Samsung cuts smartphone output in April as demand slumps

(Image credit: Future)

The Covid-19 outbreak has taken a toll on global smartphone demand and manufacturers like Samsung are calibrating the anticipated reduction in sales and curtailing production during the current quarter.

The Korean phone maker had witnessed less than robust demand for its Galaxy S20 range of smartphones that launched in March as the coronavirus pandemic resulted in lockdowns and fears of job losses.  A report from Wave7 Research suggested an overall decline of around 13% in global sales during 2020.

A report in the South Korean tech publication The Elec says Samsung would cut down production from an average 25 million units a month to 10 million units in April. The publication quotes an unnamed source to suggest that the ongoing Covid-19 lockdowns and the shutting of production facilities in India and Brazil were the main causes for this output cut.

Samsung usually produces less than the monthly average during April as it prepares the inventory for the rest of the year based on demand during the month. However, this time, the output has dropped even below the numbers recorded a year ago this time due to the sluggish global demand.

The company believes output would be normalized in May when the India and Brazil plants resume production. However, given that the lockdown has been extended in India till May 3 and Covid-19 cases are rising in both these countries, the recovery may take longer than Samsung anticipates.

There is a reason to smile though

Nonetheless, there is a silver lining for the Korean tech giant. Sales projections for the Samsung Galaxy S20 Ultra are beating market estimates with sales expected to reach 6 million units during the year as against the anticipated 3.5 to 5.25 million units. 

Following the pandemic, the market had slashed sales projections for the S20 series by 40% with sales of 20 million handsets during 2020. While the Galaxy S20 was expected to sell 6 million units, the S20+ was pitched at 8 million and the S20 Ultra at 3.5-5.25 million units.

Earlier in April, the South Korean tech giant had stated that its operating profits during the three months ended March would touch $5.23 billion, up about 2.7% over the profits it posted in the same period a year earlier. 

However, with the spread of Covid-19 and the resultant economic slowdown the immediate future appears bleak for Samsung and other smartphone manufacturing companies across the world.