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Samsung Could Make $22 Billion Off Next Year's iPhones (cnet.com)

Posted by BeauHD on from the it-takes-two-to-tango dept.

According to a report by Korean outlet ETnews (via The Investor), Apple placed an order for 180 million to 200 million OLED displays from Samsung's manufacturing branch, Samsung Display, for the next round of iPhones. Each display is estimated to cost $110, which could mean the deal is worth up to $22 billion. CNET reports: The recently released iPhone X was Apple's first phone to feature an OLED display, rather than an LCD panel. Samsung, on the other hand, has been using OLED displays in its phones for quite some time. Currently Samsung holds a near monopoly on the world's manufacturing of OLED screens. As a result, Apple had little choice but to turn to its rival for this type of screen. This isn't the first deal of its kind. Earlier this year it was reported that Apple bought 60 million OLED displays from Samsung, apparently for what would later become the iPhone X. According to the report, Apple's next order is up to four times larger than this previous order. Demand is so high that Samsung considered opening a new manufacturing plant to process Apple's order, the report said, but has been able to manufacture enough of the panels to fill Apple's order.

43 comments

  1. But, the environment!! by Anonymous Coward · · Score: 0

    Apple, please reassure me..

    (sucking thumb)

    1. Re: But, the environment!! by Anonymous Coward · · Score: 0

      Dont worry, they'll slow down all the old phones so they can be recycled!!

    2. Re: But, the environment!! by Anonymous Coward · · Score: 1

      You live in a moron area I guess.

    3. Re: But, the environment!! by Anonymous Coward · · Score: 0

      Cupertino?

    4. Re: But, the environment!! by Anonymous Coward · · Score: 0

      Wherever you are is a moron area. The people you hang out with are morons. You just admitted as much, if your anecdote is to be believed.

    5. Re: But, the environment!! by Monster_user · · Score: 1

      Not sure what that rebuttal was about, but that AC wasn't me.

      Call the area I live in a moron area if you want, but it doesn't provide me with anything to take back to them to change their minds.

      Not sure what, if anything, would convince them. Their focus is a bit more near term. Profits, the economy, etc. Dog eat dog world. Worrying about the environment is a luxury we apparently cannot afford.

    6. Re:But, the environment!! by Anonymous Coward · · Score: 0

      Apple, please reassure me..

      (sucking thumb)

      Gee, Samsung has a crappy environmental record, and you blame Apple for it?

  2. Samsung could gross $22 billion by RhettLivingston · · Score: 2, Informative

    We have no idea how much they will make (a word usually synonymous with "profit") or even whether they will make anything at all on the deal given how expensive, and even risky, the tech is to develop and produce. Only time will tell.

    1. Re:Samsung could gross $22 billion by AvitarX · · Score: 1

      If they we're contemplating a second factory, but made due without, it's safe to assume they're doing alright on the deal (but probably not even close to half of the 22 billion).

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    2. Re:Samsung could gross $22 billion by ShanghaiBill · · Score: 3, Informative

      The easiest way to tell if a journalist is economically illiterate is when they don't understand the difference between revenue and profit.

      TFA was written by someone who is not qualified to be writing about business.

    3. Re:Samsung could gross $22 billion by Anonymous Coward · · Score: 0

      Samsung holds a near monopoly on the world's manufacturing of OLED screens.

      Too bad Samsung doesn't have the balls to tell Apple:

      "You want your 200 million OLED screens? Then sign this agreement that you'll stop suing us or else fuck off."

    4. Re:Samsung could gross $22 billion by Anonymous Coward · · Score: 0

      They did to some extent with reciprocating lawsuits as well as price rises. Apple are paying a hefty premium to use Samsung due to their legal actions.

    5. Re:Samsung could gross $22 billion by Actually,+I+do+RTFA · · Score: 1

      We have no idea how much they will make

      OLEDs are already coming off the line, so no new tech. And $110 was the estimated profit per unit, not the total cost to Apple. I imagine Apple is starting up it's own OLED factory for that much cash.

