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Samsung Scales Back Smartphone Production As Demand Weakens

Samsung Galaxy S22 Plus AM AH 10
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Samsung has scaled back smartphone production as demand weakens globally. The Korean behemoth’s smartphone factory in the Thai Nguyen Province of Vietnam is reportedly operating below capacity, churning out fewer devices than it could. The campus has the capacity of manufacturing over 100 million smartphone units in a year. Samsung also has one more smartphone campus in the country. Combined, the two factories manufacture half of the company’s annual smartphone production.

Samsung reduces smartphone production as sales decline

According to a Reuters report, a global slowdown in consumer spending has forced Samsung to scale back smartphone production. Major retailers such as Target and Best Buy have warned of a rising inventory as people have started checking on their expenses following a months-long spending spree after the COVID-19 lockdowns. The smartphone market witnessed a boom in 2021 and through early 2022.

However, factors like the Russian invasion of Ukraine and rising inflation, with financial experts forecasting a potential global recession, have hit the industry hard once again. With fewer buyers on the market, inventories are rising rapidly. A couple of months back, reports emerged that Samsung has an unsold inventory of over 50 million smartphones across its global distributors and retailers. No wonder it is reducing production.

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Reuters talked to some employees from Samsung’s Thai Nguyen factory and they suggest that the business is worse than last year. The company is running some production lines only four days a week, down from six during normal business time. Some employees only need to work three days a week. The time around June and July usually sees lower business activities but there’s never a cut in workdays.

However, Samsung is still optimistic that things will improve in the coming months. It reportedly expects the overall annual production volume in Vietnam to be of the same level as before. It’s unclear whether the company plans to increase production in the other factory.

Samsung has already revised its smartphone sales target

Samsung has already reduced its smartphone sales target for 2022 by ten percent. It is now expecting to sell around 270 million smartphones this year, the same as last year. The company had originally set a sales target of 300 million units. Time will tell whether the firm can achieve the revised target. It has high hopes from the Galaxy Z Fold 4 and Galaxy Z Flip 4 foldables. The new foldables launch on August 10, alongside the Galaxy Watch 5 series smartwatches.

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