Asian handset and component suppliers are cutting production, throwing a shadow over the mobile industry outlook as the global economy slows.

While it is being driven mostly by the COVID-19 lockdowns in China that have shuttered factories and reduced domestic demand, Taiwan analyst Ming-Chi Kuo says it is also a sign of falling demand globally.

Big Chinese brands, including Xiaomi, Oppo and Vivo, have slashed 100 million units from their 2022 forecasts since the end of March, Kuo has revealed, pointing out that the second half of the year is the peak season for smartphone sales.

Figure 1: Besides handset makers like Xiaomi, Samsung, Oppo and Vivo, key chip suppliers, MediaTek and Qualcomm, are also dialing back.
(Source: SOPA Images Limited/Alamy Stock Photo)

The respected analyst said his latest survey of suppliers also found a 20%-30% drop in orders for smartphone camera components for Q3.

'Weak demand'

He said the big cut in production by Chinese Android brands represented "weak demand" in Europe and emerging markets as well as in China in the face of COVID-19.

Besides the handset players, the two key chip suppliers, MediaTek and Qualcomm, are also dialing back.

MediaTek has cut 4Q22 orders by 30%-35%, mainly for mid-to-low-end chips, while Qualcomm has trimmed orders of high-end Snapdragon 8 chips by 10%-15% for the second half.

That is a turnaround for Qualcomm. Just a month ago, executives told analysts that they were confident the softening market would affect just the low-end of the market, with little impact on Snapdragon's premium chips.

Kuo said that because of the longer lead time for 5G chips, the lower second half orders from MediaTek and Qualcomm imply that demand may not improve until Q1 2023.

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He points out that Samsung also cut 2022 smartphone forecasts by about 10% to 275 million. By comparison, the outlook for iPhone shipments remains stronger, Kuo says.

But it's not just demand for handset components that is losing steam.

In Taiwan, some chip design firms have cut production by as much as 20%-30% because of the fall in demand, the Taiwan Economic Daily reports.

An industry source revealed that it had been necessary to cut orders to control inventory, the paper said.

Just a few months ago, a number of consumer chip companies increased production capacity because of global shortages. Now they are dumping that extra capacity as they try to manage inventories and pricing.

A research note by ING says that Taiwan semiconductor production grew just 0.5% in April month-on-month while computers and LED panels fell 21% and 17%, respectively.

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— Robert Clark, contributing editor, special to Light Reading