As we have noted previously, BOE (200725.CH), China’s largest panel producer maintains active communication with its shareholders or potential shareholders.  While this Q&A does not always answer questions or acknowledge the validity of suggestions, at least management responds to a reasonable proportion of the numerous questions asked.  Over the last 24 hours, the company responded to the most recent batch of questions and suggestions, some of which we detail here.

• (Suggestion) – BOE should consider buying Visionox.  According to the ‘investor’, Visionox’s (002387.CH) major shareholder is looking for an exit strategy and the value of the stock is ~10b yuan ($1.566b US), which would buy Visionox’s three OLED fabs at a price far cheaper than they could be built for today.  BOE’s response, “Thank you for the suggestion”.  Visionox has been struggling to achieve profitability for years and while they continue to build out the 3rd OLED fab in Hefei, they have been relying on government subsidies to provide operating capital, with net income negative despite increasing sales from fab ramps.  While BOE would be paying cents on the dollar and has the production experience to improve overall yield, such an increase in capacity would likely outstrip BOE’s customer demand.

 

• Status of Repurchase Plan? BOE has been operating a stock repurchase plan under which it has bought 248.6m shares.  While this seems like a very substantial amount, it represents 0.645% of the company’s outstanding shares and a purchase value of ~$213m US and seems to have done little for the stock, although the program continues.

 

• Who is Your Glass supplier for the Vehicle Display Base Project?  Last month BOE announced it will spend $390m to build a ‘Vehicle Display Base’ in Chengdu.  It seems some investors are confused about what this actually entails as the project is an assembly facility that takes open cell panels (those without backlights) and customizes them according to customer specifications.  That would include adding a backlight, frame, and a number of other possible components, so the only glass that might be used in such a situation would be a cover glass.

 

• What are your capabilities for LTPO?  BOE responded that LTPO is in development and would be ‘introduced in a timely manner’ and that all of the company’s flexible OLED lines ‘have conditions to upgrade part of the production capacity to LTPO’.  We expect 2023 at the earliest.  This question was most likely asked in reference to BOE’s tacit final approval from Apple to be supplying OLED displays for the iPhone 13 and future iPhone series.  Some iPhone models are expected to be using TFT systems using LTPO rather than the more typical LTPS backplanes in the future, with the LTPO process being more complex and more costly.  We believe only Samsung Display (pvt) is currently able to supply high volume LTPO OLED displays to Apple and will probably be the primary supplier of those models in 2022, with LG Display (LPL) developing MP capabilities for LTPO to a small degree next year and expanding that in 2023. 

 

• It seems the company is behind plan as to flexible OLED shipments.  In July and August 11m and 14m units were shipped.  How many in September?  Surprisingly the company indicated that they had shipped 40m flexible OLED panels by the end of 3Q, which would imply ~15m in September, although they did not confirm the correctness of the July and August figures.  We believe they are correct.

While BOE continues to gain traction in the OLED space, at the end of 3Q we estimate that they had a 16.3% share of the small panel flexible OLED market, in terms of units.  This is larger than any other small panel flexible OLED producer, including LG Display, but quite a bit behind Samsung Display’s 62.2% share over the same period.  We do expect BOE’s share to increase considerably as it builds production into Apple’s iPhone supply chain, but despite the increasing unit numbers, we expect Samsung’s ability to produce higher value LTPO displays for Apple, will continue to give SDC a sales dollar advantage that is out of proportion with its unit volume share.  That said, BOE continues to push hard to develop its small panel flexible OLED business with Apple, and while the stock likely reflects more of the company’s exposure to the LCD panel business, they are now the #2 player in the small panel flexible OLED space and will see considerable growth in 2022.

