Gerry Palmers Tech 05.30.2022 02:May AM EDT

Why Did Samsung Decide To Cut Phone Production by 10% for 2022?

As the COVID 19 pandemic and a global chip shortage affect device production worldwide, the situation is seemingly not improving in the foreseeable future. Samsung was not spared, and the tech giant is reported to cut its smartphone production this year.

Samsung Reduces 2022 Production Targets by 30 Million Units

Citing a source in Samsung's supply chain, South Korea's business newspaper Maeil Business News that the tech giant has significantly reduced its smartphone production target for this year, SamMobile further reported.

Samsung was said to have informed its suppliers that it plans to scale back its order volume halfway through 2022. This means the company intends to only ship 280 million units this year. This is 30 million short of its initial target of 310 million units. Investment analysts also indicated in the report that Samsung would cut production by 35% in May.

n Wednesday, a CNET report similarly said that Apple would also produce fewer handsets than the 240 million phones analysts expected -- a small but notable 20 million shortfall down to the 220 million iPhones released last year. That report cited a wide range of global factors, including geopolitical shifts, inflation, and exchange rate volatility, as well as the component shortages and COVID disruption that plagued the tech industry since the pandemic started at the start of 2020.

High Inflation, Ukraine Crisis Cited asFaxtors in Phone Production Cuts

According to the report, the key reasons for the production cut were high inflation and the ongoing Ukraine conflict. In particular, Russia's invasion of Ukraine is expected to hamstring the country's handset market in 2022, as per Counterpoint Research.

Samsung originally estimated it would ship 310 million phones by the end of 2022. Still, that number has been reduced to 280 million phones, a source in the company's supply chain told Maeil Business News. Samsung, the report said, will reduce production by 35% in May and another 10% later in the year.

Cutbacks a Growing Industry Problem

Samsung's lower target yet again shows the trend of phone makers preparing for the potential impact of the declining global economy. Most recently, Apple was reported in Bloomberg to be producing only 220 million iPhones this year versus a market forecast of around 240 million units.

Samsung Components Business Also Affected by Crisis

Additionally, Samsung has amended orders to its electronic component manufacturing companies as the crisis hit its components business. The company reportedly reduced its volume by up to a month for its components manufacturing companies.

Samsung To Reduce Production of Entire Phone Product Line

But while Apple's production cuts apply only to its flagship phones, Samsung's move will affect handsets across various smartphone product lines. This includes budget models as well as many of the top-of-the-line Samsung phones set to launch later this year, such as the upcoming successors to the Galaxy Z Fold 3and Z Flip 3.