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Apple Owes SDC Penalties for Shortfall in OLED Orders
July 01, 2019 Samsung Display and Apple are embarking on psychological warfare regarding a penalty issue. Apple had to agree to pay Samsung Display hundreds of millions of dollars in penalties to secure supplies of flexible OLED panels for its new iPhones and greatly fell short of this contract. However, Samsung Display is also going through an issue where some of its panels that were supplied to Apple experienced quality issues. As a result, both businesses are looking for ways to minimize damage. Samsung Display built its Gen 6 fab over two years. The A3 line, which was constructed ‘exclusively for Apple’. fab has a capacity of 105,000 flexible OLED panels per month, The exact amount that Apple guaranteed from Samsung Display is not known. Samsung Display was expected to produce about 100 million OLED panels for Apple annually. However, sales of ‘iPhone X, and future models did not meet Apple’s sales expectations. As a result, the utilization rate of A3 line fell to a low of 10% of capacity and never went above 50%. Samsung Display’s performance plunged due to lack of orders from Apple and lack of sales of Galaxy Smartphones. It made $2.26 billion (2.62 trillion KRW) in operating profit last year that is almost half of the operating profit in 2017 when it was $4.66 billion (5.4 trillion KRW). |
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Samsung Display is the only business that supplies flexible OLED panels to Apple. Although LG Display and BOE are also preparing to supply their products to Apple, they are not currently at the level of threatening Samsung Display. “Samsung Display took a huge blow as a result and exercised the penalty clause according to their contract.”
Apple currently has supply contracts for LCD panels with LG Display and JDI and these contracts have terms providing panel makers to receive penalties from Apple, the company almost never paid penalties. Apple would substitute panels orders for other products rather than actually paying a penalty. In JDI’s case, Apple prepaid for orders to guarantee supply and perhaps a reduced price. “Samsung Display was also levied a small penalty due to faulty performance of few panels that were supplied to Apple and they are looking into many options as they both have to pay each other a penalty.”, according to an industry analyst, and that “Samsung Display actually received hundreds of millions of dollars in penalties from Apple already.” If it did receive penalties from Apple, there is a chance that SDC’s performance would improve as the corresponding penalty will be applied to its operating profit in the second quarter. Samsung refused to comment on the situation. From:[email protected]
Now the rest of the story, Apple may try to offset the shortfall in iPhone OLED panel shipments by using OLEDs in the Mac. Apple uses the vibrant high-end screens as a selling point for its iPhone XS and XS Max, but the company needs other places to put those screens. OLED screens are already used in Samsung’s Galaxy Tab S tablets and in laptops, like the Lenovo ThinkPad X1 Yoga. Future revisions of the MacBook Pro (rumored to launch in 2021) and iPad are said to be using mini-LED screen technology, not OLED, according to analyst Ming-Chi Kuo, who has a solid track record predicting Apple’s moves. But, if Apple now decides to order laptop- and tablet-sized OLED screens, any OLED-equipped MacBook Pro or iPad might be a few years away. An alternative is an OLED screen in the low-cost iPhone XR’s successor, as reported by Kuo. That phone will apparently release in 2020, alongside the first 5G iPhone. Apple says that the iPhone XR is its best-selling phone, so putting one of these displays into a popular, somewhat affordable iPhone might be a good way to move a lot of OLEDs and satisfy Samsung at the same time. From: The Verge
Apple currently has supply contracts for LCD panels with LG Display and JDI and these contracts have terms providing panel makers to receive penalties from Apple, the company almost never paid penalties. Apple would substitute panels orders for other products rather than actually paying a penalty. In JDI’s case, Apple prepaid for orders to guarantee supply and perhaps a reduced price. “Samsung Display was also levied a small penalty due to faulty performance of few panels that were supplied to Apple and they are looking into many options as they both have to pay each other a penalty.”, according to an industry analyst, and that “Samsung Display actually received hundreds of millions of dollars in penalties from Apple already.” If it did receive penalties from Apple, there is a chance that SDC’s performance would improve as the corresponding penalty will be applied to its operating profit in the second quarter. Samsung refused to comment on the situation. From:[email protected]
Now the rest of the story, Apple may try to offset the shortfall in iPhone OLED panel shipments by using OLEDs in the Mac. Apple uses the vibrant high-end screens as a selling point for its iPhone XS and XS Max, but the company needs other places to put those screens. OLED screens are already used in Samsung’s Galaxy Tab S tablets and in laptops, like the Lenovo ThinkPad X1 Yoga. Future revisions of the MacBook Pro (rumored to launch in 2021) and iPad are said to be using mini-LED screen technology, not OLED, according to analyst Ming-Chi Kuo, who has a solid track record predicting Apple’s moves. But, if Apple now decides to order laptop- and tablet-sized OLED screens, any OLED-equipped MacBook Pro or iPad might be a few years away. An alternative is an OLED screen in the low-cost iPhone XR’s successor, as reported by Kuo. That phone will apparently release in 2020, alongside the first 5G iPhone. Apple says that the iPhone XR is its best-selling phone, so putting one of these displays into a popular, somewhat affordable iPhone might be a good way to move a lot of OLEDs and satisfy Samsung at the same time. From: The Verge
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