Mehul DasMay 30, 2022 10:48:32 IST
The tech industry has been hit hard by the COVID pandemic, and the chip shortage that ensued. On top of that, Russia’s invasion of Ukraine has wreaked havoc on the already stressed global supply chain. The end result is, that companies like Samsung will have to cut their production forecasts short and absorb a significant loss in revenue.
According to a report in South Korean business news daily, Maeil Business News, the tech giant has had to make the tough decision of producing fewer phones than it initially planned. Samsung has apparently informed its production partners and distributors that it plans on shipping only 280 million smartphones this year, as opposed to the previous forecast of 310 million units.
However, South Korean investment analysts also allege, that there is a strong possibility that Samsung may have to reduce its production by up to 35 per cent, if the Russia-Ukraine situation continues, and if global supply chains aren’t put into order.
One of the key reasons why Samsung has had to take this drastic decision is the globally high inflation and the disruption in supply chains that has been caused by the military conflict between Russia and Ukraine. The conflict means that raw materials needed for the manufacturing of several key components of a smartphone are not readily available. Even if they are available, the prices of these raw materials have shot up so high, that it wouldn’t be feasible for Samsung to absorb the costs, nor will it be feasible to pass them on to the customer.
Samsung's lower target is yet another sign of a growing trend of phone makers bracing for the potential impact of the worsening global economy. Earlier this year, Apple had also reported that they will be producing only 220 million iPhones this year versus a market forecast of around 240 million units.
Although Apple will be limiting the production of their flagships only, Samsung will be reducing production across its lineup. This brings up a number of questions regarding the smartphone industry going forward. The most pertinent of them is whether this is a lull following a decade of explosive smartphone sales, or will the arrival of new technology like foldable screens and under-the-display cameras be sufficient to pull the industry through.
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