Perhaps LG Display
Much attention is being paid to if Samsung Electronics, which recently stopped ordering from China’s No. 1 display maker BOE, will expand the amount of liquid crystal displays (LCDs) that it buys from LG Display in the future. Samsung has been buying LCD TV panels from LG Display since 2017.
According to industry sources on July 17, Samsung had considered using BOE’s organic light-emitting diode (OLED) displays in a premium smartphone to be released next year but recently stopped discussing it. Samsung’s MX Division, which makes smartphones, had reportedly been in talks with BOE for quite some time, but a patent lawsuit sparked the suspension of the discussion.
The patent case in question began in May when BOE filed a lawsuit in a Chinese court against Samsung Electronics and Samsung Display, accusing the Korean companies of infringing upon its patents. They claimed that Samsung copied their OLED panel technology and that Samsung forced BOE to lose money by distributing smartphones with Samsung Display’s OLED displays that used its pirated technology.
This has embarrassed Samsung. This is because BOE hit Samsung first while Samsung was preparing for a lawsuit after it discovered that BOE had stolen four OLED display patents for the iPhone 12 developed by Samsung Display.
BOE’s technology theft was discovered when a private iPhone repair company in the United States replaced a broken iPhone 12 screen panel. The company used both genuine Samsung Display OLED panels and fake ones made in China, and gave customers choices between the two when they brought their iPhone 12 devices in for repair.
After confirming that the fake Chinese panels copied four of its technologies, Samsung Display sent notice to BOE on May 2 last year and filed a complaint. In December of the same year, it filed a patent case with the U.S. International Trade Commission (ITC) against its suppliers, MobileSentrix and U.S. component wholesalers including Injured Gadgets, DFW, and Cellphone & Parts. BOE was accused of selling fake product panels to these companies.
Pushed into a corner, BOE responded with a counter-suit in China. This prompted Samsung Display to file a patent infringement lawsuit against BOE in the U.S. District Court for the Eastern District of Texas on June 26. This marked the first time Samsung has filed a patent lawsuit against BOE. Among the four infringed technologies was Samsung Display’s core patent for the Diamond Pixel. It is a technology that enhances the graphic clarity of OLED panels and enables them to display sharp, intricate lines and etc.
“BOE infuriated Samsung,” said an industry insider, “Samsung even calls BOE technology thieves. A relevant department at Samsung has recently decided to scratch out BOE from Samsung’s supply chain.”
If Samsung actually excludes BOE from its supply chain, it will have a significantly negative impact on BOE. This is because Samsung has been a big corporate customer of BOE panels for TVs, smartphones, and tablets.
In addition to smartphone panels, Samsung Electronics has planned to gradually decrease the volume of TV panels from BOE. The Korean tech giant is currently highly dependent on Chinese suppliers in the LCD TV panel market. Chinese suppliers account for about 60 percent of LCD supply to Samsung. Since Samsung Display’s exit from the LCD business, Samsung Electronics has been ramping up the percentage of LCDs from Chinese suppliers with a BOE volume estimated at 11 percent. Apart from BOE, Samsung also outsources LCD TV panels from CSOT (26 percent), HKC (21 percent), and CHOT (2 percent) in China.
At one point, the share of LCDs outsourced from BOE reached 17 percent in 2021, but it nearly halved to 9 percent in 2022. This year, it is expected to reach 11 percent, but this could change if Samsung Electronics significantly reduces its BOE supply beginning from the second half of this year.
“Samsung Electronics withdrew from the LCD business in the first half of last year, diversifying its LCD TV panel suppliers to include LG Display, Chinese companies, and Taiwanese companies such as AUO and Innolux,” said an industry insider, adding that Samsung Electronics believes that its price bargaining power will decrease if it becomes more dependent on a particular panel supplier.
Some observers speculate that Samsung will use LG Display to fill the void left by BOE, but this will not be easy. This is because LG Display has been steadily shrinking its LCD business due to its deteriorating profitability.