Due to Apple iPhone X production cuts, Samsung faces a glut of OLED production capacity?

Due to Apple iPhone X production cuts, Samsung faces a glut of OLED production capacity?
Because Apple announced that the average revenue per iPhone unit sold during the fiscal first quarter was higher than expected, it appeared that the iPhone X was selling better than believed. Prior to the earnings release, every other day we would get conflicting reports on how the tenth anniversary model was selling. This quarter, Apple has apparently scaled back production of its $1,000 handset, but whether the cut is as deep as feared is unknown.

A report recently published by Japan's Nikkei says that Samsung has been hurt by Apple's decision to cut production of the iPhone X. Samsung built up its capacity to produce OLED panels based on the amount of business it figured to receive from Apple. The iPhone X is the only one of the 2017 iPhone models to carry an OLED display. With production of that model cut, Samsung is left with excess capacity. The company charges $100 for each OLED panel, including touch sensors. It is twice the cost of the Samsung-made LCD panel used on the Apple iPhone 8 Plus.

Smartphone manufacturers are reluctant to switch from LCD panels to OLED because of the additional cost. For example, only 5% to 10% of the handsets made by leading Chinese manufacturers Oppo and Vivo employ an OLED screen. And many of the Chinese handset producers who do use the higher priced display are said to be increasing their own production capacity. Making matters worse, last year Samsung used fewer OLED displays internally than it did in 2016. While that helped Samsung compete on price with rivals, it contributed to the capacity glut that has Samsung using only 50% to 60% of its production capabilities.

The glut could continue in the future. LG Display is one of several companies building new OLED production lines. Overall, this capacity is expected to double by 2020.

source: NikkeiAsianReview

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43 Comments

1. byazatt

Posts: 316; Member since: Oct 26, 2012

I thought the two companies were in a some form of a contract. If I'm not mistaken then, the excess OLED panels should still be Apple's properly. I could be wrong.

3. AxelFoley unregistered

Excess capacity to make panels. Not excess panels.

8. Phullofphil

Posts: 1822; Member since: Feb 10, 2009

The iPhone has the same pattern of high production for launch than drops off need till the next iPhone. Should not have been a surprise at all. Supply and demand. Also demand and supply. The money they made from the deal should have paid for all the machines 100 times over. So who cares Samsung is going to change out all the machinery all the time anyway as to build these things get more advances just like the screens there building. This artical is not really news as much as the reality of How computer manufacturing goes. Design build, updat, build and s on

18. htcisthebest

Posts: 437; Member since: Nov 15, 2011

I really admire your grammar.

30. zacsaturday

Posts: 262; Member since: May 09, 2014

It's not too bad, though it could use a few more commas.

34. tedkord

Posts: 17415; Member since: Jun 17, 2009

Yes, but the initial demand could have been less than expected, the dropoff sooner and bigger than expected. They deal in hard number forecasts. If those numbers didn't reach the forecast, then everyone could have been caught off guard.

2. byazatt

Posts: 316; Member since: Oct 26, 2012

I thought the two companies were in a some form of a contract. If I'm not mistaken then, the excess OLED panels should still be Apple's properly. I could be wrong.

35. tedkord

Posts: 17415; Member since: Jun 17, 2009

Apple is the biggest customer you will have, and they're not shy about using that power to force tens others can't get. They never get stuck footing the bill. Just ask all the small companies that went out of business supplying them.

4. byazatt

Posts: 316; Member since: Oct 26, 2012

Oo I understand now.

5. Trex95

Posts: 2383; Member since: Mar 03, 2013

Seems that lg played some dirty game since the iPhone 8 Plus LCD comes from Samsung now and no more lg LCD panels for regular iPhone!

6. foreverNOOB

Posts: 167; Member since: Jul 07, 2017

Dirty to what?? That was a contract between Samsung and Apple not LG, and low demand for new Samsung oled panels for Apple iPhone wasn't connected to LG because that problem was all about lower than expected sales performance of Apple current gen the iPhone X. Also Apple made a contract with LG for next gen product not the current one. So, underperformed production capacity of samsung now wasn't related to LG "YET". Sorry for poor Grammar.

10. Trex95

Posts: 2383; Member since: Mar 03, 2013

You didn’t get the point what I meant that LG used to supply iPhone with LCD panels since iPhone 3G and suddenly things changed and Apple went with Samsung LCD panels and OLED panels.

36. tedkord

Posts: 17415; Member since: Jun 17, 2009

It could be that getting all from one supplier enabled them to negotiate a better price.

7. RoyalMike unregistered

'' the revenue per iPhone unit sold during the fiscal first quarter was higher than expected'' Says alot how Apple is selling a very cheap smartphone at a very high price with very high margin between selling price and cost of production.

17. rouyal

Posts: 1583; Member since: Jan 05, 2018

What does that say about the 99% of overpriced androids?

19. AxelFoley unregistered

No Android device has margins anywhere near the iPhone X. So it says nothing. I'm sure your assessment that 99% of Androids are overpriced is based on quantative data such as price, bill of materials, and production costs and you're not just trolling. Trolls don't tend to be bright individuals.

24. rouyal

Posts: 1583; Member since: Jan 05, 2018

Oh trust me, I see their comments every day ^^^

28. midan

Posts: 3016; Member since: Oct 09, 2017

Android flagship phones have very big margins just like iPhones, don't fool yourself. Difference is no-one sells tens of millions android flagship phones every q, they are lucky if they reach 10 million for whole year.

33. AxelFoley unregistered

Apple has dropped to number 3 in sales behind Samsung and Huawei. Compare that with their percentage of monile profits and let me know what your calculations are in terms of margins. Most Android "flagships" have a BOM $80 greater that the latest round of iphones and cost less.

38. ShadowSnypa786

Posts: 595; Member since: Jan 06, 2017

Yeah exactly apple make 600 dollars on each iphone sold samsung make 200-300 on each flagship sold. No android devic makes profit margins like Apple. They know how to make cheap devices and sell them at extortionate prices. Whereas Samsung devices cost more to make than Iphones but sell for cheaper prices.

40. midan

Posts: 3016; Member since: Oct 09, 2017

"Yeah exactly apple make 600 dollars on each iphone sold samsung make 200-300 on each flagship sold." False

39. midan

Posts: 3016; Member since: Oct 09, 2017

"Apple has dropped to number 3 in sales behind Samsung and Huawei." Wrong

23. htcisthebest

Posts: 437; Member since: Nov 15, 2011

Android flagships are worth every penny. They are not overpriced you stupid.

27. rouyal

Posts: 1583; Member since: Jan 05, 2018

On this doll, show me where Apple touched you

32. Trex95

Posts: 2383; Member since: Mar 03, 2013

What about pixel 2 xl price? Low quality hardware that a lot of issues and expensive price .

9. Phullofphil

Posts: 1822; Member since: Feb 10, 2009

This is all expected every year people.

14. rouyal

Posts: 1583; Member since: Jan 05, 2018

Samsung should make a notched S9 to deal with the extra displays.

43. tedkord

Posts: 17415; Member since: Jun 17, 2009

My God, no.

15. htcisthebest

Posts: 437; Member since: Nov 15, 2011

No worries. When the Galaxy S9 comes out it will sell like hot cakes and fill up most of these OLED panels.

26. MarmiteTheDog

Posts: 192; Member since: Jul 31, 2017

Hopefully it'll mean more OLED screens on otherwise good phones ruined by an LCD//1080 OLED.

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