      Or, in other words, Samsung is making about what Apple's Irish fine is, and Apple still has more money than anyone.

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    6. Re:Samsung could gross $22 billion by Anonymous Coward · · Score: 0

      Yeah, the world doesn't work like this. Samsung sells displays and Apple is a customer.

      If shareholders got wind that Samsung flippantly lost a sale of 200 million units, parts for the most popular smartphones in the world, there would be blood.

      If Samsung won't do it then Apple will pay someone else to bring their lines up to speed, build factories, buy whole design firms, etc. Apple didn't like buying their phone SoCs from someone else and develops their own. Apple didn't like buying GPU IP from someone else and developed their own.

      If apple cant buy the displays they want they will make their own.

      Samsung needs Apple more than Apple needs Samsung.

    7. Re:Samsung could gross $22 billion by Desler · · Score: 0

      So then Apple goes: “Okay. Bye.”

    8. Re:Samsung could gross $22 billion by Anonymous Coward · · Score: 0

      And $110 was the estimated profit per unit, not the total cost

      lol no. Based on your user name you do read the article, but apparently this word "read" to you means "pass in front of my eyes" because comprehension clearly is not involved in that process.

    9. Re:Samsung could gross $22 billion by Solandri · · Score: 1

      Samsung operates as large multi-national conglomerate should. Their different branches do not favor each over over the competition. Samsung Device Solutions (who manufactures their semiconductor products) will happily prioritize DRAM sales to Apple over Samsung Mobile if Apple will pay more. That's why Samsung sells lots of things to Apple (RAM, SSDs, manufactures their SOCs) despite Apple suing them. That said, Samsung Mobile may have some sway with Samsung Consumer Electronics (which contains their display division), because Mobile has basically been subsidizing CE's OLED development for the last 7 years.

      If Microsoft had acted this way (OS division had not given preferential treatment to their software division making Internet Explorer; software division making Office had released iOS and Android versions immediately instead of acting as an incentive for Windows Phone sales), they wouldn't be as universally reviled.

    10. Re:Samsung could gross $22 billion by Actually,+I+do+RTFA · · Score: 1

      Samsung is estimated to earn $110 (roughly £83/AU$140), due to the Samsung-manufactured OLED displays and memory chips that go into each device.

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    11. Re:Samsung could gross $22 billion by RhettLivingston · · Score: 2

      Apple is paying somewhere between $65 and $71 per display depending on where you get your numbers. The variance in the cost per display in different reports is likely due to market variance caused by the supply pinch.

      The $110 number comes from an analysis of the total that Apple is paying for all Samsung components that they use in the phone and is still the gross amount, not the profit.

      The full production cost of the iPhone X is said to be around $357. There isn't exactly room in that for Samsung to make $110 profit on a display.

    12. Re:Samsung could gross $22 billion by jellomizer · · Score: 1

      In general when a company sells a lot of products it can compete hard with and be the best parter with the same company. It isn’t hard to do if the people in charge are willing to be adults.

      We have Google and Amazon who doesn’t realize this yet.

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    13. Re:Samsung could gross $22 billion by jabuzz · · Score: 1, Informative

      Making OLED displays is going to be hard for Apple. Firstly there are still a ton of valid patents in the field that would more or less exclude Apple, and given Samsung have invested large sums of money developing OLED displays that's exactly what patents are for, unlike Apples software bull shit patents.

      Secondly even in the absence of patents there is a huge amount of just "know how" in actually running a plant that actually produces OLED displays at volume. Again this is something that Samsung have spent many billions of dollars working out over many years and Apple cannot just magic out of nowhere.

      So if Apple want to make their own OLED displays they are going to have to negotiate some patent license deals and good luck with that, and then spend many years building the plant and getting the manufacturing processes perfected for the volumes they need. That will take years and billions of dollars, so it's not going to happen.

