Phones out of stock → Order reductions
Factory operation rates plummet by more than double digits
Announcements of partial shutdowns from emergency management

Samsung Electronics’ smartphone partner’s factory operating rate has plummeted to its lowest rate in September. Some partners were led to being temporarily closed for a month for the first time in 15 years in the same month.

According to a business report of Samsung Smartphone's major camera module supplier on the 5th, the operating rate of factories in the 2nd quarter fell by more than double digits compared to the same period last year except for CammSys. Companies with the production operating rate for camera modules in the second quarter of last year was close to 97%, lowered their operating rate to 74% this year. The operating rate of one factory, which maintained nearly 90% of operating rate last year, also fell to 60%.

Company A, the first partner company, announced the regular shutdown of its production plant in September for the first time in 15 years. In two years after the outbreak of COVID-19, the Company Bs operating rate of its smartphone optical filter plant fell to half (around 50%). A camera module company (Company C) lost half of its monthly average sales in the second quarter.

The gap is wider in comparison to the second quarter of 2019, before COVID-19. The factory operating rate of major Samsung camera partners decreased by more than 12% on average compared to 2019. In fact, it is now considered to be the lowest operating rate ever.Apart from the operating rate of production plants announced by the figures, the aftermath of "order cuts" (decreases in orders) is higher at production sites. Factories operate, but significantly reduce input labor or encourage vacations. The move is aimed at minimizing fixed and labor costs.

The aftermath of the "Order Cuts" is expected to continue even after the third quarter. The third quarter is usually the peak season for parts production in preparation for Samsung's Smartphone 'Year-end Special'. However, the inventory problem, which has continued since the second quarter, showed no signs of being easily resolved so emergency management began.

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The parts industry predicts that Samsung's Smartphone will inevitably grow back this year. Samsung Electronics set its annual target for smartphone shipments to 330 million units earlier this year due to the recovery of COVID-19 and easing supplies and demand difficulties for semiconductors, but drastically lowered it to 270 million units in the second quarter. The industry expects to maintain or fall below 260 million units, which was last year's numbers.

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<Image of Galaxy S22 - Reporter Min-soo Kim>

An official from the parts industry said, "Samsung Electronics is making all-out efforts to manage the inventory as consumption decreases due to the aftermath of the global economic downturn. The situation is expected to improve somewhat by the end of the year."

According to the market research firm TrendForce, the global smartphone production in the second quarter of this year was 292 million units, down 6% from the previous quarter. Samsung Electronics' shipments in the second quarter fell 16.3 percent from the previous quarter to 61.8 million units.

By Staff Reporter So-raPark (srpark@etnews.com)