While Samsung and Apple continue to fight fiercely in the smartphone market, behind the curtains they share a supplier-customer relationship with Samsung being one of its largest component suppliers. Samsung’s display unit is the sole supplier of OLED displays for Apple’s iPhone X and is expected to make as much as $22 billion in revenue by supplying OLED panels to iPhones in 2018. Naturally, any slow-down in iPhone sales will have an adverse impact on Samsung’s component business revenues, even if it benefits the Samsung’s smartphone business.
Even as Samsung continues to downplay the potential impact of less than expected iPhone X sales on its revenue, reports are surfacing every day about Apple reducing component orders from Samsung Display for its iPhone X. Today, quoting component suppliers, ET News has reported on reduction in part orders for the iPhone X.
Apple might just be reducing its reliance on Samsung
According to the report, Samsung Display informed its partners last month that it will be reducing the volume of parts it buys to make iPhone X OLED displays. The company’s display unit came up with new forecast numbers for partners whereby it reduced part orders by more than 50% from its initial estimates. As per the latest forecasts, Samsung Display will cut-down part orders from 40 million units to 20 million units for Q1 2018. It expects the drop in part orders to continue during the second half of the year as well.
The report also states that Apple is not planning to place any more component orders for its iPhone X during the second half of this year. It is not entirely surprising as Apple would like to make and sell more of its newer iPhones during every holiday season. However, Apple tends to keep the older models in the market by offering them at lower price points than the newer devices. If these reports are to be believed, iPhone X may not follow that trend.
The publication quotes a representative for a component manufacturer saying, “Amount of orders is being reduced by more than 50% every quarter, and there are not any scheduled orders for the second half of this year as of now.”
While a decline in part orders during the first half of the year is a common trend as it is usually a slow sales season and companies tend to launch newer products during the second half of the year to target the holiday quarter, the report states that the decline in iPhone X part orders is more than usual.
“Because we lost number of orders more than usual, we believe that lack of sales of iPhone X besides usual slow quarters is also impacting number of orders we receive,” the report quotes another part supplier to Samsung Display as saying.
There are also reports of Apple planning to discontinue the iPhone X during the second half of this year. Even if Apple does that, it shouldn’t be surprising as Apple would like its newer bezel-less iPhones in 2018 to sell well without any threat of competent older models cannibalizing sales through lower prices.
There might be another reason why Apple may cut orders for Samsung Display. The company could simply be reducing its reliance on Samsung for OLED displays. It was reported last year that Apple has invested $2.7 billion in LG Display’s OLED production for smartphones. The investment was reportedly made as an advance payment for planned panel supplies from LG Display which are slated to begin in the second half of 2018.
Other reports have suggested that Sharp and Japan Display will also try and win orders for from Apple in the second half of this year. It would make sense for the company to diversify the supply chain for the most crucial component of its flagship smartphone and that will obviously happen at Samsung’s expense.