TCL/Chinastar (000100.CH) has announced that it will join three other panel manufacturers in building a Gen 8.6 OLED fab to produce IT products (tablets, laptops, and monitors).  The $4.1b project is to be constructed in Guangzhou along side the TCL/Chinastar campus and is expected to have a capacity of 22,500 sheets/month when fully completed.  We expect two phases to the fab development, with the first phase in mass production in late 2028 or early 2029 and the second phase in 2030 or later depending on market conditions.  TCL is budgeting a lower cost for this fab, lower than competitor’s BOE (200725.CH), who expects their fab to cost $9b and Visionox (002387.CH), who expects to spend $7.7b.  The reason for the lower cost is that TCL will not be producing OLED panels using the FMM (Fine Metal Mask) process, which is used by most OLED producers at the Gen 6 level, and by both BOE and Samsung Display (pvt) for their new Gen 8.6 IT OLED fabs. 
TCL will be using ink-jet printing, although details of which process steps will include IJP have yet to be revealed.  Ink-jet printing, which is used by Samsung Display to deposit quantum dots on their QD/OLED process, and others for OLED encapsulation, would replace the highly material inefficient vacuum deposition and FMM process used currently.  This (FMM) process wastes up to 70% of the OLED material, which winds up coating the interior of the deposition chamber and the mask, and causes downtime in order to remove that material with harsh chemicals.  Ink-jet printing has a much higher material utilization rate of 85% to 90% and is therefore expected to be more cost effective and enable TCL to produce IT OLED products at a lower cost.
Of course, all of this is speculation as TCL has only been running a Gen 5.5 pilot ink-jet production line in Wuhan, producing one size displays for the medical industry. Gen 8.6 substrates are over 3 times larger, pushing the limits of ink-jet technology, so we are quite conservative as to when the TCL fab will enter true mass production and what yield might look like.  As noted, little is known about TCL’s ink-jet process, but we know with a substrate of this size the mechanics of placing 340 pixels per inch containing three sub-pixels (RGB) each requires considerable engineering expertise.  Panasonic (6752.JP) is said to be supplying the ink-jet equipment, but little else is known about TCL’s process and how easily it might scale.

​What makes the Gen 8.6 IT OLED supply chain a bit unusual is that of the four panel
producers who have committed to building such fabs, only two are using the standard vacuum deposition FMM process that has been used for smaller (Gen 6) OLED production.  With TCL committed to ink-jet and Visionox committed to a photolithographic deposition process, there will be less commonality across the equipment industry, especially given how little is known about how these new processes will scale.  Everybody is watching everybody to see if things are progressing, but we are still at the cusp of mass production for SDC’s phase 1 VD FMM line, and we expect that is the easiest of the three technologies to scale.  It will be a while before anyone can claim success.

As panel producers begin production for the upcoming holiday period, they are negotiating with brands for next year’s shipments.   Rather than the rigid contracts that were the mode used years ago, current contracts are flexible and build in clauses that can adjust to changing economic conditions, and tend to include both long-term agreements for more generic panels, and shorter-term metrics for more specialized panels.  Samsung Electronics (005930.KS) is the largest purchaser of LCD TV panels as their display production affiliate Samsung Display (pvt) does not produce LCD panels, and purchases over 40m TV set panels from suppliers each year.  With 8 major LCD panel producers, Samsung has TV set panel production contracts with most, if not all, TV set panel producers.  Depending on the size of the producer, Samsung can represent between 5% and 30% of the producer’s capacity for the year, making these negotiations quite important and critical to the profitability of panel producers.
Years back BOE (200725.CH) was high of Samsung’s list as China’s largest LCD panel producer and among the lowest cost producer for many panels, however competition for Apple’s display business and conflicts over incentive fees reduced BOE’s share of Samsung’s LCD TV panel purchases to between 3% and 4%.  However, after a few visits from BOE officials talk out of South Korea indicates that Samsung and BOE might have settled their differences, giving BOE a chance at bringing it supply contracts with Samsung back up.  Expectations are for BOE to have a roughly 4% share of Samsung’s TV panel purchases next year, but if the settlement rumor proves true, that share could increase to as much as 10% next year. 
Samsung has an additional consideration next year.  LG Display (LPL), a supplier of LCD TV set panels to Samsung, sold their Gen 8.5 LCD fab in Guangzhou, China to Chinastar (pvt), which will reduce LG Display’s share of Samsung’s TV set panel business next year, but at the same time it creates another problem for Samsung.  Now that the Guangzhou fab is owned by Chinastar, who is already Samsung’s largest LCD TV panel supplier, that LGD supply contract is now Chinastar’s, and that pushes Chinastar over Samsung’s ‘production maximum’ .
We expect Samsung settled the conflict with BOE, in part, to give it the option to reduce its dependence on Chinastar and increase it reliance on BOE, leading to the current negotiations.  The production maximum mentioned above is not a legal or financial point, but one of risk, with too much of Samsung’s TV set panel purchases coming from one supplier a dangerous position that has hurt Samsung in the past.  By increasing BOE’s share, Samsung can reduce Chinastar’s share and reduce its overall supplier risk. 
OMDIA breaks out estimates for Samsung’s LCD TV set panel purchases for 2024 and this year, which we show below, along with our forecast of share under two BOE scenarios.  Scenario A is our current forecast, using a conservative share for BOE, while Scenario B is more aggressive, with Samsung reducing Chinastar’s share by increasing BOE’s.  It is too early to tell how this will play out and Samsung does not have to make a final decision yet but given the number of units Samsung is expected to purchase next year (40m+) the stakes are high.

