BOE Gets Nod From Apple, Almost…
China’s largest panel producer BOE (200725.CH) has been trying to break into the Apple (AAPL) iPhone OLED display supply chain since Apple began using OLED displays back in 2017, and while the Chinese trade press has applauded any rumors to the positive, citing China’s and BOE’s eventual dominance over South Korean OLED panel producers, there has been little to get excited about. There have been reviews where Apple has requested samples from BOE to meet certain evaluation standards and production abilities, but Apple is a strict taskmaster when it comes to components and requires both tight specification control and yield compliance which heretofore has not been met.
We believe at times BOE has been able to provide small quantities of OLED displays, primarily for screen repair and replacements, but has not quite been able to meet Apple’s standards. While likely embarrassing for BOE management, since the dance between the company and Apple has been reasonably public, we certainly give them credit for trying without hesitancy, especially knowing that even LG Display, second only to Samsung Display as Apple’s RGB OLED display supplier, saw its share of Apple’s OLED display business shrink after a problem with a limited number of LGD’s displays were made public.
There could be some celebrating at BOE headquarters in Beijing as it seems Apple has given BOE ‘conditional’ approval as an OLED supplier for the iPhone 13. In this case conditional means that BOE has not yet met full compliance with Apple’s standards, but has a prescribed period during which to fix issues or to meet other Apple requirements in order to become a fully approved supplier. We believe this is not the first time BOE has reached this stage with Apple, having failed to fully qualify previously, but at least they are back in the running once again and given the close similarity to the iPhone 12, which BOE has been approved to produce, this go round should be a bit easier than last year.
Regardless of whether BOE gets final approval we would expect volumes to be relatively small, likely less than 5m, potentially due to the fact that BOE would likely have to be separately qualified to produce LTPO OLED displays that are used in the two upper-tier iPhone models. As Samsung Display is currently the only supplier of LTPO (VRR) OLED panels, both BOE and the more experienced LG Display would be looking to take share from SDC. While LGD’s more extensive small panel OLED experience, we would expect that battle, should it occur next year, to be considerably more toward LGD’s favor.
All in, any progress Is a good thing for BOE on the Apple OLED front, given the typically high unit volumes and ‘once-a-year’ release process, but from Apple’s standpoint, BOE is the ideal leverage point to be used to squeeze out a few more pricing concessions from SDC and LGD. We would expect Apple to push BOE with “if you were to get approval, we would need a better price”, and then take that back to SDC and LGD, and we would expect BOE to be a willing participant and one that would be willing to work for very tight margins in order to garner Apple’s favor. But for BOE to become a high volume small panel OLED supplier to Apple, price is not the biggest factor and the massive amount of experience SDC has with small panel OLED will take years for BOE to develop while at the same time SDC and LGD keep pushing the OLED development cycle. South Korea will inevitably lose small panel OLED share to China, but Chinese dominance is still a ways away as having the capacity to dominate is a paper metric while having the experience to dominate wins the game.
We believe at times BOE has been able to provide small quantities of OLED displays, primarily for screen repair and replacements, but has not quite been able to meet Apple’s standards. While likely embarrassing for BOE management, since the dance between the company and Apple has been reasonably public, we certainly give them credit for trying without hesitancy, especially knowing that even LG Display, second only to Samsung Display as Apple’s RGB OLED display supplier, saw its share of Apple’s OLED display business shrink after a problem with a limited number of LGD’s displays were made public.
There could be some celebrating at BOE headquarters in Beijing as it seems Apple has given BOE ‘conditional’ approval as an OLED supplier for the iPhone 13. In this case conditional means that BOE has not yet met full compliance with Apple’s standards, but has a prescribed period during which to fix issues or to meet other Apple requirements in order to become a fully approved supplier. We believe this is not the first time BOE has reached this stage with Apple, having failed to fully qualify previously, but at least they are back in the running once again and given the close similarity to the iPhone 12, which BOE has been approved to produce, this go round should be a bit easier than last year.
Regardless of whether BOE gets final approval we would expect volumes to be relatively small, likely less than 5m, potentially due to the fact that BOE would likely have to be separately qualified to produce LTPO OLED displays that are used in the two upper-tier iPhone models. As Samsung Display is currently the only supplier of LTPO (VRR) OLED panels, both BOE and the more experienced LG Display would be looking to take share from SDC. While LGD’s more extensive small panel OLED experience, we would expect that battle, should it occur next year, to be considerably more toward LGD’s favor.
All in, any progress Is a good thing for BOE on the Apple OLED front, given the typically high unit volumes and ‘once-a-year’ release process, but from Apple’s standpoint, BOE is the ideal leverage point to be used to squeeze out a few more pricing concessions from SDC and LGD. We would expect Apple to push BOE with “if you were to get approval, we would need a better price”, and then take that back to SDC and LGD, and we would expect BOE to be a willing participant and one that would be willing to work for very tight margins in order to garner Apple’s favor. But for BOE to become a high volume small panel OLED supplier to Apple, price is not the biggest factor and the massive amount of experience SDC has with small panel OLED will take years for BOE to develop while at the same time SDC and LGD keep pushing the OLED development cycle. South Korea will inevitably lose small panel OLED share to China, but Chinese dominance is still a ways away as having the capacity to dominate is a paper metric while having the experience to dominate wins the game.
BOE Headquarters - Beijing - Source: BOE
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