Samsung cuts parts orders by half as COVID19 crashes phone demand

According to a report out of South Korea, Samsung Electronics has aggressively cut its orders for smartphone parts. There's said to be a 50 percent cut in orders for parts across the board as Samsung anticipates weak demand for smartphones going forward.

Samsung no longer buying as many smartphone parts as it used to

It was also reported two weeks ago that Samsung had halved its smartphone production in April – it made just 10 million units instead of the monthly average of 25 million units. Its smartphone plants in South Korea, India and Brazil all suffered from COVID19-related shutdowns.

An official for a parts manufacturer cited in the report says that Samsung has cut orders for all low to mid-range as well as high-end models. This comes following a solid performance in Q1 which was aided by the launch of the Galaxy Z Flip and the Galaxy S20 lineup. There wasn't much disruption initially but things started to take a turn for the worse in April when COVID19 wreaked havoc across Europe and the United States. Samsung is also said to have reduced its production forecast to six months amid demand uncertainty.

Samsung is stable enough to make it through the storm but the impact of its cut in orders will be significant on parts suppliers that don't have pockets as deep as the Korean giant. Since it makes more than 300 million smartphones every year, Samsung is one of the biggest customers for parts in the mobile market. Therefore, the parts industry is going to feel the pinch when Samsung stops buying. One representative for a parts company said that a 50 percent reduction in orders is “like a death sentence.”

It's difficult to say right now when the situation might improve so an increase in demand can't be predicted. Given the state of the world right now, it seems that things will get worse before they get better.