Samsung asks Apple for compensation on missed OLED order minimums

Posted:
in General Discussion edited July 2019
Samsung has asked Apple to pay a penalty for not buying enough iPhone displays, hoping to recoup losses from missed manufacturing goals.




Samsung Display is the worlds largest OLED manufacturer, producing 40% of the OLED displays in the world. When Apple introduced the iPhone X, its first phone with an OLED display, they were forced to source the displays from Samsung. Despite the success of the iPhone X, Samsung Display claims that Apple has not met the minimum order requirements.

According to a report from Korean media outlet etnews, Samsung Display's earnings have plummeted from $4.9 billion in 2017, to $2.3 billion in 2018. To offset this, Samsung Display is seeking a penalty fee for unfilled contracts, which has produced 50% less business than expected.

The companies have met several times in hopes of resolving the problem, but have not currently found a clear solution. Legally, Apple would have to pay a fee if they violated their contract, but it is exceedingly rare for a company to be punished by a parts supplier.

Apple has been known to offer alternative solutions to supply problems. It's been reported that Apple plans to order OLED panels for additional Apple products, including iPads and Macs, according to an unnamed "indsutry official."

Apple also has an outstanding contract with LG, reportedly paying them $2.7 billion for future phones.
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Comments

  • Reply 1 of 26
    gatorguygatorguy Posts: 23,171member
    I would have expected that considering Samsung invested in new plant specifically to serve Apple's needs and certainly would not have invested $B and more without contractual guarantees of future orders. I am a tad surprised that the situation has become public as I would presume neither company finds that helpful in sorting it out.
    edited June 2019 davenralphie1STnTENDERBITShodarFileMakerFellerCarnage
  • Reply 2 of 26
    davendaven Posts: 626member
    gatorguy said:
    I would have expected that considering Samsung invested in new plant specifically to serve Apple's needs and certainly would not have invested $B and more without contractual guarantees of future orders. I am a tad surprised that the situation has become public as I would presume neither company finds that helpful in sorting it out.
    Yes. Going public with that doesn't enamor the buyer to repeat business but Samsung is the current go-to company for OLEDs.
    AppleExposedFileMakerFellerbshankCarnage
  • Reply 3 of 26
    MacProMacPro Posts: 19,380member
    Asking for compensation is better than going straight to East Texas at least.
    cornchipFileMakerFellerfotoformat
  • Reply 4 of 26
    robjnrobjn Posts: 263member
    The fact is that Samsung invested big on OLED with Android hopes that did not materialize.

    They predicted that all the cheap Androids would rush to adopt OLED. They believed that once Apple started to use OLED everyone else would have to copy them. That simply didn’t happen. Samsung wasted billions building production capacity that was never used.

    Whether Apple met their contractual obligations or not, the big problem for Samsung is that they made a massive error in predicting the wider market. 
    TomERayz2016AppleExposed1STnTENDERBITSIreneWlolliver
  • Reply 5 of 26
    DAalsethDAalseth Posts: 1,722member
    robjn said:
    The fact is that Samsung invested big on OLED with Android hopes that did not materialize.

    They predicted that all the cheap Androids would rush to adopt OLED. They believed that once Apple started to use OLED everyone else would have to copy them. That simply didn’t happen. Samsung wasted billions building production capacity that was never used.

    Whether Apple met their contractual obligations or not, the big problem for Samsung is that they made a massive error in predicting the wider market. 
    Exactly right. All Apple has to do is show that they bought all the screens THEY contracted to buy, and Samsung is SOL. Yes Samsung can whine all they want but I expect the shortage was due to nobody else following Apple down the OLED road.
    edited June 2019 AppleExposed
  • Reply 6 of 26
    SpamSandwichSpamSandwich Posts: 33,408member
    I don’t believe a word of this second-hand report.
    LordeHawkcornchiplolliver
  • Reply 7 of 26
    techsavytechsavy Posts: 34member
    This seems pretty sketch to be airing out in public like this. I wonder which side leaked this.
    cornchiplolliver
  • Reply 8 of 26
    steven n.steven n. Posts: 1,222member
    DAalseth said:
    robjn said:
    The fact is that Samsung invested big on OLED with Android hopes that did not materialize.

