The US International Trade Commission has opened an investigation into claims by Samsung Display (pvt) that alleges a number of device repair companies have been importing OLED displays and components into the US that infringe on four SDC patents.  While there is still relatively little documentation, as the case has yet to be made before an administrative law judge, the concept seems to be that some of the OLED displays being used by the repair companies listed below, violate SDC’s patents, and while it is unclear who produces the OLED displays in question, it is thought that the target of the SDC complaint is China’s BOIE (200725.CH), who has been supplying OLD displays for the repair of the iPhone 12 and 12 Pro, along with some that have made it into Samsung’s Galaxy S Series phones when repaired.
The complaint asks for a General Exclusion Order and a Cease & Desist, with the exclusion order being  a more general ban on the companies indicated and any companies that ‘show similar behavior’, to avoid companies bypassing current trade routes that are monitored, and finding other companies that will help them import the affected items.  BOE has been said to sell displays that do not qualify as primary grade to companies that perform display repairs on a number of products, and with the more flexible repair rules that have become available for Apple products, Samsung Display seems to be looking keep repair shops from replacing Samsung Display screens with those from BOE.
While this could have implications for BOE and potentially raise the cost of repairs, the ITC also considers the impact on the general public and even if the alleged violation proves to be true, it is up to the ITC to determine whether an outright ban would be in the interests of the public, as opposed to the financial benefit of SDC.  The defendants will cite consumer’s rights to repair a device any way they choose, but the typical patent infringement suit would normally take 24 to 36 months before a judgement is obtained, while the ITC usually takes a year to 18 months for such decisions.  Once a decision is made by the ALJ, it goes to the President to be approved, at which point an appeal can be filed in the Federal Court of Appeals, but if the President rejects the decision, neither party can appeal.

• Apt-Ability, LLC d/b/a MobileSentrix of Chantilly, VA; 
• Mobile Defenders, LLC of Caledonia, MI; 
• Injured Gadgets, LLC of Norcross, GA; 
• Group Vertical, LLC of Grand Rapids, MI; 
• Electronics Universe, Inc. d/b/a Fixez.com of Las Vegas, NV; 
• Electronics Universe, Inc. d/b/a Repairs Universe, LLC of Las Vegas, NV; 
• LCTech International Inc. d/b/a SEGMobile.com of City of Industry, CA; 
• Sourcely Plus LLC of Tempe, AZ; 
• eTech Parts Plus, LLC of Southlake, TX; 
• Parts4Cells, Inc. of Houston, TX; 
• Wholesale Gadget Parts, Inc. of Bixby, OK; 
• Captain Mobile Parts Inc.of Dallas, TX; 
• DFW Imports LLC d/b/a DFW Cellphone and Parts of Dallas, TX; 
• Phone LCD Parts LLC of Wayne, NJ; 
• Parts4LCDof Wayne of NJ; 
• Mengtor Inc. of El Monte, CA; and
• Gadgetfix Corp. of Irvine, CA.

Many consumer electronics companies have developed or purchased dedicated production facilities for key components, who can both guarantee supply and use excess capacity to produce for external brands, especially display panels that are the basis for many CE products.  Typical examples would be Samsung Electronics (005930.KS) affiliate Samsung Display (pvt), LG Electronics’ (066570.KS) subsidiary LG Display (LPL), China’s TCL (000100.CH), that owns Chinastar (pvt) and Foxconn’s (2354.TT) ownership of Innolux (3481.TT).  These panel producing subsidiaries run quasi-independently in most cases, and while they are typically the primary display supplier to the parent company, they are not necessarily the only supplier, with parent TV, IT, and mobile divisions purchasing displays from a variety of sources, with many of those decisions based on supplier panel pricing and expertise.  Further, most large CE brands farm out design and assembly of a portion of their lines to OEM/ODMs, who are not necessarily bound to the brand’s supplier list, allowing them to source display panels from suppliers with whom they have relationships.
 
