Samsung's Reliance on Chinese LCD Panels Increasing
BOE, China’s largest display company, was listed as a major panel supplier in Samsung Electronics’ business report. BOE has filled the vacancy created by Samsung Display’s phased reduction of large LCD panels for TVs.
The business report, which was registered with the Financial Supervisory Service’s electronic disclosure system, listed three major display panel suppliers for the company's consumer electronics (CE) sector in 2021 -- BOE and CSOT of China and AUO of Taiwan. BOE was newly added as a major supplier. BOE surpassed LG Display in 2018 to become the world’s No. 1 LCD manufacturer.
Samsung Display decided in early 2021 to stop producing large LCD panels beginning from 2022. The decision was made to speed up its transition to next-generation QD-OLED panels as the profitability of the LCD business fell significantly due to a price war with Chinese companies.
It stopped the operation of L7 at Asan Campus in South Chungcheong Province, which had produced large LCD panels, in March 2021. An 8th-generation LCD production line at the Suzhou plant in China was sold in April 2021. However, it is still operating some of its large LCD production facilities at Asan Campus at the request of Samsung Electronics. Samsung Display is considering shutting down these facilities within June 2022.
Industry insiders say that Samsung Display's withdrawal from the LCD business has weakened Samsung Electronics' bargaining power in negotiations with Chinese vendors.
To bolster its bargaining power, Samsung Electronics is increasing its transactions with Taiwan’s AUO and Innolux, but this cannot be a long-term measure.
Samsung Electronics’ price burden for TV panels has nearly doubled over the past year. The Samsung Electronics business report says that the company spent 10,582.3 billion won on purchasing display panels in 2021. This was an increase of 94.2 percent from the previous year (5,448.3 billion won). The main factor behind the increase is a rise in LCD panel prices. Samsung Electronics explained that prices of TV panels rose about 39 percent on year in 2021.
Industry insiders say one solution is to accelerate a shift to OLED-based TVs. Chinese panel makers are investing aggressively to develop large OLED panel technologies, but they have not yet reached the volume production stage.
Samsung Electronics is negotiating with Samsung Display and LG Display over the release of OLED TVs. LG Display is the only company that mass produces large OLED panels. It can produce 10 million TV panels annually. Samsung Display started mass production of large OLED panels at the end of 2021. The two Korean OLED panel makers adopt white (W) and blue (B) light sources, respectively.