Apple paid Samsung estimated $683M in Q2 for missing OLED purchase target

Posted:
in General Discussion edited July 5
Samsung on Friday released a bleak earnings forecast for its second fiscal quarter of 2019, projecting operating profits more than halved from last year due to ongoing weakness in the company's bread-and-butter memory chip business.




Operating profit likely dipped to 6.5 trillion won (about $5.5 billion) during the three-month period ending in June, Samsung said in a regulatory filing. The tentative result beats industry estimates but represents a year-over-year decline of 56%, reports CNBC.

The first quarter result would have been worse was it not for a one-time payment from Apple, which reimbursed Samsung for missing contractual purchasing obligations for OLED panels.

The earnings forecast recognizes Apple's payment, Samsung said without offering further detail. According to analysts, Samsung received an estimated 800 billion won for unfilled orders of display panels bound for iPhone, Reuters reports.

Reports in June said Apple and Samsung met to discuss an alternative to the monetary penalty but failed to agree on a middle ground.

Samsung Display is in a tight spot after investing in a state-of-the-art OLED production facility to serve Apple's needs. The company's sixth-generation "A3" line is capable of pumping out large quantities of next-generation OLED mother glass and was tipped to supply display parts for what was thought to be a glut of current and future iPhone orders. With slow iPhone X sales and lower-than-expected iPhone XS demand, however, the plant is reportedly operating at less than half of its output capacity.

If accurate, the guidance foretells Samsung's third consecutive quarter of year-over-year profit declines. Following a dismal holiday season, the Korean tech giant posted operating profits of 6.2 billion won for the first quarter of 2019, its weakest performance since 2016.

Increasing tensions with Japan and the U.S.-China trade war are in part blamed for continued memory chip pricing and demand softness. With no near term solution in sight for either trade issue, Samsung could see its profits continue to slip well into 2019.

Comments

  • Reply 1 of 14
    seanismorrisseanismorris Posts: 1,008member
    Memory prices are extremely cynical... it’s feast or famine.

    The USA/China trade war and its effect on Apple... is unfortunate timing for Samsung.

    Samsung needs to figure out a way to get into the services business, or buying into another area like Sony did with Sony Pictures Entertainment.
  • Reply 2 of 14
    AppleExposedAppleExposed Posts: 1,373unconfirmed, member
    I see how it works.

    Analysts predict record-breaking high revenue for Apple and very low for Apples competitors. So Apple will be doomed and Sammy beats expectations.  :D
    lkruppjony0
  • Reply 3 of 14
    brakkenbrakken Posts: 682member
    Maybe after SS dies, Apple will no linger be blamed for their failure any more. As with most companies, SS has spent its money on advertising, and its effort on superficial copying. Good riddance. Who knows - maybe its failure of a CEO will reanimate in ten year’s time and winge about ‘not being fast enough’ too. 
  • Reply 4 of 14
    ksecksec Posts: 1,566member
    Samsung received estimated $683M ( revenue ) payment from Apple in Q2, still projects 56% decline in profits

    Samsung on Friday released a bleak earnings forecast for its second fiscal quarter of 2019, projecting operating profits more than halved from last year due to ongoing weakness in the company's bread-and-butter memory chip business.

    Operating profit likely dipped to 6.5 trillion won (about $5.5 billion) 

    Well Done AI.
    ktappe
  • Reply 5 of 14
    racerhomie3racerhomie3 Posts: 1,148member
    I will say it here first. Samsung is doomed. ;)
    AppleExposed
  • Reply 6 of 14
    9secondkox29secondkox2 Posts: 530member
    Galaxy Fold failure ripped a good chunk of capital away, no doubt. 
    Carnage
  • Reply 7 of 14
    lkrupplkrupp Posts: 7,162member
    Oh, I thought the stated reimbursement amount was an actual figure when it’s just an “analyst” estimate. Silly me. I shouldn’t believe everything I read on the Internet.
    FileMakerFeller
  • Reply 8 of 14
    lkrupplkrupp Posts: 7,162member
    I see how it works.

    Analysts predict record-breaking high revenue for Apple and very low for Apples competitors. So Apple will be doomed and Sammy beats expectations.  :D
    Finally, someone who understands Wall Street!
    AppleExposedFileMakerFeller
  • Reply 9 of 14
    gatorguygatorguy Posts: 20,893member
    The penalty goes back to Apple’s insistence that Samsung Display build a facility to exclusively manufacture OLED displays for the iPhone. Apple had told Samsung Display it would need 100 million OLED iPhone displays a year. But a slump in iPhone sales had a knock-on effect for Samsung Display, which saw its operating profits halve in a year, falling from 5.7 trillion won in 2017 to 2.62 trillion won in 2018.
    lkrupp said:
    Oh, I thought the stated reimbursement amount was an actual figure when it’s just an “analyst” estimate. Silly me. I shouldn’t believe everything I read on the Internet.
    Spot on sir. While Samsung acknowledges there was an Apple penalty payment for missed purchases there are no other details offered by them. That $683Million (or $684 depending on the report) in this story is the US dollar equivalent for the rounded off 800 billion won penalty ESTIMATED by analysts who follow the company. Could have been a $Million or could have been a $B US Dollars. No idea how reliable those people reporting the figures are. 

    For those not sure what this was about to begin with:
    "The penalty goes back to Apple’s insistence that Samsung Display build a facility to exclusively manufacture OLED displays for the iPhone. Apple had told Samsung Display it would need 100 million OLED iPhone displays a year. But a slump in iPhone sales had a knock-on effect for Samsung Display, which saw its operating profits halve in a year, falling from 5.7 trillion won in 2017 to 2.62 trillion won in 2018."



    edited July 5 bigtdsCarnage
  • Reply 10 of 14
    JFC_PAJFC_PA Posts: 353member
    Huawei no doubt was a big bite of that. 
  • Reply 11 of 14
    realisticrealistic Posts: 1,143member
    So basically Apple's cost of goods increased $3 to maybe $4 extra per iPhone sold. Don't think it will hurt Apple all that much.
  • Reply 12 of 14
    tigstigs Posts: 1member
    So if apple had reduced its price of the iPhone or actually kept them at the previous price point it would have sold more and not have to paid Samsung any money- go figure Apple. You are pushing the price too high I might think in the current economic climate. Certainly in Australia normally a very strong Apple market most people stretched their normal cycle of upgrade to another year or more.
  • Reply 13 of 14
    MacProMacPro Posts: 18,347member
    Oh good that will help Samsungs profits loss decrease from a 50% to only 49.9999%.  
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