iPhone X Sales Collapse Leads To Bitter Row With Samsung, Apple Up For Big Penalties
A bitter row has erupted between Samsung and Apple who facing paying out hundreds of millions of dollars in penalty payments after already paying penalties due to the collapse in sales of their much-heralded iPhone X which came with an OLED display made by Samsung.
When Apple wanted to take on the top end Samsung Galaxy smartphones, they engaged archrival Samsung Display to deliver a new OLED screen.
And because of the forecast numbers which were up to 100 million screens a year Samsung built a brand-new OLED production plant which was configured to supply Apple with over 100 million OLED display panels annually.
The new Samsung A3 plant was capable of delivering 105,000 6th generation flexible OLED panels per month and was constructed ‘exclusively for Apple.
Then everything went “pear shaped” claim insiders.
The much-heralded Apple iPhone X failed to sell due to the premium cost of the device and the fact that the new Samsung range of smartphones were seen as a better offering with thousands of iPhone owners choosing to stick with their current model smartphone.
The contract between the two Companies had “penalty clauses” built in according to sources, which Apple are now trying to get out of paying as they add up to hundreds of millions. One source told ChannelNews that one lot of payments has already been paid.
Apple has responded claiming that the supplied OLED panels were “faulty” which observers claim appear to be a stalling tactic as they try to negotiate a settlement.
At this stage the issues have not made it to a court room.
As a result of the slump in forecast sales Samsung had to wind back their A3 production line to the extent that Samsung was only producing less than 10% of what Apple forecast.
The drop-in sales of Apple iPhones with an OLED screen coincided with a fall in demand for smartphones across the boards as well as for Samsung Galaxy smartphones.
This impacted Samsung Display’s performance with 2018 profits plunging to US$2.26 billion, this was half of the US $.66 billion operating profit in 2017.
They have also moved to investing in JDI (Japan Display) who have been struggling to stay afloat and have been desperate to attract investors, Apple is set to use this Company to produce LED panels.
“Although Apple requested Samsung Display to extend its plant believing that it would use about 100 million OLED panels annually, actual market demand was far lower than Apple’ prediction.” said a Samsung media executive.
“Samsung Display took a huge blow as a result and requested a penalty from Apple in accordance with the contract.” they added.
Apple has also suggested putting in place a guarantee for the supply of panels for other products rather than actually paying a penalty, Samsung appear to have rejected this.
“It is difficult for us to make information available regarding our customers.” said Samsung Display.
Apple may be able to avoid a penalty if it commits to OLED orders for future products, which could be “tablets or notebooks.”
Another industry source said: “It is heard that Apple made some suggestions such as guaranteeing supply of OLED panels for other Apple products. 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.”
Recent reports have suggested Samsung may already be in talks with Cupertino over potentially using an OLED display for a revamped MacBook Pro.