This leads to an ever-changing complex web of interconnections that not only can influence company results but play a significant part in ‘display’ politics, and recently a conflict between LG Electronics and Chinese panel supplier BOE (200725.CH) has made those connections and conflicts quite obvious, and exposes the struggle that such purchaser/supplier relationships can incite. 
 
BOE is the largest LCD panel producer in China and the largest producer of LCD panels globally.  While the company has been growing both capacity and sales over the last few years, BOE faces stiff competition from both Samsung Display and LG Display as BOE tends to be the less expensive supplier.  That said, BOE has been so aggressive toward building its large panel LCD display business that it became apparent to both competitors that they could not compete with BOE on a price basis, which led to SDC’s complete withdrawal from the large panel LCD production market, and LGD’s large reduction in large panel LCD capacity. 
 
Both competitors however have developed OLED capacity as they have decreased LCD capacity, with SDC dominating the small panel OLED market and LGD dominating the large panel OLED market and remain closely tied to parent organizations due to those display products.  BOE, while putting billions to work toward building out its own OLED capacity, does not have the OLED experience that its South Korean competitors have, and has faced challenges as it has entered the OLED display market.  One of the bellwethers for the OLED market is being added to Apple’s (AAPL) display supplier list given Apple’s stringent requirements for its displays, and as BOE has been qualified as an Apple OLED supplier, after an arduous and frustrating path to that goal, BOE has shown itself to continue to be a strong competitor.
 
In fact, due to BOE’s large scale LCD production capacity, the company supplies displays to both Samsung Electronics and LG Electronics, and is the largest outside display supplier to LGE, supplying over 40% of their large panel LCD displays, which would make one assume that they have a somewhat ‘protected’ status with the parent organizations, but that is not the case.  Samsung Electronics recently omitted BOE from its supplier list, likely over a conflict between the companies over an advertising fee that Samsung required from BOE,, and Samsung Display has issued a warning to BOE and its customers over allegations that the company tweaked its pixel structure slightly to avoid paying SDC a license fee for the underlying IP.  Included in that warning to BOE’s customers was Apple, SDC’s largest outside customer which makes the conflict all the more sensitive to SDC where a misstep could damage that key relationship (Samsung Display is expected to have captured between 70% and 80% of the display business for the Apple iPhone 14).
 
If that is not enough of a conflict, a subsidiary of LG Display known as Global OLED Technology LLC (pvt)[1], that maintains and licenses the OLED IP that is owned by LG Group (pvt), the entity that controls all LG companies, has also recently warned BOE that it is infringing on OLED patents owned by LGD.  However, thus far they have limited the conflict to just a warning and have yet to file any court documents, the typical next step toward forcing BOE to pay due royalties.  Given the large role that BOE plays in the TV business of LG Electronics, there are multiple factions involved in the pursuit of IP license dollars from BOE, bringing such conflicts to the highest levels of corporate hierarchy.
 
Such IP battles have always been a part of the display space and the CE space overall, but we expect to see more aggressive behavior, not only due to the competitive nature of the players, but as a result of the display cycle.  Since 2020 panel producers have been focused on being able to supply COVID related increased demand and with that goal, have paid less attention to costs.  With demand slowing and costs still high profitability has waned, which we believe will focus more attention on cost containment going forward.  Along with costs we expect and increased focus on exploiting existing revenue sources that are not display production oriented, and there is nothing better than a high margin royalty in that regard.  We expect a renewed focus by display IP holders to capture IP dollars in 2023, and while this might rile feathers a bit, we expect to see a bit of a shift in corporate sentiment toward enforcement rather than appeasement as a result.
 


[1] Global OLED Technology LLC is 32.7% owned by Idemitsu Kosan, a Japanese chemical supplier, with the rest divided between LG Display, LG Chem, and LG Electronics. 

