Apple reportedly paid $950 million to Samsung for the shortage of OLED panel orders

Photo: Xavier Wendling

From: Unsplash

Samsung, in their revenue guidance, stated that they received a one-time gain related to its display business, reported by Display Supply Chain Consultants, previously theelec.net has reported that the payment was made by Apple of $745 million to Samsung, but the latest report from DSCC stated that the payment was close to $950 million.

The payment was made because Apple has failed to order enough OLED panels from Samsung, and Samsung charged the said amount has a penalty to Apple. "The Apple payment likely turned what otherwise would have been an operating loss for display devices into an operating profit," said the Display Supply Chain report.

Samsung's operating profit was up 17% Y/Y, but its revenue guidance has seen a decline of 11% Y/Y might be because of the decline in demand for electronic products because of the on-going pandemic. But the loss is much less than the expected, Samsung's revenue guidance and operating profits of the 2nd quarter have exceeded the analyst's expectations.

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9to5 Mac has noted that a similar situation occurred in the 2nd quarter of 2019, where Apple has failed to order enough OLED panels from Samsung, At that time Apple cleared the due by ordering more panels next time to cover the loss for Samsung.

This happens because Apple makes an agreement with its suppliers to order a minimum stock to get the units at a lower price and if Apple fails to order the minimum requirement it has to pay the penalty according to the contracts.

It is understandable why Apple has ordered fewer OLED panels this year, as the manufacturing process was disturbed by the pandemic and Apple's main manufacturing site was located in China which went to complete lockdown in the early days of the pandemic.

Via, 9to5 Mac.