​On October 29, BOE (200725.CH), China’s largest panel producer, held a quiet ceremony marking the final certification needed to become a full scale OLED supplier to Apple for the iPhone 13 line.  As we have noted on numerous occasions, this has not been an easy path for BOE, as the company was unable to qualify for full production at least twice that we know of, and was most recently put on a limited production schedule until final certification could be affirmed.  While BOE has been producing small panel OLED for Apple, an estimated 5.5m units in 1H, the final certification proves out the company’s ability to reach both quality and production goals set by Apple, with an additional 6.5m units produced between July and the end of October, and a current run rate of between 1.5m and 1.9m units/month.  According to Chinese press, by the end of the year this run rate would represent ~10% of Apple’s iPhone shipment target of 160m units, with BOE showing a total of ~50m OLED units (all customers) this year.
In 2022 BOE should be increasing capacity at its Gen 6 Chongqing OLED fab as phase 2 capacity begins production.  While the local press says that production will start in January, and BOE will increase shipments to 80m units next year, we expect mass production, based on a more conservative ramp to see an incremental 27m units from Chongqing in 2022, but we note that is at 100% yield, which we expect is far different than what is seen currently and what will be the case as the new Chongqing lines ramp up.  While we expect BOE will certainly be a bigger contributor to Apple’s OLED supply chain in 2022, we hesitate to make predictions as to absolute share as much will depend on BOE’s ability to ramp production to a viable yield, and BOE’s ability to produce the particular OLED display variations that Apple will request in 2022. 
As we expect most, if not all of the LTPO OLED displays for the top iPhone models will be produced by Samsung Display (pvt), and LG Display (LPL) will produce much of the intermediate model, BOE’s share will be limited somewhat, depending on Apple’s application of LTPO across the iPhone line.  This is certainly a big win for BOE, after a long and difficult path to success, but we expect the Chinese press will take the win to mean that BOE’s ‘glorious success’ will ‘mark the end of South Korean OLED domination’, a bit of a stretch in 2022.  It does mean more competition for both SDC and LGD, but we assume they have been expecting that for some time

​In a Q&A with investors, Chinese panel producer BOE (200725.CH) was posed the question below:
“The recent continuous decline in panel prices has fallen by more than 30%.  What is the impact of the panel price reduction on the company?  How does the company face the decline in panel prices?”
The answer is about as close to pure ‘company speak’ as is possible, with little direct information as to the impact of the panel price declines on the company’s financials.  Most entertaining was “structural adjustments” as a euphemism for panel price reductions, and the phrase, “The company maintains its judgement on the weakening of the panel cycle…” which gives little indication as to any adjustments to production, product development, etc. that the company might be making, falling back on the typical platitudes of ‘good products, customer structure, etc.’ and emphasizing that the company “still maintains a good level of profitability.”  In a follow-up question that phrase changes a bit to “believes that BOE can still maintain good profitability and strong elastic recovery even in a weak market.”
While BOE tends to be a bit more ‘talkative’ than most Chinese panel producers, when things get a bit more difficult, they rely on the same carefully worded corporate answer evasions that most companies fall into.  Here is the company’s answer to the question above:
“Hello!  After the semiconductor display has experienced a long period of prosperity, there have been some fluctuations in the current structure, which is mainly reflected in the TV field.  Entering the third quarter, due to congestion in shipping and rising logistics costs, which affected the willingness of downstream customers to stock up, the prices of TV products have undergone structural adjustments;  IT products have remained relatively stable thanks to better demand and supply concentration.  The company maintains its judgement on the weakening of the panel cycle, relying on good products, customer structure, and leading technology and product capabilities, and still maintains a good level of profitability. Thanks!”
Our point here is that during the upcycle in the display business the virtues of Chinese display companies were constantly extolled with adjectives like ‘glorious’, ‘wondrous’, and ‘triumphant’, essentially taking credit for what was by any measure, a singular set of circumstances that bailed out a cyclical industry that was doing little to plan for the future other than domination of an industry that more experienced participants were looking to move away from.  While the Chinese display industry might seem to have a coherent plan shaped by a government that is interested in promoting long-term growth and sustainability after spending many billions to grow capacity, in reality there is considerable competition between Chinese display producers, as well as provincial and local governments, with financial carrots held out to display producers who are looking for both a home for capacity and a reliable source of funding.  With the motivation of growth, usually led by increasing capacity, the driver for the industry, we wonder if China’s display industry is able to respond to changing conditions as easily as it responded to an increase in demand last year.
Rumors that BOE has cut large panel LCD production have surfaced, with what we calculate as an 11.1% capacity reduction against maximum stated production capacity in October, and while the company will not confirm or deny such production changes, when queried about such production cuts, BOE’s response was as indicated below, which seems to be a tacit confirmation, or at the least an indication that some response to the decline in panel prices has been made.:
“With the increase in new technologies of the company’s production lines, investment in new product research and development, and product structure adjustments, it will lead to changes in the volume of production (to) enhance competitiveness to ensure that the company’s overall profitability is maximized.”
We admire Chinese panel producers for their drive and focus, but once the projects have been completed, factories built and local workers employed, there seems to be little planning as to how companies would deal with anything other than an ever increasing demand cycle, and only when things are near collapse does the state government step in with plans for absorbing weak entities into state monoliths.  The constant push to be the biggest, produce the most units, and unseat whoever is the dominant player is a worthy goal if it is based on building a profitable business that can remain profitable in all or most parts of typical cycles, but we see little in the way of anticipating the possibility that demand might not always be growing and while we do not expect companies such as BOE to readily reveal how they might be dealing with a reduction in demand for a substantial portion of their business, we hope that somewhere there is a playbook for how the company (and others) will deal with the down-cycle.  

