BOE in Penalty Box?
Before we go further we note that ‘could’ shows up a large number of times in the source material, which leaves open the idea that much of this information is unverified and open to interpretation, so we present it here with that understanding.
According to a South Korean trade press source, Chinese OLED panel supplier BOE (200725.CH) has seen significant reduction in its small panel OLED panel shipments to Apple (AAPL) since February with speculation that the displays it has been producing for the iPhone 13 have been suspended by Apple after it was allegedly discovered that BOE had changed the display’s design without Apple’s approval. Originally the reduced production was thought to be the result of display driver shortages that we noted in our 02/17/22 note, “BOE Behind the Eight Ball”, caused by the prioritization of drivers to LG Display (LPL) by LX Semiconductor (108320.KS) rather than BOE, given LXS’s ownership by LG Group (pvt), the holding company for LG Electronics (006570.KS), LPL’s parent.
While the above theory was both logical and not uncommon during periods when complete orders are unable to be filled, the source speculates that the reduced production was the result of Apple discovering that BOE had made changes to the layout of the TFT (Thin-film transistor) circuitry that triggers each sub-pixel in the display. Apple has very strict rules about making sure that displays meet company standards and designs, which has been a problem for BOE in the past. BOE was unable to qualify for Apple’s ‘new model’ display supply chain a number of times, although we believe much of that issue was based on yield rather than design, however BOE’s full iPhone qualification this year seemed to indicate a more reassured Apple toward the company’s production processes.
The speculation does note that there is no expectation that Apple will limit BOE’s iPhone 14 display production based on the possibility of BOE’s possible misstep under the notion that Apple needs BOE for leverage toward iPhone 14 panel pricing with Samsung Display (pvt) and LG Display and cites continued production at BOE’s B11 fab, where the iPhone displays have been produced, but some wonder whether Apple might have given BOE a warning and expects BOE to find a way to fix the issue going forward. Again, while we consider much of the above supposition, it is certainly not out of the realm of possibility, especially given Apple’s tight control over its supply chain and product quality.
Both Samsung Display and LG Display have faced quality issues relative to Apple products in the past, and while Apple had little choice to remain with Samsung Display, given they have been the only volume source of Apple’s non-standard small panel OLED displays at times, LG Display has faced significant volume cutbacks that took many quarters to completely rectify, which puts BOE’s possible entry into the penalty box a real possibility, but until production for the iPhone 14 begins during the summer, the possible impact will not be known. BOE has been expected to supply the majority of the displays for the iPhone 14, while Samsung Display and LG Display supply displays for the iPhone 14 Pro and Pro Max. BOE was said to have been using a 40m unit target for iPhone displays this year, but it would seem that not only will that fall short of expectations due to the above issues, but also as Apple is expected to have already reduced its overall build projections for the iPhone, as we noted on Monday. While Chinese trade press is still extoling BOE’s virtues as the iPhone display provider that will replace SDC and LGD, it might prove a bit harder than BOE might have expected.
According to a South Korean trade press source, Chinese OLED panel supplier BOE (200725.CH) has seen significant reduction in its small panel OLED panel shipments to Apple (AAPL) since February with speculation that the displays it has been producing for the iPhone 13 have been suspended by Apple after it was allegedly discovered that BOE had changed the display’s design without Apple’s approval. Originally the reduced production was thought to be the result of display driver shortages that we noted in our 02/17/22 note, “BOE Behind the Eight Ball”, caused by the prioritization of drivers to LG Display (LPL) by LX Semiconductor (108320.KS) rather than BOE, given LXS’s ownership by LG Group (pvt), the holding company for LG Electronics (006570.KS), LPL’s parent.
While the above theory was both logical and not uncommon during periods when complete orders are unable to be filled, the source speculates that the reduced production was the result of Apple discovering that BOE had made changes to the layout of the TFT (Thin-film transistor) circuitry that triggers each sub-pixel in the display. Apple has very strict rules about making sure that displays meet company standards and designs, which has been a problem for BOE in the past. BOE was unable to qualify for Apple’s ‘new model’ display supply chain a number of times, although we believe much of that issue was based on yield rather than design, however BOE’s full iPhone qualification this year seemed to indicate a more reassured Apple toward the company’s production processes.
The speculation does note that there is no expectation that Apple will limit BOE’s iPhone 14 display production based on the possibility of BOE’s possible misstep under the notion that Apple needs BOE for leverage toward iPhone 14 panel pricing with Samsung Display (pvt) and LG Display and cites continued production at BOE’s B11 fab, where the iPhone displays have been produced, but some wonder whether Apple might have given BOE a warning and expects BOE to find a way to fix the issue going forward. Again, while we consider much of the above supposition, it is certainly not out of the realm of possibility, especially given Apple’s tight control over its supply chain and product quality.
Both Samsung Display and LG Display have faced quality issues relative to Apple products in the past, and while Apple had little choice to remain with Samsung Display, given they have been the only volume source of Apple’s non-standard small panel OLED displays at times, LG Display has faced significant volume cutbacks that took many quarters to completely rectify, which puts BOE’s possible entry into the penalty box a real possibility, but until production for the iPhone 14 begins during the summer, the possible impact will not be known. BOE has been expected to supply the majority of the displays for the iPhone 14, while Samsung Display and LG Display supply displays for the iPhone 14 Pro and Pro Max. BOE was said to have been using a 40m unit target for iPhone displays this year, but it would seem that not only will that fall short of expectations due to the above issues, but also as Apple is expected to have already reduced its overall build projections for the iPhone, as we noted on Monday. While Chinese trade press is still extoling BOE’s virtues as the iPhone display provider that will replace SDC and LGD, it might prove a bit harder than BOE might have expected.
Inside the Penalty Box - Source: "You Can't Win From Inside the Penalty Box" - Mike Camp
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