Apple has reportedly made another payment to Samsung for selling too few iPhones. According to a new report from Show supply chain consultantsApple made a one-time payment of $ 950 million to Samsung for purchasing fewer iPhone OLED displays than required.
Samsung noted in its second-quarter guidance statement that the operating profit for the second quarter of 2020 included a “one-time gain related to its display business,” but did not include the amount. TheElec reported last month that Samsung received about $ 745 million from Apple, but today’s report from the DSCC He cites unidentified sources and says Apple made a payment of “closer to $ 950 million.”
“Apple’s payment likely turned what would otherwise have been an operating loss for display devices into an operating profit,” the report explains. Revenue guidance decreased 7% yoy for Samsung Display, but operating profit guidance increased 23%, and that’s much higher for analyst expectations.
If this situation is familiar to you, it is because something similar happened in the second quarter of 2019 when Apple also faced a penalty from Samsung for not buying OLED screens at the agreed level. As we reported at the time, Apple was unlikely to settle the debt in cash, but instead issued additional orders to Samsung Display to the point where the profit equals the penalty due. It is unclear whether that was what happened this year or not.
Apple has agreements with many of its suppliers to make a minimum purchase, probably to achieve lower unit prices. If Apple doesn’t meet that minimum purchase, contracts generally stipulate that a fine will apply. This year, Apple’s supply chain and demand were affected by COVID-19, which could explain what led the company to order fewer OLED panels than initially expected.
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