South Korean component suppliers to Samsung Electronics are expecting poor scorecards for their second quarter earnings due to drastic decline in the production of smartphones by the tech behemoth.
It was a “life or death” situation for some companies, people with direct knowledge of the matter told TheElec, Monday.
First quarter earnings wasn’t bad as Samsung has ordered in bulk in consideration of its sales plan for the whole of the first half of 2020 __ but orders have “nosedived” in the second quarter, one of the people said.
Samsung Electronics was doubling its original design manufacturing (ODM) orders from China this year from a year ago, another person said. Coupled with the contraction of the smartphone market due to the COVID-19 pandemic, South Korea printed circuit board (PCB) makers are expected to see their sales decline by 30% in the second quarter, they said.
Samsung was also assembling camera modules for its smartphone on its own, which was previously done subcontractors, another person said.
Most of them has lost the order to assemble triple or quad cameras which has caused their sales and profitability to decline, they said.
Likewise, most lens maker failed to make a profit in the first quarter and are expected to be on the red again for the second quarter.
Demand for smartphone is expected to recover on the third quarter at the earliest, another one of the people said. Samsung was internally expecting demand to surge in the third quarter, then dropping again in the fourth quarter due to the possible resurgence of the virus, they said.
In April, Samsung reduced its smartphone production rate to 10 million units for the month, a sharp fall from its usual 25 million a month, according to sources within the company.