Samsung Smartphone Production Targets
While Samsung Electronics’ (005930.KS) smartphone production goals for this year were optimistic when they were made late last year, they now seem even more optimistic given the confluence of events that have suppressed smartphone sales across the globe. Samsung’s original production estimate for this year was for the production of 240m units and an additional 60m to 70m produced by ODM, for a total of 300m to 310m. Samsung shipped 74m units in 1Q but likely produced ~77m units, leaving an excess of ~3m units. Based on our estimates for Samsung’s production and shipments for the remainder of the year, we expect using Samsung’s original production estimate (single point of 305m units), the company would overproduce by between 13m and 14m units.
[1] 5 Year Average Share of Full Year Shipments
[1] Aggregated shipments from multiple sources
[1] Aggregated shipments from multiple sources
Based on our existing shipment estimates for 2Q – 4Q we expect Samsung would likely reduce production in 2Q and 3Q, with signs that they have already reduced production in April and a bit more severely in May seem to indicate that they are at least at this point on the path to a reduction in overall production this year. We have seen estimates for production as low as 280m units but we remain a bit more optimistic at 290m based on what we know so far. Our biggest concern would be if 2Q shipments come in lower than 68m units, which would push us to lower full year again, although we expect Samsung will push production back up in June as the COVID restrictions in China are loosened.
The effect of reductions in Samsung’s smartphone production plans will likely be felt more by ODMs, as Samsung will likely focus on marketing the more profitable flagship phones that it produces internally, and we noted last week that Samsung was already expected to reduce the number of feature phones it produces for the India market this year, which are produced by Dixon Technologies (DIXON.IN). We expect Samsung’s other ODM, most likely Wingtech (600745.CH) and Huaqin (pvt) will have seen some cutbacks, with Samsung Display (pvt), an affiliate of parent Samsung Electronics, seeing less of a reduction as it produces the Galaxy S series flagship line and the Z Flip & Z Fold, Samsung’s foldable smartphone offerings.
The effect of reductions in Samsung’s smartphone production plans will likely be felt more by ODMs, as Samsung will likely focus on marketing the more profitable flagship phones that it produces internally, and we noted last week that Samsung was already expected to reduce the number of feature phones it produces for the India market this year, which are produced by Dixon Technologies (DIXON.IN). We expect Samsung’s other ODM, most likely Wingtech (600745.CH) and Huaqin (pvt) will have seen some cutbacks, with Samsung Display (pvt), an affiliate of parent Samsung Electronics, seeing less of a reduction as it produces the Galaxy S series flagship line and the Z Flip & Z Fold, Samsung’s foldable smartphone offerings.
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