Samsung reportedly slashes smartphone component orders radically as coronavirus ravages demand

The coronavirus pandemic continues to wreak havoc and with many consumers following shelter-in-place orders, economic activity has slowed down. This, in turn, has led some employers to lay off or furlough employees, while others have cut pays. As a result, demand is expected to weaken further. And since smartphones are viewed as discretionary items, their shipment will likely suffer too.
 

COVID-19’s impact on US and European consumer spending expected to be severe this quarter

 
While we have already heard reports that the demand for the Galaxy S20 range pales in comparison to that of the Galaxy S10 series, it seems like the company’s mid-range and low-end phones are doing no better. That’s because industry insiders claim that Samsung has cut down part orders by as much as 50 percent for models across all segments.
 
This is in line with a previous report that had said that the company is now manufacturing only 10 million smartphones each month, as opposed to 25 million units, which was the monthly average before.
 
The company has also reportedly reduced production forecast to six months.
 
Since the manufacturing process begins long before the launch of a product, components like camera modules and displays are mass-produced and delivered 2 to 3 months before the unveiling. Thus, a reduction in parts order is indicative of a company’s outlook on demand.
 
And since Samsung’s phones are mostly manufactured in Vietnam, South Korea, and India, supply-side issues do not seem to be the main problem. That’s not to say that the distribution network has not been affected.
 
However, as the situation remains grim in the US and Europe, demand is forecasted to decline steeply. A recent report has said that global smartphone shipments can go down by up to 15 percent this year to 1.15 billion units.
 
And since the second quarter is expected to be more reflective of the effect on consumer spending, it’s not hard to see why Samsung is trying to make some adjustments to weather the storm. Strong demand for its memory chips is also expected to help it offset the negative demand for consumer goods.