​As we have noted, Chinese panel producer BOE has been working toward inclusion in Apple’s (AAPL) list of primary OLED suppliers, which is dominated by Samsung Display (pvt) and LG Display.  BOE has rule the Apple OLED display gauntlet before and failed to meet Apple’s stringent display specifications, which include both performance parameters and production metrics, but has returned again, this time making the grade as a ‘conditional’ supplier.  Apple is expect to give final approval to BOE within the next few weeks, allowing the company to begin producing in volume for the current iPhone 13.
Current expectations are that BOE will supply ~15m displays to Apple this year, which includes ~10m units for last year’s iPhone 12 and an additional 5m units for the iPhone 13 once final approval is given.  While the company hopes to hit the 5m unit mark for the iPhone 13 this year, suppliers are expecting closer to 2m units.  According to Korean press, BOE is currently producing between 1m and 1.5m flexible OLED panels for the iPhone 12 each month.
BOE is still somewhat limited in what it is able to produce for the iPhone 13 as Apple is considering changing the backplane of a third model from LTPS to LTPO, which heretofore has been supplied by Samsung Display.  LG Display will begin producing LTPO displays for Apple next year so that leaves the possibility that BOE, who is not yet able to produce LTPO backplanes, will be limited to one iPhone model in 2022.  While this is certainly a step in the right direction for BOE, it could prove to be a limitation that will keep BOE from achieving equal status with SDC and LGD until 2023.
Much of the numbers here are suppositions, coming from supposed supply chain sources, but there is much underlying conjecture about Apple’s actual orders for the iPhone this year, and obviously for next year.  As we have noted, we have yet to see any indication that Apple has changed order rates for this year, although Apple’s initial order rates are also still speculative, so for BOE much rests on Apple’s decisions on next year’s backplanes and how well this year’s models sell through. In any case, if BOE does get the final nod from Apple, we will hear about how the Chinese OLED industry will soon dominate the world and put all other producers to shame….

