Samsung, LG and other Asian tech companies warn of sharp drop in demand for smartphones, TVs

Asian tech companies from chipmaker Samsung to panel maker LG Display have warned of a sharp drop in demand for smartphones, TVs and smartphone devices due to inflation. growth and recession fears reduce consumer spending.

Comments from top corporate executives in Asia, often referred to as the world’s factory, echo warnings from US and European companies, who say high-income shoppers Lower incomes are skipping discretionary items and sticking with cheaper basics when it comes to buying daily necessities amid global unrest, the crisis in Ukraine and the impact of the COVID-19 lockdowns- 19 of China.

“As recession looms, consumption is expected to slow down except for essentials” LG monitora supplier of display boards for Apple and television producers, said Wednesday.

“Gather manufacturers and retailers in general are becoming more cautious in their business practices.”

Samsung ElectronicsThe world’s top maker of memory chips and smartphones, said on Thursday that “demand for PCs and mobile devices is likely to continue to weaken.”

While demand from server or data center customers is less affected by macroeconomic issues, server customers will also have to adjust their inventory if there is a downturn. happen, the Korean company warned.

Data center customers, backed by tech heavyweights include Microsoft and Alphabet reported strong quarters, by far a bright spot for chipmakers.

But Samsung’s smaller rival SK Hynix on Wednesday warned of slowing spending from both smartphone and data center customers.

“Recently, consumer sentiment has rapidly narrowed due to deeper concerns about inflation and recession, and companies are now moving to cut costs notably.”

In recent weeks, U.S. chipmakers including Micron and AMD have signaled a decline in demand as well as after a two-year semiconductor shortage caused production of consumer electronics and autos to decline. is limited.

Taiwan’s TSMC has also signaled that demand is waning from consumer electronics customers as they use their own chip stocks.

Panasonic Holdings Corp posted a 39% drop in its June-quarter profit and said the risk of a recession due to geopolitical risks and global inflation remained high. The Japanese conglomerate said profits at the power unit that supplies EV batteries to Tesla Inc fell mainly due to higher raw material and logistics costs.

China exerts pressure

American chip maker QualcommA Samsung foundry customer, said: “We think the increased uncertainty in the global economy and the impact of COVID measures in China will cause customers to be cautious in managing their purchases. their products in the second half of the year”.

On Wednesday, Counterpoint Research said smartphone sales in China, the world’s largest market, fell 14.2% in April-June while volumes hit a decade low.

While analysts expect demand for the iPhone to be stronger than for other smartphones, Apple announced price cuts in China this week, a move it occasionally makes as sales rise. sales slow down.

Tech and auto companies with factories in China have faced business disruption in the world’s second-largest economy due to the COVID-19 lockdown even as the war in Ukraine has pushed up energy costs quality and logistics up.

The restrictive measures have taken a huge toll on China’s economy, with the country’s gross domestic product in the fourth quarter to June growing at its slowest pace in three decades, unless the decline in the first quarter of 2020.

Earlier this month, the China auto industry association cut its sales forecast for the year as COVID measures hit demand, which authorities are now trying to revive with promotional measures. incentives such as reduced purchase tax on certain cars.

Toyota Motor Corp., the world’s largest automaker by sales, has seen its output hit in recent months due to chip shortages and supply constraints in China, producing less. 9.8% of vehicles from April to June compared with the original plan.

General Motors, which reported a 40% drop in second-quarter profit, said its China operations lost $100 million (about Rs 784) during the period due to restrictions.

Accompanying global auto production, GM said it was curbing spending in the face of a potential recession, as was its rival Ford Motor.

Hyundai Motor Co, like Uniqlo’s parent company Fast Retailing, has seen the value of its profits lifted by a strong dollar, warning that rising inflation poses some risks to the economy. demand in the second half of the year.

For electric vehicles, however, some analysts think it will take another year for sales to slow down, in view of Tesla battery supplier LG Energy Solution Limited.

LG Energy Solution said it expects high demand in the second half of the year.

However, Tesla boss Elon Musk has previously spoken of “an extremely bad feeling” about the economy.

© Thomson Reuters 2022

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