In manufacturing, it is generally accepted that the more you order, the cheaper the price you can get per order. This is why products that are produced in lower quantities can sometimes be priced higher than those produced in massive quantities. However, it seems that Apple did not manage to do that with Samsung.
A report from Display Supply Chain Consultants is alleging that Apple is said to have paid Samsung nearly $1 billion in penalties ($950 million to be exact) for failing to meet the minimum order quantity for OLED panels for the iPhone. Apparently Apple was supposed to have ordered a certain amount of OLED panels from Samsung, but perhaps due to the lack of demand, they might have reduced their orders which then fell below Samsung’s MOQ.
As a result, Apple is said to have to pay Samsung a penalty. This is evidenced in part in Samsung’s earning guidance for Q2 2020, where Samsung hinted that what could have been an operating loss due to the fewer orders, actually turned into operating profit due to the $1 billion penalty.
What’s interesting about this report is that apparently this is the second time that Apple has been forced to pay the company a penalty for missing orders, although in this instance, the penalty was higher than the previous year.