this year for the first time since 2017 on expectations for strong global economy, but has found softer-than-expected demand from slowing economy from the war and high inflation.

The company is expected to scale back output in May by 35 percent versus the monthly average output of January to April and another 10 percent in the second quarter from the previous quarter, according to Park Hyung-woo, senior analyst at Shinhan Investment.

The main cause for production cut is Russia-Ukraine war, which has significantly hurt smartphone sales in eastern Europe, noted Park Jin-seok, analyst at Counterpoint Research. Also, global demand for budget smartphone is expected to be weaker than last year, Park said.

Samsung Electronics at the first-quarter earnings conference call on April 28 said its operating income from phone-making MX division came to 3.8 trillion won ($3 billion), down 570 billion on from a year ago, with global smartphone market entering a low season. It had hoped for improvement, but its hopes were dashed from drawn-out war in the Baltic region.

Output cut by the world’s two phone majors would hurt global phone sales this year from last year’s levels of 1.4 billion units.

The move will hit hard on suppliers.

One parts supplier of Samsung Electronics already was notified of cut for one-month worth of parts order.

Samsung Electronics has promised its suppliers to make up for the cutback in the second half when new foldable model is released with related sales forecast revised up to 1.8 million units from initial 1.3 million units. But foldable models account for less than 10 percent of Samsung Electronics’ total smartphone sales of 270 million units.

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