​The Chinese trade press has been extolling the virtues of BOE’s (200725.CH) tacit acceptance into the Apple supply chain and the company’s dominance of the LCD panel space, as it has in the past, and while BOE does get closer to becoming a major supplier to Apple, the gist of some of the ‘glorious’ press is that BOE has also broken into the Samsung Electronics supply chain and is poised to ‘dominate the industry’ as it seeks to replace South Korean (and other) OLED panel producers that have been suppliers to Samsung in the past, particularly affiliate Samsung Display (pvt).
Various statements as to BOE supplying displays for the Samsung Galaxy M series, a low-end smartphone sold in the Mid-east and Asia carries some truth as far as our checks go, but as to whether they are the exclusive supplier (not likely), eliminating  Samsung Display as a supplier from this line, we cannot confirm.  Stories about BOE becoming a potential supplier to Samsung’s “A series” line, among the most popular of Samsung’s phones in terms of units, are also unconfirmed, but we expect much of the talk about BOE’s potential for supplanting Samsung’s typical OLED display suppliers, Samsung Display and LG Display (LPL), is likely coming from the potential approval of BOE into Apple’s iPhone supplier list, which is expected to receive final approval next month.
BOE has been supplying some displays to the iPhone supply chain, but has yet to become a primary supplier, although we do expect that to happen in 2022.  That said, the question remains as to what percentage of the display demand from the iPhone 13 and future series BOE will garner, something we have spoken about a number of times in the past.  Apple not only has display specs that are demanding, both from a technical standpoint and a capacity standpoint, but is very wary of jumping into new technology unless they are fully satisfied that suppliers can meet consistent quality standards.  This tends to categorize suppliers, even existing ones, as to what model’s displays they will produce, sometimes limiting a model to only one supplier if the capacity or quality is still a question.  BOE will have to prove to Apple that it can meet the same specs and volumes that both Samsung Display and LG Display produce in order to become a volume supplier in the same vein as the others, a task that will likely take a number of years.
As to BOE supplying OLED displays to Samsung Electronics, we see that as a somewhat different animal, given that Samsung Electronics has a vested interest in Samsung Display.  That does not mean, at least over the last few years, that Samsung would not use other display producers, and certainly has in the LCD space where a number of LCD suppliers, including BOE, have replaced Samsung Display in the large panel space, where SDC has reduced its production to almost nil.  Where the questions arise however is in the OLED space, where SDC is the leading supplier of flexible and rigid OLED displays for smartphones, and Samsung is their primary customer. 
Samsung Electronics does have to compete with other smartphone brands, especially Chinese brands, well known for producing smartphones that rival feature sets on flagship phones from Samsung.  This competition continues to push Samsung Electronics to find ways to cut costs, especially on low and mid-priced phones, where they face the most competition from Chinese brands.  Given that the display is the most costly single component of most smartphones, logic holds that reducing the cost of OLED displays is the focus of Samsung’s attention and while they are the parent of SDC, SDC is not usually the lowest cost producer.
This is both a function of production costs in Korea vs. those in China, and the fact that most Chinese panel producers are supported financially by the Chinese government through capital project and operating subsidies.  SDC also has the burden of maintaining profitability, especially in the OLED space given it waning LCD capacity, which is not the case for Chinese OLED producers, who have yet to turn profitable in the OLED display space on a yearly basis.  This leaves parent Samsung Electronics to push SDC for lower OLED panel prices, and what better incentive than to give some of its business to Chinese competitors, to make sure SDC understands that it must remain competitive with other OLED panel suppliers.
 We don’t doubt that Samsung Electronics will continue to use Chinese OLED display producers as leverage, encouraging them to continue to develop new products, and would increase usage of same if SDC does not respond in terms of price.  But in the long run, if Samsung Electronics is still going to maintain a smartphone business that is based on premium products, be they the traditional Galaxy S line or new foldables, they will be using SDC in as many instances as possible, and while Chinese OLED producers will make inroads, they will have a far more difficult time replacing SDC with Samsung than they might with Apple, where the brand has no vested interest.  JOHO.

​As we have noted in the past, while China’s stock markets are both volatile and in some cases a bit sketchy as to what passes for financial review, there are a number of systems where investors or potential investors can directly pose questions to listed companies.  Not all companies participate in such public programs and among those who do, not all participate as actively as others.  The larger companies tend to have someone (CFO, Board Secretary, IR, etc.) who answers the questions, but there is not requirement as to response time or depth of the answer, with many answers copied from earlier, similar questions.  That said, while the answers can be telling, both from a content standpoint, and from how carefully they are worded, the questions, even before they are answered, can give some indication as to the level of comfort or discontent that investors are feeling.
China’s largest panel producer BOE (200725.CH) is a company that is responsive to its investor questions, although they can accumulate for over two weeks until a response is given.  While we have reviewed some of BOE’s Q&A in the past, we always check to see what ‘state’ the current crop of questions is in, which gives us some indication as to how investors are feeling toward the stock and the industry.  Here is a sample of the current open questions to the company (We note that these are translations from the Chinese via Google (GOOG):

