Wary buyers cloud outlook for tech and auto companies in Asia

  • Samsung says demand for phone and PC chips set to weaken further
  • Server customers can adjust inventory in recession -Samsung
  • Toyota misses April-June production target
  • GM’s operations in China lost $100 million in the second quarter due to restrictions

July 28 (Reuters) – Asian tech firms from chipmaker Samsung to display panel maker LG Display have warned of a sharp slowdown in demand for smartphones, TVs and gadgets as the surge inflation and heightened concerns about a recession are weighing on consumer spending.

Comments from top business executives in Asia, often called the factory of the world, echo warnings from US and European companies that low-income shoppers are skipping discretionary items and sticking to less basics. expensive when shopping for basic necessities amid global uncertainty, the crisis in Ukraine and the impact of COVID lockdowns in China. Read more

“As a slowdown looms, consumption is expected to slow generally except for essential goods,” LG Display Co Ltd said. (034220.KS)Apple’s billboard supplier (AAPL.O) and television makers, said Wednesday. Read more

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“Set manufacturers and retailers in general are becoming more conservative in their business operations.”

Samsung Electronics Co Ltd (005930.KS)the world’s largest maker of memory chips and smartphones, said Thursday that “demand for PCs and mobiles is expected to see continued weakness.”

While customer demand for servers or data centers is less affected by macroeconomic problems, server customers should also adjust their inventory in the event of a recession, the South Korean firm warned. Read more

Data center customers, backed by tech heavyweights including Microsoft Corp (MSFT.O) and Alphabet Inc. (GOOGL.O) which have had strong quarters, have been a bright spot for chipmakers so far.

But Samsung’s smaller rival, SK Hynix Inc. (000660.KS) Wednesday warned of slowing spending by smartphone customers and data center customers. Read more

“Recently, consumer confidence has shrunk rapidly due to heightened concerns about inflation and economic recession, and businesses are now scrambling to cut costs significantly,” he said.

In recent weeks, US chipmakers including Micron (MU.O) and AMD (AMD.O) also reported falling demand after a two-year long semiconductor shortage that hampered production of consumer electronics and cars. Read more

Taiwan TSMC (2330.TW) also reported that demand is waning from consumer electronics customers as they use their own inventory of chips. Read more

Panasonic Holdings Corp. (6752.T) posted a 39% drop in its June quarter profit and said the risk of an economic slowdown caused by geopolitical risks and inflation remained elevated globally.

The Japanese conglomerate reported earnings from its energy unit that supplies EV batteries to Tesla Inc. (TSLA.O) decrease mainly due to higher raw material and logistics costs. Read more

PRESSURES IN CHINA

The American chipmaker Qualcomm Inc. (QCOM.O)a Samsung foundry customer said, “We expect elevated uncertainty in the global economy and the impact of COVID measures in China to cause customers to act cautiously in managing their purchases in the second half of the year.”

Smartphone sales in China, the world’s largest market, fell 14.2% in April-June as volumes hit their lowest level in a decade, Counterpoint Research said Wednesday. Read more

While analysts expect stronger demand for iPhones than for other smartphones, Apple (AAPL.O) announced discounts in China this week, a move it occasionally makes when sales are slow.

Tech and auto companies with factories in China have faced business disruptions in the world’s second-largest economy due to COVID-19 shutdowns, even as war in Ukraine has driven up energy and logistics costs.

The restrictions weighed heavily on China’s economy, with its gross domestic product in the April-June quarter growing at the slowest pace in about three decades, barring a contraction in the first quarter of 2020. read the after

Earlier this month, China’s auto industry association slashed its sales forecast for the year as COVID measures weighed on demand, which authorities are now trying to revive with incentives such as a drop purchase tax for certain cars.

Toyota Motor Corporation (7203.T), the world’s largest automaker by sales, has seen its output hit in recent months by chip shortages and supply constraints in China, producing 9.8% fewer cars from April to June than he hadn’t originally planned. Read more

General Motors Co. (GM.N), which saw a 40% drop in profit in the second quarter, said its China operations lost $100 million in the period due to the restrictions. Read more

A gauge of global automaking, GM said it was limiting spending ahead of a potential economic downturn, as did rival Ford Motor Co. (FN). Read more

Hyundai Motor Co. (005380.KS)which, like Uniqlo, parent company of Fast Retailing (9983.T) saw the value of its earnings boosted by a strong dollar, warned that rising inflation posed risks to demand in the second half. Read more

For electric vehicles, however, some analysts say it would take another year for sales to slow, a view supported by Tesla Inc. (TSLA.O) battery supplier LG Energy Solution Ltd (373220.KS).

LG Energy Solution said it expects strong demand in the second half of this year. Read more

But Tesla boss Elon Musk has previously spoken of “a super bad feeling” about the economy. Read more

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Reporting by Joyce Lee and Heekyong Yang in Seoul; Written by Sayantani Ghosh; Editing by Himani Sarkar

Our standards: The Thomson Reuters Trust Principles.

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