​Honor (pvt) was the #1 smartphone brand in China in 2Q and the #2 brand in 3Q.  The brand has been around since 2013 but went through a major change in November 2020 when the brand was sold by then parent Huawei (pvt) to a group of the company’s suppliers and distributors, and a state-owned supervisory organization.  The reason for the sale was the sanctions that the US government had placed on Huawei, with the company’s founder indicating that while Huawei itself would fall under the US rules, if Honor was an independent company, it would be able to avoid the US sanctions and survive as a company.
Honor has done well for itself over the last few years and has challenged Xiaomi (1810.HK), typically the smartphone share leader in China, a number of times since its divestiture from Huawei and continues to grow its base in China while expanding its product offerings to laptops, tablets, and wearables.  With just a bit under 50% of Honor’s phones being OLED based, a number of Chinese OLED producers are vying for the company’s smartphone business.  China’s Visionox (002387.CH) has most recently supplied the OLED display for the Honor 70, released in June, while BOE (200725.CH) has supplied displays for the Honor 60, Magic 3, and Honor’s Magic V foldable.
It seems that BOE is not taking any chances that it might fall behind other suppliers with Honor as the fastest growing Chinese smartphone brand, and has taken a stake in the company, although has not disclosed the size of the investment, stating, “It has not reached the disclosure standards”, meaning it is not large enough that it has to be disclosed in a filing.  That said, with BOE’s investment, once again rumors that Honor will be filing for listing on one of the Chinese exchanges have resurfaced, as they have a number of times since the spin-off.  Some Chinese tipsters have insisted that there was a requirement in the purchase agreement that the company would submit an IPO within 3 years from its separation from Huawei, which would be November of 2023, although that remains unconfirmed.
This is the second recent investment BOE has made recently, after taking a ~$291m controlling stake in HC Semitek (300323.CH), a supplier of LEDs for BOE’s mini-LED array business, so it seems that BOE is bent on making sure it has a favorable position with suppliers, in this case both semiconductors and LEDs.  BOE calls these acquisitions ‘anti-cyclical’, which seems a bit confusing as we expect the LED business in China follows the same basic economic patterns as does the display business, and while the semiconductor business is a bit more of a wild card (or has been recently), we expect the ‘anti-cyclical’ theory is really the idea that under poor macro-economic situations, BOE will still have direct access to basic components, avoiding the shortages that plagued the CE space last year and earlier this year, and even more pressing problem that could recur in the future.
These protective moves by BOE are commendable, and while the company will still be at risk for display glass substrates, given China’s lack of reliable large-area display glass production, BOE has had a long-standing relationship with Corning (GLW), who has built glass substrate production facilities alongside BOE display fabs.  Further, they would be in the same situation with Universal Display (OLED), who is the exclusive supplier of phosphorescent OLED emitters that are the basis for BOE’s OLED display production.  We only mention this because there has been considerable chatter about the US government adding the display industry to the trade restrictions it has imposed on the Chinese semiconductor industry, and while we expect a portion of BOE’s motivation for its recent acquisitions and investments might have something to do with that fear, we expect the shortages the company experienced is the key motivation.
From the perspective of how a ban on trade with the Chinese display industry would affect the companies mentioned above, 31.8% of Corning’s sales in 2021 were in China, along with 23.2% of its long-term assets, while UDC saw 34.7% of its revenue in 2021 come from the Mainland.  Aside from the considerable damage such a ban would do to the two companies mentioned above, there are innumerable other US companies in the display supply chain that would also be affected if such a ban were to be enacted.  Since the US does not have a localized ‘display’ industry that competes directly with China, it seems a stretch to envision such a ban, so we are doubtful that there is reasoning behind such talk, other than from a political standpoint, but we also note that the semiconductor trade bans have gone further than we would have thought, so we cannot rule anything out.  As BOE seems to be proactive, even in the midst of a weak CE scenario, we give them credit for at least trying to avoid the same issues that caused problems during the throes of the COVID pandemic and perhaps the foreshadowing of another potential issue that could face the Chinese display industry.

