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Production reduction/destocking, "redemption" of mobile phone head manufacturers
2022/11/26 14:35:46
The epidemic led to more severe market demand, which was already quite weak, and the brand factory was forced to reduce its production target again to cope with it. The second quarter, when the previous production volume had grown, saw a quarterly decrease of 6%, and the global output was only about 292 million tubes. Compared with the production performance of the same period in 2021, there will be an annual recession of 5%.
Affected by the decreasing demand in the consumer electronics market, inventory adjustment has also become an inevitable key topic in the industry. Recently, the market has heard that the leading mobile phone manufacturers have cleared inventory and cut orders to cope with the overall sluggish market demand.
Samsung's "Special Measures"
Earlier, it was reported that Samsung would significantly reduce the shipment of smartphones in 2023, cutting 30 million smartphones. According to the Korean media "etnews" on November 17, Samsung set the target of smartphone shipment in 2023 to be similar to that in 2022, about 270 million units. Samsung's plan to cut down the single model is mainly the A-series and M-series low-end models that were originally the main sales force. It is widely believed in the industry that Samsung's order cutting will bring pressure to relevant supply chain companies.
Some analysts pointed out that Samsung needs to reduce the output to clear the inventory, and on the other hand, it needs to improve the profit margin. Therefore, the low-end models that rely on low profit margins are the priority of Samsung.
In terms of capacity, according to the Korean media BusinessKorea on the 16th, in the third quarter of 2022, the capacity utilization rate of Samsung's smartphone factory was only 72.2%, down 8.1% from 80.3% in the same period of 2021, equivalent to only 7 of 10 production lines in operation. This is the lowest since Samsung began to separately release the capacity utilization rate of the factory in 2010.
The decline in global demand led to a surge in inventories. As of the third quarter of 2022, Samsung's inventory amounted to 57 trillion won, a sharp increase of 38.5% compared with 41 trillion won at the end of 2021. The inventory of DRAM, NAND Flash and IT products alone amounts to 16 trillion won.
Due to insufficient smartphone sales, Samsung is taking some "special measures" to adjust its inventory, including suspending factory operations and reducing workers' working hours.
According to the Korean media "etnews", Samsung is considering suspending the operation of its Vietnam plant for two weeks, which will stop from the middle of December 2022 to January 2, 2023. The company also strongly considered to shut down its two plants in Taiyuan Province in the northeast of Vietnam and Beining Province in the north for more than two weeks.
According to the previous report, the proportion of smartphone production in Samsung's Vietnam factory will drop from 50% this year to 40% next year. The main reason behind Samsung's move is the slowdown of the global consumer market and the rising labor costs in Vietnam.
Samsung has diversified its smartphone production in Vietnam, India, Brazil, Indonesia, Türkiye and other countries, of which Vietnam is Samsung's largest production base. Last year, Samsung Vietnam accounted for 60% of its total smartphone production.
This year, Samsung has steadily reduced working days, adjusted the working days of workers from 5 to 3, and encouraged holidays to adjust smartphone production.
Apple's "high maintenance" strategy
According to people in the supply chain, due to the low demand for middle and low-end models, Apple will significantly reduce the production of iPhone14 Plus and increase the production of more high-end iPhone14 Pro. After all, the price of the latter is around 10000 yuan. However, on November 7, Apple issued a statement saying that the production capacity of the iPhone 14 Pro would also be reduced due to special circumstances that temporarily affected the Zhengzhou (Foxconn) factory.
In October this year, Apple released the iPhone 14 Pro series. After the first wave of pre purchase, Apple started to adjust the proportion of new products. After the release of the iPhone 14 Plus, the market reaction was cold, which made Apple's adjustment even greater.
According to the research of TrendForce Jibang Consulting on October 25, the production proportion of the two iPhone 14 Pro series has increased from 50% of the initial plan to 60%, and will continue to increase to 65% in the future. On the whole, the proportion of new iPhones shipped to Apple remains 36%, while the annual iPhone shipment target for 2022 is 240 million, an annual increase of 2.8%.
TrendForce Jibang Consulting pointed out on October 25 that while the United States continues to raise interest rates to curb inflation, it also weakens consumer disposable income, which will affect Apple's production performance in the first quarter of 2023. It is estimated that the production will be reduced from the original estimated 56 million to 52 million, with an annual decrease of 14%.
In 2022, the global smartphone shipments will decline all the way, the consumer market will shrink, and the top mobile phone manufacturers will bear the brunt. The response measures taken by the leading mobile phone manufacturers will also affect other enterprises to follow suit. The action of cutting down orders also reflects that the current major global smartphone consumer market is facing downward pressure to rush into winter, and what worries the market is whether the smartphone market can normally recover in the future.
Under the background of uneven market supply chain and continuous pressure, mobile phone manufacturers contracted some middle and low-end production lines to ensure the capacity of high-end production lines with relatively high profits. From the perspective of smart phone manufacturers, under the tight pressure of the market, in addition to the measures of cutting down orders, reducing prices and clearing up inventory, it may become a new "salvation" for enterprises to enter the high-end market through innovation.


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