• “Your company has spent huge sums of money to build a factory, are there enough orders at present?  Are there any new breakthroughs in technological development?”
• “Hello Secretary of the Board.  Will panel prices rebound and rise in the fourth quarter?”
• “It is rumored that BOE’s performance in the third quarter fell sharply, which was less than expected and there are major risks.  Is it true?”
• “Power cuts have occurred across the country.  Has the company’s current production and operation activities been affected?”
• “Research and research institutions will release TV panel price forecasts for the next month that month.  I would like to ask: 1) Does the company’s TV panels produce according to orders, or do they produce first and then strive for orders? 2) Has the company’s TV panel shipping price been finalized in the same month? 3) How much TV panel production will the company reduce from October?”
• “I hope that the company can interpret the impact of power curtailment on the display business: 1) Are the panels, modules, and complete machine factories included in the power curtailment? 2) What are the impacts of the panel raw materials, the materials of the module section, and the complete machine section? 3)  What is the impact of power curtailment on the company’s overall display panel business?  Thanks!”
• “What does the company think about the transfer of the TV screen production line to the IT screen by the panel factory production line, will it cause the TV screen to stabilize, which will lead to a substantial price reduction of the IT screen?”
• “The company’s three OLED production lines have invested more than 130 billion yuan, but it seems they are still in a state of loss.  When will they be able to make a profit?”
• “The company has been deeply involved in the panel industry for many years and has accumulated more than 70,000 useable patents, with an annual R&D investment of 10billion yuan.  But where is the company’s technical moat?  Don’t expect BOE to become a patent hooligan, at least it can use patent barriers to prevent disorderly expansion of domestic production capacity, right?  Patents are not only used to ensure that they can produce, but also to hope that BOE can also pay attention to patent protection.”

While we left out the simplistic questions like, “Will you be profitable in the 3rd quarter?”, these questions, which are in some cases more sophisticated than might be expected, seem to indicate a growing concern among investors that the industry, and therefore BOE to a degree, is in turmoil as continuing panel price declines put pressure on sales and earnings while many panel producers are still expanding capacity. 
The last question, which was a suggestion that BOE use its patents to rein in other Chinese panel producers expansion plans was quite unusual in that it was asking BOE to be the ‘watchdog’ for the Chinese panel industry, rather than the state or local governments, who are still funding expansion plans and operating budgets.  We doubt BOE would take up such a roll, but local governments, which should more closely oversee provincial and regional expansion, have a vested interest in funding capacity in that it creates jobs and tax revenue, and do not have the expertise or insight to look at the industry as a whole.  While BOE has more of that expertise and insight, they have their own vested interest in promoting the industry and would likely be looked upon as a pariah if they began forcing competitors into court just to limit their ability to compete. That leaves the panel industry in China to police itself, and that has not worked all that well in other industries. 

Large panel shipments (Fig. 4) were up 0.1% in August while large panel sales (Fig. 5) were down 3.8%, a result of the large drop in TV panel prices (-10.1%).  With July being the peak for TV panel prices and IT product panel pricing remaining stable in August (looks the same in September), but the effects of the steep TV panel price drop in August had a negative effect on LCD panel industry sales, with the price per unit of TV panels considerably greater than that of IT panels.   We show both Shipments & Share in Fig. 6. To illustrate how shipments have remained flat but large panel price increases have kept sales momentum intact.  Given the Significant drop in TV panel prices in August and again in September, we expect the September large panel sales results to see another drop.
TV panel share is a monthly variable that does not get reported by many panel producers (some do quarterly) but based on our data, we believe the shipment level for LCD TV panels declined by 4.3% in August, following a 1.5% increase in July, offset by a 2.8% increase in monitor shipments, flat notebook shipments, and a 4.8% increase in tablet shipments.  The shipment trends are noted in Fig. 7.  Panel producers have been decreasing their share of TV panel production in lieu of IT panel products, less in anticipation of the price drop seen in August but more due to the continued demand for notebooks and monitors.  While there is much talk over how this will lessen the effect on panel producer sales as TV panel prices decline, we have only seen one month of excessive TV panel price declines and therefore little cumulative negative momentum.  Given that September saw an even larger decline in LCD TV panel prices and little price offset from IT panel pricing, we expect that September industry large panel sales will be down in excess of 5%.

