Cautious buyers are clouding the outlook for tech and auto companies in Asia

Comments from top executives at companies in Asia, often referred to as the world’s factory, echo warnings from US and European companies that lower-income customers are skipping discretionary items and sticking to their daily necessities. cheaper goods amid global uncertainty, the crisis in Ukraine and the impact of COVID lockdowns in China.

“When a downturn looms, consumption is generally expected to decline with the exception of essential goods,” LG Display Co Ltd, a supplier of displays to Apple and TV makers, said on Wednesday.

“Display manufacturers and retailers in general are becoming more conservative in their operations.”

Samsung Electronics Co Ltd, the world’s largest maker of memory chips and smartphones, said on Thursday that “demand for PCs and mobile phones is likely to remain weak.”

While customer demand for servers or data centers is less affected by macroeconomic issues, server customers should also adjust their inventory in the event of a recession, the South Korean company warned.

Data center customers, backed by tech heavyweights such as Microsoft Corp and Alphabet Inc, which reported strong quarters, have so far been a bright spot for chipmakers.

But Samsung’s smaller rival SK Hynix Inc warned on Wednesday of slowing spending by both smartphone and data center customers.

“Recently, consumer sentiment has declined rapidly due to rising concerns about inflation and economic recession, and companies are now starting to significantly cut costs,” the company said.

In recent weeks, U.S. chipmakers including Micron and AMD have also signaled slowing demand after a two-year semiconductor shortage that is slowing consumer electronics and auto production.

Taiwan’s TSMC also reported that consumer demand for consumer electronics had cooled as it used its own chip stocks.

Panasonic Holdings Corp posted a 39% drop in profit in the June quarter and said the risk of an economic slowdown caused by geopolitical risks and inflation worldwide remains high. The Japanese conglomerate said profits from its energy unit, which supplies EV batteries to Tesla Inc, fell mainly due to higher raw material and logistics costs.

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US chipmaker Qualcomm Inc, a foundry customer of Samsung, said: “We expect that the increased uncertainty in the global economy and the impact of the COVID measures in China will cause customers to exercise caution in handling their purchases in other half. “

Smartphone sales in China, the world’s largest market, fell 14.2% in April-June, while volume hit a 10-year low, Counterpoint Research said on Wednesday.

While analysts expect stronger demand for iPhones than for other smartphones, Apple this week announced discounts in China, a move the company occasionally makes when sales are slow.

Technology and auto firms with factories in China have faced business disruptions in the world’s second-largest economy due to shutdowns due to COVID-19, even as the war in Ukraine has pushed up energy and logistics costs.

The restrictive measures have hit the Chinese economy hard, whose gross domestic product grew at its slowest pace in nearly three decades in the April-June quarter, barring a contraction in the first quarter of 2020.

Earlier this month, the China Association of Automobile Manufacturers lowered its sales forecast for the year as COVID measures weighed on demand, which authorities are now trying to revive with incentives such as a lower purchase tax on some cars.

Toyota Motor Corp, the world’s largest carmaker by sales, has seen output decline in recent months due to chip shortages and supply constraints in China, producing 9.8% fewer cars in the April-June period than originally planned.

General Motors Co., which reported a 40% drop in second-quarter profit, said its Chinese operations lost $100 million in the period because of the restrictions.

GM, which bodes well for the global auto industry, said it is cutting spending ahead of a potential economic slowdown, as is rival Ford Motor Co.

Hyundai Motor Co, which like Uniqlo parent Fast Retailing has seen the value of its profits rise on a strong dollar, warned that rising inflation poses a number of risks to demand in the second half.

For electric vehicles, some analysts say it will be another year before sales decline, a view supported by Tesla Inc battery supplier LG Energy Solution Ltd.

LG Energy Solution said it expects solid demand in the second half of this year.

But Tesla CEO Elon Musk has previously spoken of “a super bad feeling” about the economy.

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