Lesson Learned from BOE
Samsung Electronics is pumping up its efforts to diversify its supply chain for large LCD panels for TVs by lowering its dependence on products from BOE, China’s largest panel maker, which is being engaged in a patent lawsuit with the Korean tech giant. The company is expected to seek to strengthen cooperation with Taiwanese and Japanese panel makers as it believes that relying on Chinese companies, which have dominated the LCD panel market for TVs through a price war, can put itself at a disadvantage in panel price negotiations.
According to industry sources on July 22, Chinese companies are estimated to supply 70 percent of the LCD panels for TVs used by Samsung Electronics. CSOT, a subsidiary of TCL, China’s largest TV maker, supplies the largest volume. It is followed by Chinese companies HKC and BOE. The share of AUO is around 20 percent. Sharp, LG Display, and others account for around 10 percent.
BOE’s lawsuit against Samsung Electronics made the latter to diversify supply lines for LCDs for TVs. Earlier, Samsung Electronics’ subsidiary Samsung Display filed a lawsuit against BOE with the U.S. International Trade Commission (ITC) to ban the import and sale of Chinese panels that infringe on its OLED panel patents. BOE then filed a counter-suit in China, alleging an infringement of LCD panel patents by Samsung Electronics and Samsung Display. Display industry insiders believe that BOE used its enormous power in the market for LCD panels for TVs in order to put pressure on Samsung Electronics, and Samsung Electronics responded by drastically reducing supply from BOE. According to market research firm TrendForce, Chinese companies’ share in the market for LCD panels for TVs is expected to make a climb to 70.4 percent from 65.5 percent in 2022.
While going through this incident, Samsung Electronics is focusing on reducing its heavy reliance on China. The company has been at a disadvantage in every price negotiation because it has no means to counter the Chinese companies’ price hike demands. Chinese vendors have reportedly raised the prices of their LCD panels by more than 30 percent since the beginning of this year. LCD TVs account for nearly 100 percent of Samsung’s annual TV shipments of about 40 million units.
Market observers expect that Samsung will ask AUO and Sharp to expand their supply volumes. LG Display, in the process of restructuring its LCD panel business for TVs, has virtually no capacity to increase its supply. The company completely shut down production facilities for LCD panels for TVs in Korea late last year, and has also cut its Guangzhou LCD line’s capacity in China by about half. Instead, LG Display is forging partnerships in the next-generation panel market, including supplying OLED panels for Samsung Electronics’ ambitious 83-inch OLED TV model.