In an exclusive, ChannelNews reveals Apple is facing hundreds of millions of dollars in penalty payments to Samsung because iPhone demand has fallen.
Apple "demanded" that Samsung construct one of the world's biggest OLED manufacturing facilities exclusively for iPhone screens.
Overconfidence of Tim Cook, not adjusting forecasts for trade wars nor a structural decline in global growth, has crushed Apple iPhone demand across the world and breached the contract of 100M OLED iPhone screens per year with Samsung.
"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.
While trade wars and lower global growth negatively weighed on iPhone demand, the price of the iPhone X also deterred consumers from upgrading.
Sources told ChannelNews the contract between both companies had significant "penalty clauses," which Apple is currently trying to finagle itself out of. Another source told the Australian news outlet that Apple had already made one tranche of payments covering part of the fine.
Apple responded by announcing the supplied Samsung OLED were "faulty" which sources say is a stalling tactic as lawyers are negotiating the fines.
In a separate report, ETNews says the Samsung A3 plant, can deliver 105,000 6th generation flexible OLED panels per month, is working under 50% capacity.
ETNews says Apple will likely skip out on paying the complete fine to Samsung. Instead, the company will upgrade iPhone XR, iPads, and MacBooks with OLED panels to compensate for the loss of the iPhone X.
"Apple made some suggestions such as guaranteeing the 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," an industry source said.
The drop in units for Apple iPhone X with an OLED screen is occurring at the same time the smartphone bubble is deflating. Even Samsung Galaxy smartphones are experiencing declining sales.
ETNews said Apple has started to work with LG Display for OLED panels, but analysts believe the move will result in less production capacity and more expensive OLED panels than Samsung.
Apple has also invested in JDI (Japan Display) who will be manufacturing the company's LED panels in the near future.
It's hard to imagine how the largest corporation in the world [Apple] could make such a careless sales forecast of one of its most popular products that resulted in hefty fines. Nevertheless, what's more, baffling is how Apple couldn't see the cycle down of the global economy that started in 1Q18.