Translating those metrics to companies, we first look at the sales share of the top 5 large panel producers to gain insight into who might be affected most by declining large panel prices.  As noted, the concentration is quite high with 83.1% of the industry’s large panel LCD sales coming from the top 5 producers.  That said, given that August was the first month where TV panel prices dropped substantially, we look at the sequential change in sales for large panel producers between July and August to see who was affected most by the TV panel price drop.  We note that ideally we would like to see at least one additional month of data that included substantial panel price drops, but we take what we can get until next month’s data becomes available.  We note that we have added share in the second table to gain better understanding as to how much each panel producer influenced the total.

​We note that Samsung Display has sold or closed much of its large panel LCD capacity, so monthly results could reflect that limited capacity (hence the 1.4% share) and the impact of large panel price declines.  LG Display, to a lesser degree, has done the same.
All in, August looks to be the tip of the iceberg for large panel LCD producers in terms of the impact of decreasing TV panel prices.  If September and October are any indication of the severity of such panel price drops, the effects will be felt by almost all large panel producers, especially if there is little positive offset from IT panel pricing or shipments.  Given that it took only a short period for TV panel prices to trace back almost half of the gains made in the last year, it sets the stage for a weak 4th quarter for large panel producers.  As noted above, we expect IT panel pricing to remain reasonably stable for the remainder of the year, and would find it difficult to assume that TV panel prices continue to fall at such a precipitous rate for the rest of the year, but we did not expect to see an almost 20% drop in TV panel prices in September.  “Surprise, Surprise” – Gomer Pyle USMC (1964).

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.

​China’s largest panel producer BOE (200725.CH) has decided to fund the construction of a 12” semiconductor line by making a $155m investment in Beijing Yandong Microelectronics (state) through its venture arm for a 9.14% share, making it the 2nd largest shareholder behind Beijing Electronics Holding (state), a large state-owned entity that is involved in display, semiconductors, new energy, and information services. The project, which has a total cost of $696m is expected to be a 65nm node line that will be added to Yandong’s 6” and recently completed 8” line.  BOE has been expanding its abilities in the IoT space and has a need for a local foundry that has experience (BYM has been in production for almost 30 years) but is not hampered by the restrictions on the use of US sourced EDA tools that could jeopardize BOE’s ability to capture business without a US trade license.  The design tools used in the project will be locally sourced, avoiding any conflict with US trade restrictions.  No dates were given as to the timeline for the new line.

