Its developed an infection. You need to remove the affected tissue by using a sterile blade. Make sure to cut beyond the infection border into healthy tissue. Dab the "wound" with ground cinnamon spice.
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Anon Y Mouse
"Never attribute to malice that which is adequately explained by stupidity." Hanlon’s Razor
I am not being argumentative. I am correcting you!
Is it an infection that could potentially spread to the other phal? Or is it going to stay localized to this orchid. I'm just wondering if I need to quarantine it.
If you are using sterilized tools every time that you go to do something to your plants, you should be able to prevent transmission from one phal to another. Just be sure that after you are done working on one plant to starilize your tools before working on another plant- this applies to all orchids. I would say that you probably do not have to quarantine it.