No sign of smartphone recovery until late 2023, TDK CEO warns

GLOBAL smartphone sales won’t pick up until the year-end holiday season of 2023, battery supplier TDK warned, offering the most cautious outlook yet on the lacklustre market hit by inflationary and geopolitical pressures.

Tokyo-based TDK, which provides batteries for the entire mobile industry including Apple’s iPhone, sees little indication of a rebound following major declines in handset sales, especially in the key market of China.

“I don’t hear any cheerful views from customers, and I expect the situation we face today will last until the middle of the next year, followed by a gradual recovery from late next year,” TDK President Noboru Saito said in an interview. He points to the releases of new devices in the second half of 2023 as the catalyst for a recovery in positive sentiment.

The smartphone market took a major hit from the global economic slowdown stemming from central banks raising interest rates, Covid-19 lockdowns in China and Russia’s invasion of Ukraine. Handset makers and suppliers started this year expecting to see sales grow, but have faced double-digit declines in their most important markets. Even Apple cut its phone production plans after seeing weaker-than-expected demand for its iPhone 14 devices.

TDK previously projected 1.3 billion handset sales in the year ending in March, but it has now reduced that estimate by 10 per cent, according to 56-year-old Saito, who took over as chief in April. He previously headed up the company’s sensor unit, turning it around from a loss-making venture to a profitable one.

The TDK view of how long a recovery would take is the most pessimistic among industry peers. Fellow Japanese component maker Taiyo Yuden expects a rebound as early as the first quarter of 2023 while Kyoto-based Murata Manufacturing is looking for an uptick in the second quarter. The three suppliers are part of the backbone of the mobile industry’s basic component supply, giving them a close view of future orders and demand.

Cupertino, California-based Apple faces growing pressure to build production capacity outside of China, where its key iPhone Pro assembly complex at Zhengzhou was this year beset by coronavirus challenges and lockdown measures. TDK’s Saito sees no imminent exit on the horizon.

“Let me make it clear that China will remain one of the most important markets for us and TDK is committed to keep the supply capacity large enough to support huge demand there,” Saito said.

TDK makes 60 per cent of its products in China and 50 per cent of its sales are in the country, which is also the world’s biggest smartphone market. Those proportions won’t change drastically for years to come, Saito added.

SEE ALSO

Chinese smartphone maker Xiaomi to slash 10% of workforce: report

“Decisions on where we make our goods largely depend on how our clients would act,” the TDK president said. “I don’t think our production capacity in China will decrease much, though I also don’t expect it to increase a lot either.” BLOOMBERG