The price per unit that Apple pays is dependent on the total number of units manufactured by Samsung Display according to the specific requirements of Apple, e.g. height and width of each OLED panel, some destined for iPhones, others possibly destined for iPads and/or MacBooks. Both parties to the contract know this.
Apple knows that it got a lower price per OLED panel from Samsung Display because of its buying power, i.e. the number of OLED panels that Apple ordered. The number agreed upon is not a fantasy number, but the number of OLED panels that Samsung Display must deliver to Apple according to a specific time schedule in order to avoid stiff penalties, some of the penalties reflecting the loss of business and profits for Apple should Samsung Display not deliver upon its commitments.
To meet its production targets of OLED panels for Apple, Samsung Display had to build new facilities, hire new employees, and sacrifice contracts that it could have signed with other manufacturers.
Apple could have reduced the financial loss of Samsung Display by using OLED panels in its iPads and/or MacBooks, but Apple chose not to do so in order to save money and increase its profits.
A business relationship is a two way street and both parties must ensure that a contract is balanced and remains profitable for both parties.
Apple is liable to pay the penalties it agreed to. Any penalty must be apportioned between the total number of OLED panels manufactured for Apple and should be viewed as a price increase for each OLED panel delivered to Apple.
Apple cannot wash its hands from the contracts it signs.
I really enjoy reading how this went from speculation to more speculation, to top it off it was Samsung's fault for over investing--not apple who over ordered. then the fact came out that apple did pay hundreds of millions of dollars for not receiving what they ordered and was produced.
it is ok if apple made a mistake in projecting how much they might have needed. they do not need our armchair, devoid of any specifics on the contractual agreement defence. they are big boys and will sort this out themselves. our feelings about this article is insignificant to the facts we do not know about it.
it would be VERY interesting to see if Samsung is allowed to sell those screens to anyone other phone maker who can use it, or are they contractually obligated to keep or destroy them.
AppleInsider says: Samsung has asked Apple to pay a penalty for not buying enough iPhone displays, hoping to recoup losses from missed manufacturing goals...
Despite the success of the iPhone X, Samsung Display claims that Apple has not met the minimum order requirements...
Samsung Display is seeking a penalty fee for unfilled contracts, which has produced 50% less business than expected.
Based on the article, it seems a clear case of Apple didn't fulfill a contract and is being held to answer. Considering that, it's a simple matter to be cleared up.
Samsung overly committing to building has no bearing on whether Apple fulfilled the contract. Apple owes what Apple owes. How is there even a question.
There's no mention in the article that Samsung failed to provide enough displays. In that case Samsung appears to have complied with the contract.
Apple is said to claim QC issues with some of the displays. Ok, that may mitigate some of what they're contractually obligated. and they've been meeting to work that out, again, according to the article.
So why are people making shit up as though in this or some article somewhere Apple is the injured party? Any support for those claims?
The 'Despite the success of the iPhone X' bit makes no sense whatsoever. It implies without substantiation that Apple has sold enough iPhone Xs to have met its contractual obligations. It's known the sales of the X fell short of Apple's own expectations. That's some editorializing within an article that isn't offered as an editorial.
Without a copy of the contract and Apple's numbers, this is supposition. But that's to be expected with leaked information. This is what we have at the moment. More substantive information may come in the future and reinforce what been said or take the story in a different direction.
However it plays out, this needs to be an object lesson/cautionary tale for anybody doing business with anybody, especially Apple. Put too many eggs in one basket can cost a supplier when the buyer doesn't buy as anticipated. This isn't the first time this has happened with Apple. Supplier beware.
If Apple owes a penalty, which at the moment seems to be the case, Apple needs to pay up, in some manner.
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.
it would be VERY interesting to see if Samsung is allowed to sell those screens to anyone other phone maker who can use it, or are they contractually obligated to keep or destroy them.
It's probably a case where Samsung Display didn't manufacture the total number of panels that it agreed to sell Apple because, at some point, Apple warned Samsung Display that it didn't need so many panels as Apple wasn't able to sell iPhones in the numbers projected (with the $100 price increase decided by Apple).
And because manufacturers sign contracts one year in advance to make sure that they have all the components that they need to build new cell phones, it was probably too late for Samsung Display to sign a last minute contract with another phone manufacturer, at least for the current year and/or models.
What are the parties to do when consumers decide that a cell phone is too expensive for the current economy and market conditions? The first thing to do was to warn Samsung Display of the shortfall in projected sales of the new and more expensive iPhones. Apple has a clear choice: pay the penalty or buy now and take delivery of OLED panels to be used with next year's iPhone models.
