Samsung slashes its full-year smartphone production forecast by 10% amid sluggish demand

According to the latest report, Samsung Electronics plans to revise its smartphone production forecast for this year by 10% recently due to high global inflation and the ongoing disruption of the Russian-Ukrainian war.

According to supply chain sources, Samsung has issued notices to parts suppliers to revise down its annual production from 310 million units to 280 million units. In addition, Shinhan Investment recently issued a report saying that Samsung has reduced its annual production volume to 280 million units this year. Mobile phone shipments are expected to drop 10% to 270 million units.

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Park Hyung-woo, a senior analyst at Shinhan Investment, expects Samsung Electronics’ production in May to be 35% lower than the average monthly output from January to April, and a further 10% drop in the second quarter from the previous quarter.

According to the above report, a component supplier of Samsung Electronics has received a one-month notice of order cut, although Samsung promised the supplier to make up for the lost order when it releases a new generation of folding mobile phones in the second half of the year, and the production of folding mobile phones is expected to be changed from the original one. 1.3 million to 1.8 million, but still less than 10% of total production.

Not long ago, on April 28, Samsung Electronics said on its first-quarter earnings conference call that its operating income from its mobile phone manufacturing MX division reached 3.8 trillion won ($3 billion), down 570 billion won from a year ago. The smartphone market has entered a downturn. Samsung also hoped for an improvement but was dashed by the effects of the Russian-Ukrainian war.

The production cuts of Apple and Samsung, the world’s two largest mobile phone giants, will undoubtedly affect global mobile phone sales this year, and last year’s 1.4 billion mobile phone sales target will fall short of expectations, which is also a heavy blow to suppliers.

At present, a parts supplier of Samsung Electronics has been notified to cut parts orders worth a month.

Samsung Electronics has promised to make up for losses through foldable phones in the second half of the year, and the related sales target for foldable phones will be revised from the original 1.3 million units to 1.8 million units. But foldable models account for less than 10 percent of Samsung Electronics’ total smartphone sales of 270 million units.

Counterpoint Research analyst Park Jin-Seok believes that the Russian-Ukrainian war is the main reason for Samsung’s production cuts, and the conflict has seriously affected mobile phone sales in Eastern Europe. He also predicted that global demand for affordable smartphones will be lower than last year.

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