Wrapup 1: Wary shoppers muddy outlook for tech, auto firms in Asia

LG DISPLAY

28/07/2022 08:50

* Samsung says chip demand for phones, PCs to weaken further
    * Server clients may adjust inventory if recession occurs
-Samsung
    * Toyota misses April-June output target 
    * GM China operations lost $100 mln in Q2 due to curbs

    By Joyce Lee and Satoshi Sugiyama
    July 28 (Reuters) - Asian tech firms from chipmaker Samsung
to display panel maker LG Display warned of a sharp slowdown in
demand for smartphones, TVs and gadgets as surging inflation and
deepening concerns of a recession crimp consumer spending.
    Comments from top company executives in Asia, often called
the world's factory, echo warnings from U.S. and European firms
who say shoppers with lower incomes are skipping discretionary
items and sticking to cheaper basics when buying everyday
necessities amid global uncertainty, the crisis in Ukraine and
the impact of China's COVID lockdowns.  urn:newsml:reuters.com:*:nL1N2Z71KC urn:newsml:reuters.com:*:nL1N2Z8113
    "As a downturn looms, consumption is expected to generally
slow down except for essential goods," LG Display Co Ltd
 034220.KS , a supplier of display panels to Apple  AAPL.O  and
TV makers, said on Wednesday.  urn:newsml:reuters.com:*:nL1N2Z808P
    "Set makers and retailers in general are becoming more
conservative in their business operations."
    Samsung Electronics Co Ltd  005930.KS , the world's top
maker of memory chips and smartphones, said on Thursday that "PC
and mobile demand is likely to see continued weakness."
    While demand from server or data centre customers is less
affected by macroeconomic issues, server clients would also have
to adjust their inventory if a recession occurs, the South
Korean firm cautioned.  urn:newsml:reuters.com:*:nL1N2Z83N6
    Data centre customers, backed by tech heavyweights including
Microsoft Corp  MSFT.O  and Alphabet Inc  GOOGL.O  that reported
strong quarters, have been a bright spot so far for chipmakers.
    But Samsung's smaller rival SK Hynix Inc  000660.KS  on
Wednesday warned of slowing spending from both smartphone
customers and data centre customers.  urn:newsml:reuters.com:*:nL1N2Z72NN
    "Recently, consumer sentiment has been rapidly shrinking due
to deepening concerns over inflation and economic recession, and
companies are now noticeably moving to cut costs," it said.
    In recent weeks, U.S. chipmakers including Micron  MU.O  and
AMD  AMD.O  have signaled waning demand as well after a two-year
long semiconductor shortage that crimped production of consumer
electronics and cars.  urn:newsml:reuters.com:*:nL1N2YI0P4
    Taiwan's TSMC  2330.TW  has also signalled that demand was
cooling from consumer electronics customers as they use their
own chip stockpiles.  urn:newsml:reuters.com:*:nL1N2YV09H  
    Panasonic Holdings Corp  6752.T  posted a 39% plunge in June
quarter profit and said the risk of an economic slowdown caused
by geopolitical risks and inflation globally remains high.
    The Japanese conglomerate said profits at its energy unit
that supplies EV batteries to Tesla Inc  TSLA.O  fell mainly due
to higher costs for raw materials and logistics.  urn:newsml:reuters.com:*:nL1N2Z90ER
    
    CHINA PRESSURES
    U.S. chipmaker Qualcomm Inc  QCOM.O , a foundry customer of
Samsung's, said: "We expect the elevated uncertainty in the
global economy and the impact of COVID measures in China will
cause customers to act with caution in managing their purchases
in the second half."
    Smartphone sales in China, the biggest market in the world,
fell 14.2% in April-June while volumes hit a decade low,
Counterpoint Research said on Wednesday.  urn:newsml:reuters.com:*:nL4N2Z80NO
    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 firms with factories in China have faced
business disruptions in the world's second-largest economy due
to COVID-19 lockdowns even as the war in Ukraine has pushed up
energy and logistics costs.
    The curbs have taken a huge toll on China's economy, with
its gross domestic product in the April-June quarter growing at
the slowest pace in some three decades barring a contraction in
the first quarter of 2020.  urn:newsml:reuters.com:*:nL1N2YW02X 
    Earlier this month, China's automobile industry association
cut its sales forecast for the year as COVID measures weighed on
demand, which authorities are now trying to revive with
incentives such as lower purchase tax for some cars.
    Toyota Motor Corp  7203.T , the world's largest automaker by
sales, has seen its output hit in recent months by the chips
shortage and supply constraints in China, producing 9.8% fewer
cars over April-June than it initially planned.  urn:newsml:reuters.com:*:nL4N2Z914D
    General Motors Co  GM.N , which reported a 40% slump in
second-quarter profit, said its China operations lost $100
million in the period due to the curbs.  urn:newsml:reuters.com:*:nL1N2Z70MK
    A bellwether for global automaking, GM said it was curbing
spending ahead of a potential economic slowdown, as did its
crosstown rival Ford Motor Co  F.N .  urn:newsml:reuters.com:*:nL1N2Z8385
    Hyundai Motor Co  005380.KS , which like Uniqlo parent Fast
Retailing  9983.T  has seen the value of its profits lifted by a
strong dollar, cautioned that rising inflation was posing some
risks to demand in the second half.  urn:newsml:reuters.com:*:nL1N2YV0BQ
    For electric vehicles, however, some analysts say it would
take another year for sales to slow, a view backed by Tesla Inc
 TSLA.O  battery supplier LG Energy Solution Ltd  373220.KS .
    LG Energy Solution said it expected solid demand in the
second half of this year.  urn:newsml:reuters.com:*:nL1N2Z800C
    But Tesla boss Elon Musk has previously spoken of "a super
bad feeling" about the economy.  urn:newsml:reuters.com:*:nL1N2XQ0PI

 (Reporting by Joyce Lee and Heekyong Yang in Seoul; Writing by
Sayantani Ghosh; Editing by Himani Sarkar)
 ((sayantani.ghosh@thomsonreuters.com;))