Major Chinese smartphone manufacturers, which had been closing the gap with Samsung Electronics by leveraging low prices, are now facing a significant slowdown.

Due to the AI boom, which has intensified supply shortages for memory semiconductors and caused component prices to soar, these companies have slashed their annual shipment targets by as much as 30% or more.

According to foreign media outlets including Nikkei Asia, major Chinese smartphone makers, including Xiaomi, have recently notified component suppliers that they are adjusting their annual shipment targets downward by up to 30%.

Lei Jun, chairman of Xiaomi, the industry leader in China, had previously boasted in 2021 that the company would become the world's number one smartphone maker within three years.

However, this year, the company has reduced its shipment target by 44%, from 170 million units last year to 95 million units.

Honor, the smartphone brand of Huawei, which recorded a record-high shipment of 71 million units last year, is also reportedly finding it difficult to maintain its growth momentum this year.

In January, Chinese smartphone maker Meizu completely canceled the launch of a slim smartphone that had been scheduled for early this year.

At the time, the company stated that the sharp rise in memory prices had become a major obstacle to its smartphone business plans.

The Chinese government has been providing massive subsidies to smartphone manufacturers to boost domestic demand.

However, the AI boom has pushed these Chinese smartphone companies, which had been growing rapidly on the back of government support, into a crisis.

This is because global semiconductor manufacturers have concentrated their facilities on producing high-value DRAM for High Bandwidth Memory (HBM) and AI servers, causing the supply of general-purpose core components such as smartphone DRAM, NAND flash, and printed circuit boards (PCBs) to evaporate.

As component prices skyrocketed, Chinese companies that had been pursuing a low-price, high-volume strategy were dealt a fatal blow.

In particular, since the main customer base for mid-to-low-end phones is price-sensitive, it is difficult to pass on the increased production costs to product prices.

Ultimately, as the abnormal structure of losing more money the more they sell has intensified, they have resorted to the desperate measure of forcibly reducing shipments to prevent losses.

The repercussions are spreading across the global smartphone market, with market research firm Counterpoint Research forecasting that global smartphone shipments will decline by approximately 14% this year, marking the largest drop in history.

Apple and Samsung Electronics, which have a higher proportion of premium products than Chinese smartphone makers, are also considered unlikely to avoid the impact of slowing demand and rising manufacturing costs.

Reported by Kim Minjeong | Video by Jang Yu-jin | Graphics by Yook Do-hyun | Produced by SBS Digital News