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Weak smartphone sales worldwide lead Samsung to cut production

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Reuters reports that Samsung’s massive smartphone manufacturing center in Vietnam has seen a sharp decline in handset production due to a current slump in global smartphone sales. The slowdown is part of a general decline in consumer spending worldwide and has left the manufacturer with a bulging inventory to get rid of, possibly by cutting prices. The report notes that major US retailers such as Best Buy and Target expect sales to continue to sputter as consumers on the state side begin to feel the weight of a weakening economy.

Samsung reportedly cuts smartphone production amid global economic weakness

Warehouses in California are filled with clothing, electronics, furniture and other goods from across the Pacific. Samsung recently said it expects flat smartphone sales or single-digit growth for the second half of this year at best. The Samsung factory in Thai Nguyen, Vietnam produces 100 million phones per year. Two factories in that country are responsible for half of Sammy’s annual smartphone production.

According to several workers at the Thai Nguyen factory who spoke to Reuters, things are not going well. Last year, around this time, things were going well. But now these workers say they’ve never seen smartphone production drop this low with some assembly lines running just three days a week, a 50% drop from the six days a week they normally run. Other lines run four days a week and no overtime is allowed.

In its report, Reuters noted that it is possible that some of Samsung’s smartphone production could have been relocated to other factories in India and/or South Korea. Nevertheless, Samsung has not yet cut jobs in Vietnam, even as other tech companies have started announcing layoffs. Those companies include software and hardware producer Microsoft, retailer Best Buy (heavy on tech sales), social media apps TikTok and Twitter, streaming content provider Netflix, online broker Robinhood and audio chat app Clubhouse.

This news comes just six days before Samsung will hold its next Unpacked event, where it is expected to introduce the Samsung Galaxy Z Fold 4 and the Samsung Galaxy Z Flip 4; the first opens like a book to turn from a small smartphone into a tablet. The latter is a small device that easily fits in a pocket and unfolds into a 6.7-inch phone with a long and thin screen.

Reserve your seat in line when it’s time to get the Galaxy Z Fold 4 and Galaxy Z Flip 4 . to pre-order

While these are very expensive phones that are hard to sell with a global recession approaching, Samsung is reportedly expecting to ship a combined 10 million units of the two foldable Galaxy Z models.

Economic data points to an impending recession in the United States, which is not good for smartphone sales

U.S. gross domestic product (GDP), which measures the value of goods and services produced in the states and purchased by the end user, has fallen for two consecutive quarters, usually a sign of an impending recession. Add to that the 150-point hike in short-term interest rates orchestrated by the Federal Reserve Board to slow inflation, and we could see more declines in smartphone production.

Higher inflation in the US also means Americans have less money to spend on expensive consumer electronic devices, including smartphones. There are still enthusiasts who can include the purchase of a new phone in their budget. Others may need to keep their current phone or downgrade from a top model to a more affordable model. Interestingly, Samsung’s Galaxy A line could perform well under these conditions.

The mid-range Galaxy A phones have usable cameras, large screens, large batteries and smaller price tags.

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