​HC Semitek (300323.CH), the 2nd largest LED producer in China, has announced that China’s largest display producer BOE (200725.CH) will become its largest shareholder through the acquisition of 272m shares in a private placement executed late last week.  The transaction was effected at 5.60 CNY ($0.80 US) per share, a 24% discount to the closing price on October 28th.   The shares make BOE the company’s largest shareholder, with a 23.08% share with BOE making voting agreements with other shareholders that increase its stake to 26.66%.  Previously Zhuhai Huafa Real Industry Investment Holdings (State) was the largest shareholder at 24.87% but that will be diluted to 19.13% after the transactions.
HC Semitek produces LED chips, wafers, and sapphire substrates and ingots, which will feed BOE’s developing mini-LED business and eventually (2024) the company’s initial foray into micro-LEDs.  The company cited a 30% growth rate for the overall MLED (Mini & Micro) market, and an 18% growth rate for the Micro-LED market (to $30b) through 2030, although no data source was mentioned.  HC Semitek is expected to use almost all of the new capital to boost its mini-LED and micro-LED manufacturing capacity.
BOE will use the relationship to further the expansion of its mini-LED backlight business, which is based on its abilities in three basic categories, semiconductor display technology, driver architecture, and transfer technology, which BOE has been using to develop and market its 65” full sheet mini-LED glass backplane while developing a 75” and 86” single sheet product in conjunction with Skyworth (000810.CH), and continues to develop its chip transfer technology, which we believe is based on a ‘pin-push’ system that moves die from tape to the substrate at ~100 chips/sec. 
We note that this is the second such transaction in the mini-LED space in China in recent weeks, with Hisense Visual (600060.CH) increasing its stake in Xiamen-based LED chip and wafer producer Changelight (300102.CH) by 3.26% to 16.82% and is expected to continue to acquire additional shares going forward.  Given that China dominates the LED space and the LCD display space, it seems logical that Chinese display companies would move toward capturing as much of the mini-LED production infrastructure as possible, especially as it extends the life of the LCD space as it competes with OLED technology.   BOE is the first Chinese company to produce a commercial glass mini-LED backlight, with others based on PCB boards that make it difficult to align TFT circuitry with LCD pixels.  While Micro-LED technology is different in that it is self-emissive, bypassing the use of LCD technology, it is based on LEDs, albeit small ones, and the Chinese government and Chinese display producers are working toward making sure that they can compete directly with Korean and Taiwanese display producers as that space develops.

​The Board of Directors of China’s BOE (200725.CH) has approved the capitalization of its latest OLED fab project, a $3.98b US project to be constructed in the Beijing Economic & Technological Development Zone.  The project is a Gen 6 OLED fab (1500x1850) that will sit on a 420,000 m2 site, and will be oriented toward the development and production of VR devices using micro-OLED technology.  The fab will also be capable of producing mini-LED backlight products and will have capabilities for both LTPS and LTPO backplane technologies.
The fab construction is expected to begin next year and be completed in 2025, with mass production scheduled for 2026.  BOE will be responsible for 11.5b RMB of the 29b RMB cost, with the remainder coming from a subsidiary of Beijing’s Economic Zone State-owned Asset Investment & Development program.  As is typical of such state financed projects, BOE will own 79.31% of the project, despite providing 39.7% of the financing.
This project will give BOE the ability to produce VR oriented micro-displays, a capability it does not presently have, and will further the development of its LTPO backplane technology when it is in operation.  LTPO is a key technology in that it combines the best aspects of LTPS and Oxide backplane technologies, but more to the point, is the backplane choice of Apple for OLED displays going forward.  Currently Samsung Display (pvt) is the only high volume LTPO provider, with LG Display (LPL) beginning to commercialize the technology, so if BOE is to compete with SDC, they need to spread their LTPO know-how to as many potential Apple projects as possible.   While Apple’s first foray into the XR world is expected to be produced by Sony (SNE) using micro-OLED, 2nd generation devices could be micro-OLED or micro-LED, both of which could be produced at the new BOE fab, according to the company, so it seems obvious that BOE is moving ahead with this project to gain ground with Apple.  That said, the competition for a 2nd generation VR display out a few years, will be intense and while Samsung Display is the de facto leader in small panel OLED, micro-OLED displays are far more difficult to produce than current smartphone or current VR displays, which are still primarily LCD displays.  While this project is an ambitious one, it will not be in production until 2026.  A lot can happen in the interim. 

