Samsung’s OLED manufacturing and quality allows it to have a number of high-paying customers among which is Apple…yeah Apple uses Samsung’s OLED screens on it’s high-end flagships. And the company having a big grasp in the OLED market allows it to contractually obligate its customers to purchase a certain quantity panels which if they don’t meet the minimum order quantity, they will have to pay the South Korean tech giant.
Apple being one of those Samsung’s OLED customers have to pay the company if it doesn’t meet the minimum order quantity and a report has it the US based Apple might have to pay the US$1 billion penalty payment to Samsung Display.
For the record, this isn’t the first time Samsung will be paid by Apple for buying fewer OLED screens than the initial agreement. Its been recorded that Apple had paid nearly US$684 million to Samsung in Q2 2019 just because it didn’t meet the minimum order quantity.
And a new report has it that Samsung Display might be getting another money due to penalty from Apple over this breach in agreement. The estimate according to a local media outlet suggests the penalty could be anywhere around US$745 million but other report has it could be in excess of US1 billion.
According to a source, it was revealed to an analysis firm Display Supply Chain Consultants that Apple’s penalty could be in excess of US$950 million in Q2 2020 because the company bought fewer OLED panels than it had bargained.
Samsung whose mobile business was really impacted by the COVID-19 pandemic might be really seeking ways to make up for it’s losses. But the truth about the payment is to serve for operating loss for the display division into an operating profit which basically means the company had to out up for the components it didn’t request despite initially agreeing upon that number.
This ever changing market dynamics also affects big companies like Apple as well and the fact that people aren’t just swapping up their expensive high-end flagship smartphones every single year when another model is out means sales dwindles and there have been reports about Apple’s iPhone decline for quite a while now.
So while it may have expected to sell more iPhones, and would have agreed to a certain quantity with Samsung Display to ensure dedicated production capacity for its OLED panels, market conditions have backed it into a corner and now it has no option but to pay almost $1 billion as a penalty.