    14. Re:Samsung could gross $22 billion by larryjoe · · Score: 1

      We have no idea how much they will make (a word usually synonymous with "profit") or even whether they will make anything at all on the deal given how expensive, and even risky, the tech is to develop and produce. Only time will tell.

      Why wouldn't Samsung not make a huge profit? The technology and manufacturing process are not risky, since they've been doing this for many years at high volume. They are also the dominant supplier, so they would be hugely inept to not negotiate a deal that guarantees huge profits. At worst, they could walk away from any deal and actually better compete with Apple in the high-end smartphone market.

      Based on the supposedly reliable Ming-Chi Kuo, Apple is paying Samsung $120-$130 per OLED screen and is urgently trying to find a second source for OLED screens to diminish Samsung's strong current negotiating position. Hence, Apple's huge $2 billion investment in LG.

      Also, according to this article, Samsung OLED operating margins are 12% to 22%, which would put the profit on $22 billion at around 2.5 to 5 billion dollars.

    15. Re: Samsung could gross $22 billion by Anonymous Coward · · Score: 0

      If they have a near-monopoly, it's not hard to believe that their profits would be higher than 50%

    16. Re:Samsung could gross $22 billion by Anonymous Coward · · Score: 0

      Nobody needs apple.

    17. Re:Samsung could gross $22 billion by gnasher719 · · Score: 2

      Or, in other words, Samsung is making about what Apple's Irish fine is, and Apple still has more money than anyone.

      Just saying: There will be no "Irish fine". There _may_ be a correction of Apple's Irish tax bill.

    18. Re:Samsung could gross $22 billion by RhettLivingston · · Score: 2

      Samsung OLED operating margins are 12% to 22%, which would put the profit on $22 billion at around 2.5 to 5 billion dollars.

      Exactly. They will "make" something less than $5 billion assuming there aren't further issues waiting in the wings as these screens age. They will not make $22 billion. But that is the way most are reading these headlines and articles. The comments and follow-on analyses present on virtually every article that has reported this show that the readers are being successfully misled into believing that Samsung is pocketing $22 billion profit.

      There also seems to be a lot of confusion on the actual gross amount Samsung is getting paid for the OLED displays. Contracts reported in the April timeframe worked out to $71 per display. The whole display assembly was reported as $110 as recently as November 8th but includes components such as the touch panel and glass that come from other vendors. The Samsung component is just a piece of that. Many articles, including the WSJ article that started this latest media storm on an old subject have played very loose with the numbers and terms in an apparent attempt to hype Samsung whose stock has been moved by this.

      There was also some fast and loose comparison with the Samsung's profit on this versus the Galaxy 8. They limited the comparison to component sales, leaving out the profit that Samsung makes on the phones themselves. Just as Apple makes more profit than the total production cost on each iPhone, Samsung's big profit is on the phones, not the components.

    19. Re:Samsung could gross $22 billion by Anonymous Coward · · Score: 0

      If you keep digging you'll see that your source is using the word "earn" to mean revenue.

    20. Re:Samsung could gross $22 billion by Anonymous Coward · · Score: 0

      Making OLED displays is going to be hard for Apple. Firstly there are still a ton of valid patents in the field that would more or less exclude Apple, and given Samsung have invested large sums of money developing OLED displays that's exactly what patents are for, unlike Apples software bull shit patents.

      Wake up and smell the "roses" Samsung has been selling you for Christmas. Samsung needs patents for inevitable countersuits after they stole somebodies inventions, so they can crush them in the market while the court cases drag along. They've been doing that for decades now, and they did it in the OLED market too. https://www.vanityfair.com/news/business/2014/06/apple-samsung-smartphone-patent-war

      BTW, isn't it odd that the majority of Samsung's patents are design patents? Since long before the patent war with Apple started?

