Samsung reduces procurement orders amid inventory pressure

Samsung Electronics is temporarily halting new procurement orders and asking multiple suppliers to delay or reduce shipments of components and parts for several weeks due to swelling inventories and global inflation concerns, sources have told Nikkei Asia.

The notification by the South Korean tech titan applies to components for multiple key product lines, including TVs, home appliances and smartphones, four people familiar with the situation said, and the postponement of orders involves a wide range of components across chips, electronics parts and final product packages.

The move by Samsung, the world’s No. 1 smartphone and TV maker and one of the leading home appliance providers, is the latest sign that electronics makers are pessimistic about the economic outlook amid global inflation risks.

Samsung told suppliers that the company needs to closely review its inventory levels of both components and final products to ensure stock on hand is manageable, according to the sources. Two people said the move will last until the end of July. One of the people said shipments from that source’s company have not been completely halted but the volume of the company’s planned shipment to Samsung for July has been slashed by 50%.

Samsung’s inventory assets reached 47.6 trillion won ($36.9 billion) at the end of March, up from 41.4 trillion won in December, according to its first quarter earnings report. The ratio of inventory assets to total assets also jumped to 10.8% from 9.7% during the same period.

The South Korean tech giant’s notice to suppliers comes in stark contrast to its previous plan last month, when it told suppliers that it had a relatively healthy view of the year ahead and that it still planned to ship at least 270 million smartphones in 2022, a similar level as last year, Nikkei Asia earlier reported. Chinese makers Xiaomi, Vivo and Oppo, by contrast, have scaled back orders by at least 20% due to the lockdowns in China and weakening demand in the European market for the coming quarters.

Samsung was contacted but did not immediately provide a comment for this story. Nikkei.Asia