Apple Had To Pay Samsung An Almost Billion-Dollar Fine
Having overestimated the demand for its smartphones, which fell due to the coronavirus pandemic and the economic crisis provoked by it, Apple faced the need to pay the penalty to one of its largest suppliers-Samsung. According to Display Supply Chain Consultants, the one-time fine totaled $ 950 million and saved Samsung's display division from a loss.
We are talking about the sanctions provided for by many Apple contracts for the supply of components; if the company buys a smaller volume of goods from the manufacturer than stipulated, it is obliged to compensate for the lost revenue. Such conditions allow Apple to achieve a lower price per unit of purchased goods but create risks in the event of an unexpected drop in demand for smartphones.
Samsung's official report for the second quarter of 2020 referred to "one-time revenue related to the display business," but the amount received was not named. The publication TheElec last month reported that Apple paid the South Korean company about $745 million. The figure named today is $205 million more.
At the same time, the report notes, it was the payment of a fine by the iPhone manufacturer that allowed Samsung's display division to demonstrate operating profitability instead of a loss. In a preliminary forecast, Samsung Display focused investors on a 23% increase in operating profit despite an expected 7% year-on-year decline in revenue.
A similar situation occurred a year ago — in the second quarter of 2019, Apple did not fulfill its obligations to purchase OLED displays for the flagship iPhone models from Samsung. Then the publication 9to5mac wrote that, most likely, the American company agreed not to pay the penalty in money, but to compensate the agreed amount with additional orders.