While companies in the US and other regions face Q&A from analysts and investors on quarterly conference calls and investor presentations, individual Q&A from same tends to be via e-mail or a phone call that rarely is made public, especially given the disclosure rules that could force a public disclosure ‘event’ if non-public information is accidentally disclosed by a company and further disclosed by the analyst.  Chinese companies, at least some, disclose contact with brokers and analysts but also have ‘public’ forums where investors can ask questions ad hoc, directly to company managements.  In most cases questions are focused on technical points such as current shareholder count or details of some complex share transaction, but companies do get asked more specific questions about business details which are sometimes both highly specific and quite direct.
Company spokespersons are careful to keep competitive information close to the vest however at times company enthusiasm can seep through with details about a particular topic or product, while similarly when things are difficult to answer company’s refer back to a number of platitudes  or explanations that are far from answers.  Here’s an example that is part of a Q&A between investors and BOE (200725.CH), China’s largest display panel producer:
Q            What is the progress of the company’s acquisition of minority shares in Wuhan B17? And is there any acquisition plan and timetable for the minority stake in Hefei B9? Thanks.
A            Hello!  For the financial data, please pay attention to the company’s regular reports.  Please pay attention to company announcements for major issues.  Thanks!
The question, which was getting at trying to gauge whether BOE is progressing with a plan to buy out smaller shareholders in a particular company LCD fab, which would put BOE just behind the government as the 2nd largest shareholder, was not answered, with a very typical generic response, however another question, which was of more value from a publicity perspective was answered with considerably more detail:
Q            Chengdu BOE Electronics CO. Ltd., in which the company has a shareholding, was established on August 26.  Is it to support cooperation with Changan Automobile (000625.CH) and Cherry Group (pvt) in automotive smart cockpit display and vehicle applications?  What is the company’s shareholding ratio?
A            Hello! According to the announcement of the company’s holding subsidiary BOE Seiki Co., Ltd. (BOE Seiki, 0710.HK), the company and the company’s holding subsidiary BOE Seiki’s wholly-owned subsidiary Hefei BOE Automotive Display Technology Co., Ltd. (Hefei BOE) and Chengdu BOE Automotive Electronics Co., Ltd. was established as a joint venture by Canada Investment Co., Ltd. (Annual Canada). The investment ratio of the joint venture company is 40% of the company, and Hefei BOE 40%, with an annual increase of 20%. The establishment of the joint venture company will be able to strengthen the BOE Group's layout in smart car display devices. Thanks!
This was obviously something that the company wants shared, and was willing to be more specific about details, especially as BOE has been promoting its stature in the automotive display market for some time, but when another question touched on a topic that was a bit more sensitive to the fact that BOE is the largest producer of TV panels globally, the Q&A took a more defensive tone.
Q            Hello, not only did the TV screen drop sharply in August, but in September, according to third-party media surveys, there will also be a sharp drop. The 43-inch price is even more likely to return to January. May I ask the company once said the industry’s weak cycle, why can’t it be reflected at all? ,thanks
A             Hello! In the past year or so, the prices of TV and IT LCD products have risen sharply. At present, product prices have gradually begun to differentiate, and prices of basic products have begun to loosen, but the prices of tight-selling and high value-added products will remain high. At present, the prices of IT LCD products, which account for a higher proportion of the company’s revenue, remain high, and the prices of some products are still rising. The price of TV LCD products has dropped to a certain extent, and the price of relatively larger and higher-end products has fallen slightly. There are large differences between different products, but due to the continued tight supply of upstream raw materials, the overall effective capacity increase is relatively limited, and the profitability of products, especially the profitability of high value-added products, is still expected to remain at a good level. Thanks!
It is quite obvious from the company’s response that this is a topic that was very carefully considered before an answer was given and crafted to maintain a sense that the company has things well under control and has planned for such an eventuality, which is usually not the case.  In reality, panel producers tend to be reactive rather than proactive, making decisions based on relatively short-term prospects and Chinese panel producers tend to be more so inclined, and while there are many considerations that go into capacity expansion decisions, an underlying goal for China’s display space has been to gain a dominant position at almost any cost.  This desire for ‘share bragging rights’ and the state, provincial, and city government’s desire to fund this aspiration has certainly given China the dominant position in the LCD panel space, and for the last  year, been a source of profitability for almost all Chinese panel producers.
That said, even if there has been a shift away from LCD TV panel production from Chinese panel producers, there is little escaping the effects of the rapid drop in TV panel prices seen this month.  There are some offsets, such as a bit of an increase in IT panel prices or the lesser impact of the TV panel price decline on the very large TV panel segment, but the panel industry is so obviously cyclical that no matter what language company’s use to explain how they have morphed into non-cyclical entities, it is difficult for us to believe that such rhetoric will change the eventual outcome.  China will continue to dominate the large panel LCD space over the coming years, but whether that will sustain profitability over the next few years is a less likely scenario.