In the alternative, Apple could sign a new contract with Samsung Display and use larger OLED panels in upcoming iPad and/or MacBook Pro revisions. So far, we don't know if Apple chose to use OLED panels outside its iPhone models.
Comments
The price per unit that Apple pays is dependent on the total number of units manufactured by Samsung Display according to the specific requirements of Apple, e.g. height and width of each OLED panel, some destined for iPhones, others possibly destined for iPads and/or MacBooks. Both parties to the contract know this.
Apple knows that it got a lower price per OLED panel from Samsung Display because of its buying power, i.e. the number of OLED panels that Apple ordered. The number agreed upon is not a fantasy number, but the number of OLED panels that Samsung Display must deliver to Apple according to a specific time schedule in order to avoid stiff penalties, some of the penalties reflecting the loss of business and profits for Apple should Samsung Display not deliver upon its commitments.
To meet its production targets of OLED panels for Apple, Samsung Display had to build new facilities, hire new employees, and sacrifice contracts that it could have signed with other manufacturers.
Apple could have reduced the financial loss of Samsung Display by using OLED panels in its iPads and/or MacBooks, but Apple chose not to do so in order to save money and increase its profits.
A business relationship is a two way street and both parties must ensure that a contract is balanced and remains profitable for both parties.
Apple is liable to pay the penalties it agreed to. Any penalty must be apportioned between the total number of OLED panels manufactured for Apple and should be viewed as a price increase for each OLED panel delivered to Apple.
Apple cannot wash its hands from the contracts it signs.
it is ok if apple made a mistake in projecting how much they might have needed. they do not need our armchair, devoid of any specifics on the contractual agreement defence. they are big boys and will sort this out themselves. our feelings about this article is insignificant to the facts we do not know about it.
it would be VERY interesting to see if Samsung is allowed to sell those screens to anyone other phone maker who can use it, or are they contractually obligated to keep or destroy them.
Based on the article, it seems a clear case of Apple didn't fulfill a contract and is being held to answer. Considering that, it's a simple matter to be cleared up.
Samsung overly committing to building has no bearing on whether Apple fulfilled the contract. Apple owes what Apple owes. How is there even a question.
There's no mention in the article that Samsung failed to provide enough displays. In that case Samsung appears to have complied with the contract.
Apple is said to claim QC issues with some of the displays. Ok, that may mitigate some of what they're contractually obligated. and they've been meeting to work that out, again, according to the article.
So why are people making shit up as though in this or some article somewhere Apple is the injured party? Any support for those claims?
The 'Despite the success of the iPhone X' bit makes no sense whatsoever. It implies without substantiation that Apple has sold enough iPhone Xs to have met its contractual obligations. It's known the sales of the X fell short of Apple's own expectations. That's some editorializing within an article that isn't offered as an editorial.
Without a copy of the contract and Apple's numbers, this is supposition. But that's to be expected with leaked information. This is what we have at the moment. More substantive information may come in the future and reinforce what been said or take the story in a different direction.
However it plays out, this needs to be an object lesson/cautionary tale for anybody doing business with anybody, especially Apple. Put too many eggs in one basket can cost a supplier when the buyer doesn't buy as anticipated. This isn't the first time this has happened with Apple. Supplier beware.
If Apple owes a penalty, which at the moment seems to be the case, Apple needs to pay up, in some manner.
Most likely based off history.
It's probably a case where Samsung Display didn't manufacture the total number of panels that it agreed to sell Apple because, at some point, Apple warned Samsung Display that it didn't need so many panels as Apple wasn't able to sell iPhones in the numbers projected (with the $100 price increase decided by Apple).
And because manufacturers sign contracts one year in advance to make sure that they have all the components that they need to build new cell phones, it was probably too late for Samsung Display to sign a last minute contract with another phone manufacturer, at least for the current year and/or models.
What are the parties to do when consumers decide that a cell phone is too expensive for the current economy and market conditions? The first thing to do was to warn Samsung Display of the shortfall in projected sales of the new and more expensive iPhones. Apple has a clear choice: pay the penalty or buy now and take delivery of OLED panels to be used with next year's iPhone models.
In the alternative, Apple could sign a new contract with Samsung Display and use larger OLED panels in upcoming iPad and/or MacBook Pro revisions. So far, we don't know if Apple chose to use OLED panels outside its iPhone models.