China’s leading smartphone makers have told suppliers to scale back orders by about 20 percent for the coming quarters from previous plans following month-long Covid-19 lockdowns that have severely disrupted supply chains and damaged consumer confidence, Nikkei Asia has learned.
Xiaomi, China’s largest smartphone maker and the world’s third largest, has told suppliers it will lower its full-year forecast to about 160 million to 180 million units from its previous target of 200 million, sources said. have been informed about the matter. Xiaomi shipped 191 million smartphones last year and aims to become the world’s leading smartphone maker. The company could adjust its orders again as it continues to monitor supply chain conditions and consumer demand in its home market.
Vivo and Oppo have also cut orders for this and next quarter by about 20 percent in an effort to digest the excessive inventories currently filling sales channels, suppliers told Nikkei Asia. Vivo has even warned some vendors that it won’t update specs for some key components that go into some midrange smartphone models this year, citing efforts to cut costs amid inflationary concerns and declining demand, those sources said.
This bleak outlook is in stark contrast to the start of 2022, when most smartphone makers expected a recovery in the post-Covid era and an improvement in component supply.
Production forecasts for smartphone makers less exposed to the Chinese market, such as Samsung Electronics, are relatively unchanged, according to multiple sources familiar with the matter, though even they face challenges from looming inflation and the war in Ukraine. The South Korean giant hopes to ship more than 270 million units this year, which would be a slight increase from last year, the people said.
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Google, which recently unveiled its new Pixel 6A and hinted that it will launch its flagship Pixel 7 series in the fall, has told suppliers it plans to produce more than 10 million units this year, more than double the shipments in 2021.
China’s Honor, Huawei’s former budget unit, has yet to review its orders for 70 million to 80 million units for this year, sources said. The smartphone maker has recently regained its domestic market share and is making an aggressive bid to expand abroad in 2022.
Xiaomi, Oppo, and Vivo have all benefited from the US crackdown on Huawei, costing the one-time smartphone giant market share at home and abroad. Xiaomi rose to become the world’s No. 3 smartphone maker for the first time last year with a market share of 14.1 percent, compared to 9.2 percent in 2019, according to data from IDC. In the second quarter of last year, it even overtook Apple to become the second smartphone maker in the world.
But that tailwind seems to be abating. In the first three months of this year, Xiaomi, while still No. 3 in the world, saw its shipments drop 18 percent year-on-year. Oppo and Vivo shipments were down 27 percent and 28 percent year-on-year, respectively. In its home market, Xiaomi dropped from third to fifth place in the quarter.
Top Chinese chipmaker Semiconductor Manufacturing International Corp has warned of further troubles ahead, predicting global smartphone shipments to fall by some 200 million units this year due to the Covid lockdowns and the war in Ukraine.
Apple had already cut orders for its low-cost iPhone SE by 2 million units and cut by a few more million after the lockdowns in and around Shanghai. The main assemblers of MacBooks, iPhones and iPads in China are only gradually resuming production.
Samsung, whose smartphone supply chain is mainly in South Korea and Vietnam, has been less affected by China’s lockdowns. Its market share in the country is less than 1 percent, which also makes it less vulnerable to declining demand in the Chinese market.
“If we say that China’s war, inflation and lockdowns are the three biggest factors affecting the smartphone industry this year, Samsung has only two factors compared to the other players,” said an executive at a Samsung supplier, Xiaomi and Honor. “It gives Samsung an edge compared to those who relied heavily on the Chinese market – but there are still two knives in the back, so there are still uncertainties about Samsung’s smartphone sales this year,” added the source to it, referring to inflation and the war.
Jeff Pu, a veteran analyst at Haitong International Securities, told Nikkei Asia that his agency lowered its outlook for the global smartphone market this month from flat to 1 percent down to reflect macro uncertainties and the fallout from China’s lockdown.
“Most of the delays are now really coming from China, while demand in the US, Western Europe, Latin America and Southeast Asia still looks good. As Shanghai starts to reopen, we are watching closely to see if demand picks up a bit. recovers,” said Pu. “An important indicator is the upcoming online sales in China on June 18. We have heard that all online sales channels and brands are planning to offer deep discounts to boost sales.”
June 18 began as a JD.com birthday sale, but has gradually evolved into a major mid-year shopping event. This year it is seen as an important indicator of how quickly the effects of the lockdown may fade.
Eddie Han, an analyst at Isaiah Research, was a little more pessimistic. His agency predicts a 2 to 7 percent decline for the global smartphone market this year. He expects the Chinese market to fall by as much as 10 to 15 percent this year.
“Demand is weakening significantly in China and is not particularly strong around the world. We have noticed that overseas customers, especially those in Europe and North America, are more likely to turn to Samsung or Google for Android phones than Chinese smartphone brands. can play a role in consumer behavior.”
Vivo has not commented at time of publication, while Honor and Oppo declined to comment on this story. Xiaomi did not respond to requests for comment.
A version of this article was first published by Nikkei Asia on May 18. ©2022 Nikkei Inc. All rights reserved.