  3. When there is money... by ELCouz · · Score: 1

    ...there is no enemy.

  4. Last year's tech still has to be paid for by raymorris · · Score: 1

    > OLEDs are already coming off the line, so no new tech.

    It's still a cost, whether they do the R&D this year, or they borrowed money for it last year and pay that back this year, or they "borrowed" from themselves and need to replenish their funds. The cost is spread over all the displays that use the exact same tech, though, so their R&D cost for this year's displays is less if by sharing the cost with last year's production.

    1. Re:Last year's tech still has to be paid for by Actually,+I+do+RTFA · · Score: 1

      Nope, that's not how things work. Samsung paid for the line and R&D for other uses. That they can run a third shift and sell the screens to Apple didn't involve any capital expenditures.

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  5. Re: Sad news ... Christopher Reimer, unnoticed at by Anonymous Coward · · Score: 0

    Leave him alone!

  6. Micro LED by backslashdot · · Score: 1

    Nobody at Samsung even knows what tf a microLED is. It is the next big thing, and other companies are way ahead of the game. Samsung executives better make sure they pay off all their mortgages by 2019.

    1. Re:Micro LED by Anonymous Coward · · Score: 0

      I'm sure they know what it is, and Samsung is no stranger to making regular LEDs. They still have time to get into microLED once people start figuring out how to put them together.

    2. Re:Micro LED by vlad30 · · Score: 1

      When apple chooses a tech to include, it needs to make sure that it will be available in the quantities they will sell this usually means bleeding edge tech which is still going through manufacturing teething problems are put on the wait list until they can guarantee 100 million units thats why the iphone is behind on some features but the overall experience for most is excellent and consistent.

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  7. Re: Sad news ... Christopher Reimer, unnoticed at by aussie_a · · Score: 1

    Cock off Chris. No-one loves you or wants you.

  8. Near-Monopoly by mentil · · Score: 1

    LG, Sharp, Kopin, and Japan Display also make OLED displays, off the top of my head. No idea if any make displays suitable for a smartphone, though if $22 billion was on the line I imagine they could make it happen.

    If the order amount is tripled, then either demand for a $1,000 iPhone is far higher than anticipated, or they're planning on rolling out OLED displays to other models e.g. the iPhone 9 Plus. I imagine once consumers realize how much better HDR screens are, they'll start thinking "normal iPhone screens look crappy." It's kind of ironic given that Jobs badmouthed OLED, but makes me wonder why they didn't go with quantum dot displays (supply issues I'd imagine).

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  9. market for $200 phones by Anonymous Coward · · Score: 1

    I'm typing this on a $200 Moto something-gen. Works great. Then I see ads for $300 off and this for the screen which costs (at massive volume) $100 ...

    And I'm left wondering, what am I missing? Is there a funding model for $1000 phones I'm missing, or are folks that flush that they can fork over the $1000, and not blink?

    1. Re:market for $200 phones by Anonymous Coward · · Score: 0

      Well, laptops used to cost $3000, good desktops $2000 before that.
      I'm not too surprised a $1000 "phablet" sells (lol, remember that word?)

      What you have is a $200 phone _with good support_, I think that's something of an exception.
      Likely, it's just something that even the lower middle class can afford. like some peoplé own a luxury handkerchief or something.
      I would say, most people dream of living in a simple house with a backyard and having room for a large dining table for family and friends to come over. But when it costs at least 200x to 400x what an iphone X does, I can't blame them for going with the iphone X instead - even though I'm some of the most anti-capitalist/anti-consumerism around.

  10. Re: Sad news ... Christopher Reimer, unnoticed at by ELCouz · · Score: 1

    Good luck if your strategy is to target all the good karma accounts on Slashdot to find your lover.... now fuck off troll

  11. Re: Sad news ... Christopher Reimer, unnoticed at by ELCouz · · Score: 1

    /del fucking comment unrelated as fuck I was high AF