The leading chipmaker in China has sounded an ominous warning about the fragile state of the global economy, highlighting weakening demand for tech products.
Reuters reported on Friday that the CEO of Semiconductor Manufacturing International Corp (SMIC) said demand for smartphones and computers “dropped like a rock” recently.
It comes after Apple in March was reportedly planning to lower iPhone and AirPod production, as consumer demand slows due to the Ukraine crisis and rising inflation.
Shortly after that in late April, the iPhone maker posted very positive financial results, but at the same time it also issued a gloomy outlook.
Apple warn that sales could be dented by as much as $8 billion in the current quarter due to supply chain problems.
CFO Luca Maestri blamed the supply chain problems on chip shortages, Covid-related lockdowns in China, as the pandemic makes an unwelcome return in the Shanghai region, as well as Russia’s illegal war in Ukraine.
And now chip maker SMIC has also issued its own worrying outlook, saying on Friday that it anticipates smartphone sales from its clients this year to fall by at least 200 million units.
It also blamed Russia’s war in Ukraine war and China’s Covid lockdowns.
This warning comes in stark contrast to only a few months ago, when SMIC had issues fulfilling orders due to high demand amid a global chip shortage.
But now according to Reuters SMIC CEO Zhao Haijun told analysts that customers from the smartphone, personal computer and household appliance sectors were now cancelling orders due to these two events.
Demand for such products “dropped like a rock” as sales in Russia and Ukraine were heavily impacted while China’s Covid lockdowns meant that companies had trouble delivering products or had to shut stores, he reportedly said.
“This year we expect (demand for) smartphones to fall by at least 200 million units, and the majority of these 200 million are from our domestic Chinese phone makers. So many orders have been cancelled,” he reportedly said.
This meant that the proportion of SMIC’s manufacturing capacity dedicated to smartphones and such products had fallen to 29 percent, he reportedly said, from around 50 percent previously.
Reuters reported that SMIC had posted a 66.9 percent jump in first quarter revenue and said net profit rose 181.5 percent to $447.2 million.
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