Samsung asks Apple for compensation on missed OLED order minimums
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.
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.
Comments
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.
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
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
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.
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.