Yesterday we noted that a number of regions and cities in China were facing an unprecedented heat wave that had caused local power authorities to cut production from August 15th to August 20th.  According to China’s largest panel producer BOE (BOE), the four display production lines that it runs in Sichuan province have been notified by the Sichuan Power Authority that “in order to ensure the safety of the power grid in Sichuan Province and ensure people’s livelihood enterprises need to make production adjustments.”  The company goes further stating that it will cooperate with people’s livelihood, security policies, and minimize electricity load, and flexibly arrange production operations, although the company will make ‘timely’ adjustments to the TFT-LCD production line, performing routine equipment maintenance.  However they also state that “Based on the above situation, after evaluation, this power cut will not have an impact on the company’s overall operating performance.
BOE’s fabs in Sichuan province are:

​Based on the fabs affected, potential production outages could represent 9.6% of BOE’s overall display capacity should they all be shut down, with 8.6% of the company’s LCD capacity and 55.2% of its OLED capacity more specifically.  We do not yet know which lines and by how much production cuts are being made, but the metrics here represent the worst case and are not actual estimates of actual production reductions.  We would expect that ongoing negotiations with the local power authority are continuing, as they are with HKC (248.HK) and other CE supply chain companies in the region, but we are a bit more focused on BOE considering its entry into the Apple (AAPL) OLED supply chain this year and the problems it has already faced in that regard.  As we noted yesterday, forecasts for Chengdu and the region call for continued above average heat through the 25th, so we expect that the original restriction end date of 8/20 will be extended for an extra few days.

In our note of 7/15/22 we indicated a dispute between Samsung Electronics and China’s BOE (200725.CH) over what amounts to advertising royalties which have caused Samsung to reduce orders for LCD panels from BOE and has spiked interest from other Chinese panel producers who would like to fill the gap left by the Samsung/BOE disagreement.  As we also noted BOE’s Chinese rival Chinastar (pvt), owned by TCL (000100.CH) has already been to South Korea to sweet talk Samsung executives and local suppliers and is now expected to travel to Cupertino to schmooze with Apple (AAPL) folks to gain some traction as a panel supplier for MacBooks and iPads.
Chinastar has been reviewing plans to expand its OLED production capacity, potentially with lines dedicated to Apple, and would be expected to put additional pricing pressure on LG Display (LPL), the current panel supplier to the MacBook line.  China star is already a supplier of TV panels to Samsung, along with AUO (2409.TT), Sharp (6753.JP), BOE, and LGD, and Samsung is a shareholder in TCL, so the visit to Korea was one with some weight and a visit to Apple by TCL’s chairman would certainly create some anxiety at BOE and LGD.  As Apple is quite particular about their displays, the recent brouhaha over BOE’s changes to Apple’s qualified display design without prior approval has set BOE back a bit in terms of company reliability and once there is even the smallest amount of blood in the water[1] the sharks will gather.  We would assume Chinastar will gain share at Samsung and Samsung will use Chinastar to further its pricing leverage with its other suppliers, particularly BOE, and any success at Apple will help Chinastar gain share against BOE, although we expect it will take considerable time for Chinastar to build out dedicated Apple capacity.


[1] Fact – Sharks can sense between 1 part in 25m and 1 part in 10 billion depending on the chemical, which would be the equivalent of one drop of blood in a small swimming pool.

