Weak demand forces Chinese top smartphone makers to trim production plans

May 19, 2022 0 Comments

China’s top smartphone makers have told suppliers to scale back orders for the coming quarters by around 20% from previous plans.

Nikkei Asia, citing people familiar with the matter, reported on Wednesday that Xiaomi had told suppliers that it would cut its full-year sales forecast to around 160 million to 180 million units from its previous target of 200 million units.

Vivo and Oppo have also reduced orders for this quarter and the next by about 20% in an attempt to digest excessive inventories currently filling retail channels, said the report. 

According to IDC, in the first quarter of 2022, 74.2 million smartphones shipped in China in 1Q22, down 14.1% year-on-year. The decline was not only the result of a high comparison base year but also due to a continued soft demand caused by the lack of product upgrades and the surge of COVID-19 cases. 

Looking into the full-year 2022, the market has a downside risk of shipping less than 300 million smartphones if it continues to see an absence of a fresh stimulus, IDC warned in its April note.

Weak demand has led to a slowdown in consumer spending. Last week, top China chipmaker SMIC warned that demand from downstream sectors such as smartphones, consumer products, and personal computers has “dropped like a rock”.

“Chinese smartphone vendors could reduce shipments by 200 million units this year. Many orders [from smartphone makers] were canceled,” Zhao Haijun, co-CEO of SMIC, said on an earnings conference call last Friday.

Xiaomi climbed to the world’s No. 3 smartphone maker for the first time last year with a 14.1% market share, compared with 9.2% in 2019, according to data from IDC. In the second quarter of last year, it even overtook Apple to become the world’s No. 2 smartphone maker.

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