Samsung Electronics and LG Electronics have reportedly scaled back production citing tough economic conditions. South Korean companies will also reduce the number of TVs and other home appliances they manufacture to meet falling consumer demand.
The companies are struggling to sell due to high interest rates and inflation affecting not only South Korea but many other countries as well. The economic situation was exacerbated by the ongoing war in Ukraine, which led to serious supply disruptions worldwide.
Corresponding The Korea TimesMarket research firm Display Supply Chain Consultants (DSCC) said the average number of inventory turnover days for Samsung was 94 in the second quarter of this year, up two weeks from a year earlier.
It has been explained that the number of days of inventory turnover refers to the time it takes for inventory to become available for sale. The shorter the time, the lower the cost burden for the producer.
“Uncertainty about demand across the technology sector is increasing and the overall sluggish trend continues,” Kim Rok Ho, an analyst at Hana Financial Investment, said in a statement. “The decline in demand for home appliances and televisions has been a concern since the second half of last year, and we indeed confirm the data on the demand decline.”
In any case, as inventories at Samsung Electronics increased, it informed its parts suppliers of volume adjustments, which reportedly indicates a drop in production. It was further reported that the company also temporarily canceled new procurement orders due to an inventory build-up and global inflation concerns.
Inventory of the company’s home appliances has increased as social distancing regulations are lifted around the world and people are becoming more active and engaging in outdoor activities. As a result, demand for new household appliances has decreased.
Before this slump in device production, Samsung Electronics was already cut production of his smartphones in the last month. Samsung is one of the largest mobile phone manufacturers in the world, but has reduced its production by 30 million units.
Samsung Electronics’ rival LG Electronics, meanwhile, also scaled back its home appliance production. The company is also facing lower demand, according to the decision. An LGES official said: “During the pandemic demand has increased but we are switching to an endemic disease so we have adjusted our production accordingly.”