Inflation, Russia-Ukraine War Forces A Cut In Phone Production For 2022

Two out of the world’s leading phone manufacturers, Samsung and Apple, have reached the decision to cut the number of phone production for this year than initially planned as demands decrease. The reports explain this decision is a result of the high inflation and also because of the ongoing unrest between Russia and Ukraine. Russia’s invasion of Ukraine in particular seems to have taken an unexpected toll on the country’s handset market this year.  But let us not forget that before the ongoing unrest between Russia and Ukraine, the COVID-19 pandemic and the global chip shortage have also been contributors to factors not making the smartphone market look good for the past two years.

According to a  Korean publication, Apple will cut its production at low to mid-range prices while Samsung Electronics is said to have cut production not only for mid-to low-end models but also for flagship (high-priced mobile phone) models. The Russia-Ukraine war has taken a toll on the demand for iPhones across Europe. Electronic consumers in Europe are presumed to be less likely to spend money on tech consumables and more likely to save money for food and other supplies. Apple is expected to ship 15-20 million units in 2022, which is lower than the estimate of 25-30 million in previous years.

Earlier in the month of March, Apple announced its plans for a reduction in the production of the iPhone SE. This implied a 20% decrease compared to its original plan for the year 2022. A reason that has been associated with the new decision is the decreasing demand for mid-to-low models due to high prices, and the supply of parts is also being disrupted.

The Korean report further quoted an official from a Samsung Electronics partner company revealing Samsung’s move. The official says “Recently, Samsung Electronics received a call to reduce the order volume of smartphones from the current target of 310 million units to 280 million units.” That’s a whopping 30 million short of its initial target units. The electronic giant has reportedly informed its suppliers of the new decision to scale down its order volume halfway through 2022. The source further said Samsung intends to restore the reduced order volume when a new foldable smartphone is released in the second half of this year.

Shinhan Financial Investment has also issued results from the analysis that state Samsung Electronics recently lowered its annual smartphone production forecast for 2022 by about 10% to 270 million units. After producing 300 million units in 2017, Samsung Electronics has stayed in the mid-to-late 200 million range and set a goal of producing 300 million units this year ‘in five years. A researcher at Shinhan Investment Corp, Park Hyung-woo, said that “As of May, a strong inventory adjustment is confirmed.” “Smartphone production in May is expected to decrease by 35% compared to the average in January-April.”

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