    They predicted that all the cheap Androids would rush to adopt OLED. They believed that once Apple started to use OLED everyone else would have to copy them. That simply didn’t happen. Samsung wasted billions building production capacity that was never used.

    Whether Apple met their contractual obligations or not, the big problem for Samsung is that they made a massive error in predicting the wider market. 
    Exactly right. All Apple has to do is show that they bought all the screens THEY contracted to buy, and Samsung is SOL. Yes Samsung can whine all they want but I expect the shortage was due to nobody else following Apple down the OLED road.
    Yep. Sounds like a simple contractual issue and nothing more. Should be supper easy, barely an inconvenience to figure this out. 
  • Reply 9 of 26
    seankillseankill Posts: 554member
    robjn said:
    The fact is that Samsung invested big on OLED with Android hopes that did not materialize.

    They predicted that all the cheap Androids would rush to adopt OLED. They believed that once Apple started to use OLED everyone else would have to copy them. That simply didn’t happen. Samsung wasted billions building production capacity that was never used.

    Whether Apple met their contractual obligations or not, the big problem for Samsung is that they made a massive error in predicting the wider market. 
    It would appear Apple made the same error if they overcommitted. Contracts are contracts, pay up Apple!
    muthuk_vanalingamkestralCarnage
  • Reply 10 of 26
    AppleExposedAppleExposed Posts: 1,805unconfirmed, member
    Apple: "Sure just deduct payment from the millions you owe us in patent infringement."
    StrangeDayscornchipFileMakerFellerfotoformatlolliver
  • Reply 11 of 26
    arlorarlor Posts: 528member
    If guarantees are in the contract, they're in the contract. If they're not, nothing will happen. I'm confident Apple would not try to avoid a clear contractual provision, if there is one. It is a little weird that the story has leaked. Perhaps another term in the contract makes interpretation more complicated than it would appear based on what little we know, if in fact we can be said to know anything at all. 
    hammeroftruthbeowulfschmidt
  • Reply 12 of 26
    matrix077matrix077 Posts: 868member
    Lower the price then Apple could use those screens on iPad Pro or even iPad mini. I’d buy one in a heart beat. 
  • Reply 13 of 26
    gatorguygatorguy Posts: 23,171member
    DAalseth said:
    robjn said:
    The fact is that Samsung invested big on OLED with Android hopes that did not materialize.

    They predicted that all the cheap Androids would rush to adopt OLED. They believed that once Apple started to use OLED everyone else would have to copy them. That simply didn’t happen. Samsung wasted billions building production capacity that was never used.

    Whether Apple met their contractual obligations or not, the big problem for Samsung is that they made a massive error in predicting the wider market. 
    Exactly right. All Apple has to do is show that they bought all the screens THEY contracted to buy, and Samsung is SOL. Yes Samsung can whine all they want but I expect the shortage was due to nobody else following Apple down the OLED road.
    According to the report Apple has NOT accepted all the OLED panels they contractually obligated themselves to. While the entire market is slowing this particular spat is about Apple and its contract. This PatentlyApple article is a bit more detailed:

    https://www.patentlyapple.com/patently-apple/2019/06/apple-is-reportedly-in-a-dispute-with-samsung-over-a-contract-penalty-kicking-in-due-to-lower-than-expected-oled-demand.html
    edited June 2019 1STnTENDERBITSbigtdskestralmuthuk_vanalingamCarnage
  • Reply 14 of 26
    MplsPMplsP Posts: 3,256member
    "Legally, Apple would have to pay a fee if they violated their contract, but it is exceedingly rare for a company to be punished by a parts supplier. "

    The story isn't clear whether there was any sort of guaranteed 
    minimum in the contract, although if there were then it would likely be an open and shut case and we wouldn't have heard more. 

    More than a story about compensation between Apple and a parts supplier, this speaks to the drop in demand for smartphones and tells me iPhone Xs sales have not met their forecasts
    elijahg
  • Reply 15 of 26
    DAalsethDAalseth Posts: 1,722member
    gatorguy said:
    DAalseth said:
    robjn said:
    The fact is that Samsung invested big on OLED with Android hopes that did not materialize.

    They predicted that all the cheap Androids would rush to adopt OLED. They believed that once Apple started to use OLED everyone else would have to copy them. That simply didn’t happen. Samsung wasted billions building production capacity that was never used.

