Image: Reuters Berita 24 English - Asian tech companies like Samsung, which makes chips, and LG Display, which makes display panels, have...
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| Image: Reuters |
Berita 24 English - Asian tech companies like Samsung, which makes chips, and LG Display, which makes display panels, have all warned that demand for smartphones, TVs, and other gadgets will drop sharply as inflation rises and fears of a recession grow.
Top company executives in Asia, which is often called the world's factory, are echoing warnings from U.S. and European companies that shoppers with lower incomes are skipping luxury items and sticking to cheaper basics when buying daily needs because of global uncertainty, the crisis in Ukraine, and the effects of China's COVID lockdowns.
LG Display Co Ltd, which makes display panels for Apple and TV makers, said on Wednesday, "As a recession looms, consumption is expected to slow down, except for essential goods."
"In general, both people who make sets and people who sell them are becoming more cautious about how they do business."
Samsung Electronics Co Ltd, the world's largest maker of memory chips and smartphones, said on Thursday that "PC and mobile demand is likely to continue to weaken."
Even though demand from server or data centre customers is less affected by macroeconomic issues, the South Korean company warned that server customers would also have to change their inventory if a recession happened.
Data centre customers have been a bright spot for chipmakers so far, especially since tech giants like Microsoft Corp and Alphabet Inc have had good quarters.
But Samsung's smaller rival SK Hynix Inc. said on Wednesday that customers of both smartphones and data centres are spending less.
"Recently, consumer sentiment has been dropping quickly because people are worried about inflation and the economy," it said. "Companies are now moving noticeably to cut costs."
After a two-year shortage of semiconductors that made it hard to make consumer electronics and cars, U.S. chipmakers like Micron and AMD have said in recent weeks that demand is also falling.
Taiwan's TSMC has also said that customers of consumer electronics were using up their own chip stockpiles, which was a sign that demand was slowing.
Panasonic Holdings Corp. said that its profit for the June quarter fell by 39 percent and that there is still a high chance that geopolitical risks and inflation around the world will cause the global economy to slow down. The Japanese conglomerate said that profits at its energy unit, which makes EV batteries and sells them to Tesla Inc, went down because raw materials and shipping costs went up.
CHINA PRESSURES
The U.S. chipmaker Qualcomm Inc., which uses Samsung's foundry, said, "We expect that the increased uncertainty in the global economy and the effect of COVID measures in China will cause customers to be more careful in the second half about how they manage their purchases."
Counterpoint Research said on Wednesday that smartphone sales in China, the biggest market in the world, fell 14.2% from April to June, and the number of units sold hit a 10-year low.
Analysts think that iPhones will sell better than other smartphones, but Apple announced discounts in China this week, which is something it does sometimes when sales are slow.
Tech and auto companies with factories in China have had trouble doing business in the world's second-largest economy because of COVID-19 lockouts. This is happening at the same time that the war in Ukraine has made energy and logistics costs go up.
China's economy has suffered a lot from the restrictions. Its GDP grew at its slowest rate in about 30 years in the April-June quarter, and it might even shrink in the first quarter of 2020.
China's auto industry group cut its sales forecast for the year earlier this month because COVID measures have hurt demand. The government is now trying to boost demand with incentives like lowering the purchase tax on some cars.
Toyota Motor Corp is the biggest automaker in terms of sales, but its output has been hurt in recent months by a lack of chips and supply problems in China. From April to June, it made 9.8 percent fewer cars than it had planned.
General Motors Co. said that the curbs caused its China operations to lose $100 million in the second quarter. The company's profits fell by 40% in the second quarter.
As a leading automaker in the world, GM said it would cut spending in case the economy slowed down, just like its rival Ford Motor Co.
A strong dollar has made Hyundai Motor Co.'s profits worth more, just like Fast Retailing, which owns Uniqlo. However, Hyundai Motor Co. warned that rising inflation could hurt demand in the second half.
For electric cars, however, some analysts say that sales won't slow down for another year. LG Energy Solution Ltd., which makes batteries for Tesla Inc., agrees with this point of view.
LG Energy Solution said that it thought there would be a lot of demand in the second half of this year.
But Elon Musk, who runs Tesla, has said in the past that he has "a super bad feeling" about the economy.
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