Samsung adjusts down smartphone production capacity in response to weakening market demand

Problems for Samsung began as early as the first part of the year, with the South Koreans having to cut up to 30 million units from their planned smartphone production for the year. In the meantime, market conditions have gotten even worse, with Samsung also having to “deal” with a surplus of production capacity that costs money just to exist.

Encouraged by the unexpectedly high market demand that came in early 2020 amid pandemic measures that forced many people to adapt to work from home and socially distant conditions, Samsung invested heavily in increasing production capacity, hoping to make the most of the high demand coming especially for products signed by well-known brands.

Meanwhile the “party” seems to be over, with the deepening global recession giving even the most successful players in the smartphone market cold shivers.

According to estimates so far, Samsung expects smartphone sales to remain flat, with minor increases at best by the end of the year. In practice, information picked up by Reuters journalists tells a different story, with Samsung in the process of downsizing its Vietnamese factories, measures that will most likely involve laying off some employees and closing at least some production halls.

For example, Samsung’s factory in Thai Nguyen orajul has so far shipped about 100 million phones annually. Aided by another factory, the two locations shipped less than half of Samsung’s annual phone production.

Based on these premises, it is plausible that Samsung anticipates a considerable slump in global smartphone sales after the middle of this year. Already, sources among employees at the factories indicate that work is being done in shifts of only three days a week, with the announcement of restructuring measures seemingly inevitable.

It is also unclear whether Samsung plans to move some production to factories in other locations, such as India or its home country of South Korea. What is certain is that for many years, smartphone production has not been at such a low level at those factories.

It should be noted that Samsung’s acknowledged problems are not unique in the industry, with other brands with global reach such as Best Buy, Canoo, Clubhouse, Coinbase, Microsoft, Netflix, PayPal, Robinhood, Substack, Tesla, TikTok, Twitter, Vimeo and Virgin Hyperloop announcing smaller or larger staff cuts.