Samsung to slash OLED panel output as iPhone X slumps
Production for Apple to halve after $12.6bn capital investment last year
KENICHI YAMADA, Nikkei staff writer
SEOUL -- Samsung Electronics is to slash production at its OLED panel plant in response to customer Apple's decision to reduce output of the iPhone X following weak demand.
Samsung Display now plans to manufacture organic light-emitting diode panels for 20 million or fewer iPhones at the South Chungcheong site in the January-March quarter. The initial goal was to supply panels for 45 million to 50 million iPhones.
The company has yet to decide its production target for the April-June period, but a further cutback may be in store.
The new target will reduce production at the plant to around 60% of the original plan. When it comes to the facility dedicated to making panels for Apple, the rate will fall to 50% or lower.
The Samsung group unit is looking to offset the impact by securing more orders from Chinese and other customers.
Samsung's display business is expected to see a year-on-year profit decline for the first half of 2018. Anticipating a demand surge from Apple, the company made a 13.5 trillion won ($12.6 billion) capital investment last year, resulting in a 1.5 trillion won increase in depreciation costs in 2018.
The display business's operating profit in the October-December period came to 1.41 trillion won, undershooting market expectations by 400 billion to 500 billion won.
The business recorded 1.7 trillion won in operating profit in the April-June quarter of last year, its highest figure going back six years. Some predictions had called for the number to exceed 2 trillion won in each of the first and second quarter in 2018. But now that seems like a tall order.
Still, many stock analysts see the business' earnings starting to grow in the July-December half, as they believe orders from Apple will recover by then.
Apple's struggle with the iPhone X is affecting production of other parts as well, bringing down memory-chip prices.