​TCL is a very price competitive brand, particularly when it comes to TVs and even more so when it comes to QD/Mini-LED TVs, as it was the first brand to release such combined technology and is a generation ahead of rivals, including Samsung Electronics and LG Electronics (066570.KS).  TCL recently released a 98” QD/Mini-LED TV to compete with a 98” offering from Samsung and noted that it had received 5,000 pre-orders for the sets in the 1st hour it was listed, which sell for ~$8,900 against Samsung’s recently discounted price of $13,000.  TCL has now stated that it has already sold more than 4,000 of the units, mostly during the 6/18 holiday, roughly 5x the number it sold last year.  Samsung has not disclosed its sales figures for its 98” QD/Mini-LED models.  Displays for the TCL 98” QD/Mini-LED model are produced by Chinastar, a subsidiary of TCL.
While it is hard to verify such specific sales figures, especially those from China, we expect TCL has had some success with its ultra-large QD/Mini-LED lines given both pricing and local familiarity, but the ultra-large TV market is a rarified one with expectations for less than 100,000 98” units sold this year, including other technologies, although the sales value is certainly enviable even for 4,000 units, which would be the sales equivalent of selling 54,769 TCL 55” QD/Mini-LED TVs based on current prices, and while the TCL98” TVs mentioned were sold in China for ~$8,900 you can steal last year’s model from Best Buy (BBY) at the currently discounted price of $8,500, although you would have to wait until August 3 to have it delivered, especially as it would be hard to fit in a standard vehicle as the box is 5 feet high and 8 feet long.

Investing in Chinese companies can be a harrowing experience, with listing requirements varying between exchanges and financial oversight a challenge for both investors and regulators who can find themselves up against corporate structures that make parsing financials a Columbo-like endeavor rather than a numbers oriented session.  But there is one aspect of investing in Chinese companies that opens up a new venue for investors that is not available in the US and that is the Q&A platforms sponsored by the exchanges that allow investors or potential investors to directly ask questions of company managements on a daily basis.  Based on the companies we follow on the Shenzhen and similar exchanges, company responses vary considerably in response time and depth, and many are just platitudes with little substance, but where face-to-face questions asked of managements might be indirect and circuitous, on-line questions tend to be quite direct, and while the answers can dance around a simple answer, the simple answer is usually obvious.
China’s BOE (200725.CH), the world’s largest LCD panel producer, is one of the more responsive companies on the Q&A platforms, and while they do the ‘dance’ like many others, they at least attempt to answer questions where others do not.  A recent very simple question prompted a rather lengthy response, which could have easily be summarized in a few words.  Here’s the question and answer, and our summary…
Question
“Hello, is the OLED screen company losing money?  Is it possible to increase the selling price to reduce losses?”
Answer
“Hello! At present, the company's three flexible AMOLED production lines are still in the climbing period, and the newly added depreciation is under pressure in the short term. In the long run, the flexible AMOLED business is one of the company's important growth points in the future. The company has given full play to its advantages in technology and production capacity, and has established extensive and close customer cooperation relationships, and has made important breakthroughs in the development of flexible AMOLED business. According to consulting agency data, in the first quarter of 2022, the company's flexible AMOLED product shipments increased by nearly 50% year-on-year. With the continuous increase in shipments, the operation of the flexible AMOLED business will continue to improve. In the field of smartphones, the company's flexible AMOLED products have basically completed the introduction of global mainstream brand customers in 2021. In the future, it will mainly focus on achieving more product series coverage for customers and continuously increasing the proportion of customers of the company's products. At the same time, continue to promote the application of flexible AMOLED in new fields such as IT and automotive, and enhance the value and performance contribution of flexible AMOLED products. Thanks!”
Summary
“No, not yet.  Not sure when”
In similar fashion, another Chinese panel producer Visionox (002387.CH) was recently queried in a similar fashion also about their OLED display business, although with a bit more detail as follows…
Question
“Thank you very much for the performance forecast.  The estimated loss in the first half of 2022 is about 1.1 billion.  After deducting more than 500 million depreciation from Gu’an in the first half of the year, the loss is basically the same as the same period last year.  Then, while the operating income has increased by about 20%, why has the loss reduction still not achieved except for the solidification.  At present, it is indeed as the majority of investors have said, the more you sell, the more you lose.  Please give a reasonable explanation for the increase in revenue but not profit after deduction of depreciation, thank you!”
Answer
“Thanks for attention.  At present, the AMOLED field is still in a period of rapid development dominated by technology. Due to the ramping production capacity, the continuous improvement of utilization rate, the continuous investment in research and development and the gradual expansion of market demand, the gross profit margin of OLED products is still in the stage of continuous improvement. In 2021, the company's OLED product gross profit margin will increase by 6.6 percentage points year-on-year. In the future, the increase in gross profit will come from economies of scale and industrial synergy. First, the yield rate and utilization rate will be further improved, especially if a relatively sustained high utilization rate can be achieved, the scale advantage of the production line will appear, and various costs and expenses will be Obtain a more reasonable and effective allocation; the second is to continue to build an industrial ecology and strengthen technical coordination. Relying on solid technology accumulation, the company provides a product verification platform, and actively promotes the localization and introduction of upstream supply chains to reduce costs and increase efficiency. Thanks!”
Summary
“No, not yet. Not sure when”
To point, we commend the Chinese exchanges for their push to open public communication between companies and investors, something far more guarded in the US, but we all know companies are going to try to paint the best possible picture, regardless of the actual answer.  While the dance is inevitable, at least there is a sort of a forum, which is a positive step, and on occasion there is some glimmer of useful information given or at least hinted at.  Of course disclosure rules differ from country to country and open Q&A platforms like these can be a minefield for legal counsel, but at least the average investor does not have to wait 90 days to ask a question, if they are able to find a way into the quarterly queue, and the answer, regardless of how obfuscated, is public record.
 