    Whether Apple met their contractual obligations or not, the big problem for Samsung is that they made a massive error in predicting the wider market. 
    Exactly right. All Apple has to do is show that they bought all the screens THEY contracted to buy, and Samsung is SOL. Yes Samsung can whine all they want but I expect the shortage was due to nobody else following Apple down the OLED road.
    According to the report Apple has NOT accepted all the OLED panels they contractually obligated themselves to. While the entire market is slowing this particular spat is about Apple and its contract. This PatentlyApple article is a bit more detailed:

    https://www.patentlyapple.com/patently-apple/2019/06/apple-is-reportedly-in-a-dispute-with-samsung-over-a-contract-penalty-kicking-in-due-to-lower-than-expected-oled-demand.html
    If so then Apple is obligated to pay the penalty. Simple as that.
    Carnage
  • Reply 16 of 26
    gatorguygatorguy Posts: 23,171member
    DAalseth said:
    gatorguy said:
    DAalseth said:
    robjn said:
    The fact is that Samsung invested big on OLED with Android hopes that did not materialize.

    They predicted that all the cheap Androids would rush to adopt OLED. They believed that once Apple started to use OLED everyone else would have to copy them. That simply didn’t happen. Samsung wasted billions building production capacity that was never used.

    Whether Apple met their contractual obligations or not, the big problem for Samsung is that they made a massive error in predicting the wider market. 
    Exactly right. All Apple has to do is show that they bought all the screens THEY contracted to buy, and Samsung is SOL. Yes Samsung can whine all they want but I expect the shortage was due to nobody else following Apple down the OLED road.
    According to the report Apple has NOT accepted all the OLED panels they contractually obligated themselves to. While the entire market is slowing this particular spat is about Apple and its contract. This PatentlyApple article is a bit more detailed:

    https://www.patentlyapple.com/patently-apple/2019/06/apple-is-reportedly-in-a-dispute-with-samsung-over-a-contract-penalty-kicking-in-due-to-lower-than-expected-oled-demand.html
    If so then Apple is obligated to pay the penalty. Simple as that.
    According to the source article they have paid a few $100million, and Samsung has in return paid some penalties of their own for production issues.
    http://english.etnews.com/20190621200001

    Sounds like a typical contract issue when terms are not met. Negotiations will sort it out since they need each other. 

    edited June 2019 robjnmuthuk_vanalingam
  • Reply 17 of 26
    robjnrobjn Posts: 263member
    Depending on how the contract is written, the quality issues may make the minimum order requirements void.

    Basically, if the manufacturer can’t meet specified quality the buyer may not be obligated to buy anything at all. This would effectively make minimum order requirements void.

    Unless we can actually study the terms of the contract, there is no way we can know what is going on.
    FileMakerFeller
  • Reply 18 of 26
    MplsPMplsP Posts: 3,256member
    MacPro said:
    Asking for compensation is better than going straight to East Texas at least.
    it's kind of the same thing
  • Reply 19 of 26
    StrangeDaysStrangeDays Posts: 11,573member
    seankill said:
    robjn said:
    The fact is that Samsung invested big on OLED with Android hopes that did not materialize.

    They predicted that all the cheap Androids would rush to adopt OLED. They believed that once Apple started to use OLED everyone else would have to copy them. That simply didn’t happen. Samsung wasted billions building production capacity that was never used.

    Whether Apple met their contractual obligations or not, the big problem for Samsung is that they made a massive error in predicting the wider market. 
    It would appear Apple made the same error if they overcommitted. Contracts are contracts, pay up Apple!
    Why you take such reports seriously is a mystery; that you offer such glee at the prospect of Apple making errors or having to pay one of its partners is beyond mystery and into well into psychosis territory. 
    DAalseth
  • Reply 20 of 26
    bigtdsbigtds Posts: 167member
    robjn said:
    The fact is that Samsung invested big on OLED with Android hopes that did not materialize.

    They predicted that all the cheap Androids would rush to adopt OLED. They believed that once Apple started to use OLED everyone else would have to copy them. That simply didn’t happen. Samsung wasted billions building production capacity that was never used.

    Whether Apple met their contractual obligations or not, the big problem for Samsung is that they made a massive error in predicting the wider market. 
    You know this for a fact or just guessing? I suspect the latter.
    FileMakerFellerCarnage
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