LG Display delivered a negative earnings surprise in the second quarter of this year. After its earnings announcement on July 25, LG Display CFO Kim Sang-don said that the company would make a decision within this year on converting its Paju plant from LCD to OLED manufacturing. Some industry insiders interpreted this as a declaration of surrender to China’s BOE.
It was BOE that broke the LCD price fluctuation cycle that used to be repeated every two years. Last year, BOE accounted for 21.5% of the global large-screen LCD panel market, rising to the top by beating LG Display. The Chinese company is about to emerge as the largest mobile LCD panel maker by beating Samsung Display, too.
BOE has grown fast since it took over Hydis, the LCD business unit of Hynix, and by making use of South Korean engineers. “Even though mergers and acquisitions are indeed frequent in the fast-changing high-tech industry, BOE’s rapid growth based on Hydis is a case that clearly shows how insensitive South Korea was to technology leak,” said an industry insider.
BOE was founded in 1993 as an electronic component manufacturer. It is generally said that the company’s rapid growth for the past 25 years can be attributed to huge subsidies from the Chinese government, the huge domestic market of China, and the nature of the display industry, that is, a level of technical difficulty lower than that of the semiconductor industry. Although each does make sense, these three factors are not enough to explain the quantum leap of BOE.
The most decisive factor is technology leak and brain drain from South Korea. BOE’s growth began to further accelerate in 2003, when business units of Hynix were put up for sale. At that time, the mobile phone business unit was sold to Pantech, the non-memory arm to Magnachip, and the electronic component division to Mando, but the LCD business unit had a hard time finding a new owner. This was because Samsung and LG refrained from acquiring it to avoid monopoly controversy and the South Korean government preferred a foreign company as Korea, which suffered a foreign exchange crisis, needed to accumulate foreign exchanges. Concerns over a brain drain and technology leak were expressed, but the government’s awareness was not enough.
In the end, Hydis ended up in the hands of BOE. In addition, more brain drain occurred in the mid- to late 2000s, when Samsung Display began to increase its investment in OLED technology. At present, rumors are circulating that BOE has 2,000 South Korean employees, including 100 from Samsung and LG, and BOE’s engineer meetings are held in Korean. In short, BOE is a company heavily reliant upon South Korea. “Both manpower and technology of BOE are from South Korea and it can be said that South Korea has accounted for 80% of BOE’s growth,” said an industry insider, lamenting that South Korea’s shortsightedness has led to BOE’s dominance in the global LCD market.