We have been hearing that a dispute between Samsung Electronics and BOE has resulted in Samsung reducing its display panel orders from the Chinese producer, supposedly over failed negotiations concerning royalty rates.  In order to recover part of the cost of advertising, brands can negotiate with suppliers for the right of the supplier to ‘advertise’ as part of the device’s promotion.  In some cases this comes as a ‘royalty’ the brand would charge the supplier to have their name appear in the advertising as ‘…display produced by xxx’ or something similar, although component cost reductions can also be used for the same purpose.  The larger the brand the more leverage it has to make such adjustments.
It seems that BOE has refused to accept Samsun’s royalty terms after 6 months of negotiations, and Samsung has therefore reduced the number of display panels it has purchased from BOE, and recent publicity surrounding an upcoming visit to Samsung by the chairman of TCL (000100.CH), seems to indicate that other panel producers have sensed an opportunity and are looking to fill the gap in Samsung’s panel purchases left by the BOE reduction.  TCL is the owner of Chinastar (pvt) China’s 2nd largest panel producer, in whom Samsung Display has a 12.33% stake taken when they sold their Suzhou LCD fab to Chinastar in 2020.
While we expect there is the potential for the BOE/Samsung royalty issue to me a motivating force behind a reduction in panel purchases from BOE by Samsung, we note also that Samsung has severely reduced its panel purchases from all of its display suppliers for the month of July as it tries to reduce panel inventory across its supply chain.  Whether the supposed BOE reductions were in line with this plan or whether they included additional cuts as a result of the royalty disagreement remains an open question, although the push by TCL/Chinastar seems more like the latter, as a trip to Samsung by TCL’s chairman would seem unlikely if it were just to fill a short-term gap in production.  It will be hard to discern the split until we see BOE sales numbers for July and compare them against reductions from other suppliers, particularly Chinastar, but if BOE’s sales look worse than others, we can then make the assumption that additional reductions were made as a result of the rancor between the two, and could continue for the remainder of the year.