Apple Pays Samsung an Estimated $950 Million for Missing OLED Panel Purchase Targets

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Apple in the second quarter of 2020 paid Samsung approximately $950 million for not meeting OLED panel purchase goals established in agreements between the two companies, according to display analysts at Display Supply Chain Consultants.


Samsung last week shared guidance on revenue and operating profit for the second quarter of 2020, which included a one-time gain related to its display business. The one-time payment is believed to be from Apple, caused by Apple purchasing fewer than expected OLED panels for smartphones during the second quarter of the year.
Samsung reported that its estimate of operating profit included a one-time gain related to its display business, according to a report at wsj.com, but did not disclose the amount. Last week theelec.net reported that Samsung Display is believed to have received KRW 900 billion from Apple for purchasing fewer OLED smartphone panels than required, but DSCC sources suggest that the payment is closer to US$950 million.
During Apple's third fiscal quarter, or second calendar quarter, many of its retail stores in the United States in other countries around the world were closed for several months, which, along with economic uncertainty, likely had a major impact on sales. Even now, many stores in the U.S. have been forced to close again as coronavirus outbreaks have continued to spike.

The payment suggests Apple did not meet projected iPhone sales and thus did not order the number of OLED panels from Samsung that it expected to need, requiring the Cupertino-based company to compensate Samsung. Apple in April reported revenue of $58.3 billion, up from $58 billion in the year-ago quarter, but the company declined to provide guidance for the third fiscal quarter of 2020 due to the instability caused by the ongoing health crisis.

Apple plans to announce earnings for the third fiscal quarter (second calendar quarter) of 2020 on Thursday, July 30, which will give a better picture of how iPhone and other product sales fared during the prolonged store closures.

Apple also made a $683 million payment to Samsung in July 2019 after missing OLED display purchase targets due to poor sales in China and other parts of the world in the 2018 holiday quarter. Apple addressed those issues with iPhone trade-in promotions, price cuts, and monthly payment options, which boosted sales until the coronavirus hit at the beginning of 2020.

Article Link: Apple Pays Samsung an Estimated $950 Million for Missing OLED Panel Purchase Targets
 
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xpxp2002

macrumors regular
May 3, 2016
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It's crazy that Apple entered into a contract to either pay for buying the panels...or pay for not buying the panels.

Seems like it'd make a lot more sense to buy the panels either way, and just use them as needed. They'll be selling iPhone XS, XS Max, 11 Pro, etc. for years to come. Might as well spend the money on something tangible that you can eventually make your money back on.
 

V_Man

Cancelled
Aug 1, 2013
654
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It's crazy that Apple entered into a contract to either pay for buying the panels...or pay for not buying the panels.

Seems like it'd make a lot more sense to buy the panels either way, and just use them as needed. They'll be selling iPhone XS, XS Max, 11 Pro, etc. for years to come. Might as well spend the money on something tangible that you can eventually make your money back on.
Seems pretty clear that Samsung has the upper hand in screen negotiations
 

AppleShareholder

macrumors member
Jul 13, 2020
35
12
Maybe now some people will understand why Apple signed up LG and BOE for OLED.
I agree that LG and BOE may drive costs down, but I feel that going back to LCDs would be more profitable for Apple.
No one can tell the difference between LCDs and OLEDs anyway except for fringe tech enthusiasts.
 

NotTooLate

macrumors newbie
Jun 9, 2020
21
34
It's crazy that Apple entered into a contract to either pay for buying the panels...or pay for not buying the panels.

Seems like it'd make a lot more sense to buy the panels either way, and just use them as needed. They'll be selling iPhone XS, XS Max, 11 Pro, etc. for years to come. Might as well spend the money on something tangible that you can eventually make your money back on.
So you think Apple can just tell Samsung to manufacture 50 million panels in a quarter , and then say , naa i just need 25 million! you can keep the other 25 million!
Note apple are having a custom spec display (based on the cutting edge samsung tech) with high level QA , which makes it even more expensive to manufacture , if they didnt bare some of the "miss target" burden , then Samsung will need to mark up the displays even more.
 

AppleShareholder

macrumors member
Jul 13, 2020
35
12
So you think Apple can just tell Samsung to manufacture 50 million panels in a quarter , and then say , naa i just need 25 million! you can keep the other 25 million!
Note apple are having a custom spec display (based on the cutting edge samsung tech) with high level QA , which makes it even more expensive to manufacture , if they didnt bare some of the "miss target" burden , then Samsung will need to mark up the displays even more.
I think Apple really messed up when they switched to OLED. I think they could've stuck with LCDs, because not many people would say OLEDs look different from LCDs. It's just too expensive for little benefit.
 
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