Taiwan’s three major panel producers saw an unusual variance in performance for August.  The largest of the three, AU Optronics (2409.TT) saw a 17.3% m/m increase in sales ($809.68m US), although down 9.2% y/y and almost right on target against the 5-year sales average for August.  On a cumulative y/y basis, AUO is up 0.6%, essentially flat with last year.  Innolux (3481.TT), saw sales decline 3.0% m/m but up 1.0% y/y, although down substantially against its 5-yr. average for the month.  On a cumulative y/y basis Innolux is up 4.6%.  Hannstar (6116.TT) is a different entity as it is primarily a small panel producer.  Hannstar saw a m/m decline in sales of 3.9% but a 38.4% increase in sales on a y/y basis, indicating how poor last year was for the small panel market.  That said, Hannstar’s results were still significantly below its 5-year average, but again, on a cumulative y/y basis, Hannstar was up 25.4%.
All in, AUO continues to keep a close handle on balancing its panel production and maintaining a steady revenue flow and will likely see easy comparisons for the next two months based on the weakness seen in 3Q and early 4Q last year.  Full year results will depend on the build into the holiday period and so far brands have remained mildly optimistic, pointing to a flat to slightly up year for AUO.  Innolux seems to have found a groove this year, with monthly results slightly above last year, but again, the full year for Innolux will depend on the next two months, particularly September, as last year September was the strongest month in the back half, which must be duplicated for Innolux to stay ahead of last year.  While Hannstar is certainly ahead of last year’s results, the back half of this year does not look particularly strong from a demand perspective unless you are a producer for Apple (AAPL), which we do not believe Hannstar is.  It will certainly be a better year than last but still a poor showing against the company’s 5-year averages.

​China’s largest display producer BOE (200725.CH) has begun shipping OLED displays for the iPhone 17 Pro, marking the first time the company has been qualified to produce LTPO OLED displays for the top models in the Apple (AAPL) iPhone lineup.  BOE has supplied replacement OLED displays for iPhones and a number of display products but has been unable to qualify for the two top models, which have LTPO displays.  However, because of the ongoing patent infringement suit brought by OLED competitor Samsung Display (pvt), BOE is operating under a bit of a cloud when it comes to Apple products, and Apple has limited BOE’s production to only those iPhone Pro’s to be sold in China.
BOE’s original plans were to produce ~10m phones as part of the 100m units that Apple is expected to ship for the iPhone 17 series, however it is now expected that the number will be between 2m and 3m because of the location limitation, leaving the remainder to be  split between Samsung Display (52-54m) and LG Display (LPL) (42 – 44m).  Apple is between a rock and a hard place this year as it is thought that BOE is offering a steep discount in price on their production, helping to boost Apple’s margins or give it some room for discounting, however at the same time Apple is also very wary of BOE’s patent infringement loss, and cannot take the chance that there will be any limitations put on sales of BOE’s displays in the US.  They can still use BOE’s pricing to extract some blood from SDC and LGD but without the threat of making BOE a full volume competitor this year, the effect is limited, especially as BOE is a first time supplier for the iPhone Pro model using LTPO and is therefore expected to have low yields relative to SDC and LGD, who have been producing these models in years past.

With Apple (AAPL) confirming the date of its next event (September 9) the rhetoric about the iPhone 17 line continues to grow.  We see, on a daily basis, “The 5 Improvements Apple will make for the iPhone 17..” or similar headlines with the same leaked or speculated changes that have been detailed hundreds of times over.  Some of these change reports are supported by ‘industry professionals’, or ‘those with knowledge of the matter”, or even ‘conversations with suppliers’, although we expect that Apple has control over most of these sources and uses them strategically to generate excitement leading up to the event. 
Rather than dwell on these changes, most of which seem rather mundane,  we look more toward the effect the iPhone 17 series will have on the smartphone ecosystem.  The Korean research firm UBI has been kind enough to share its thought on the production of displays for Apple smartphones this year and next, which we highlight, rather than dwell on whether the iPhone 17 will come in 3 colors or 4.  As we have previously noted, iPhone displays ae typically produced by three suppliers, Samsung Display (pvt), LG Display (LPL) and BOE (200725.CH).  There have been other in the past (Sharp (6753.JP), Japan Display (6740.JP), etc.) but when it comes to OLED displays, the three named above are the key suppliers.  Unfortunately not all sources agree on the percentages for each, but we have pulled together an amalgam of data that is a composite of the industry estimates for the past six years along with UBI’s projections for this year and next.  We note that due to averaging not all years equal 100%..

​While Samsung Display’s share has been declining, we note that the sales value of each iPhone model are different and in most years SDC was the dominant or sole display supplier of the higher value models while BOE tends to provide the more generic lower value models, skewing the sales value in SDC’s favor each year.  In most years SDC maintains its current year share, while ceding some earlier year production to others.  BOE has had a difficult time competing with its South Korean rivals as it has had qualification issues that have limited its production in the past, particularly on high-end models.   In 2022 it was found that BOE made a change in the design of the iPhone 13 it was producing without Apple’s authorization, for which it was punished with reduced shipment targets that year.  But Apple needs BOE to keep display costs down and rein in Samsung’s premium pricing, and based on UBI’s forecasts, despite the issues, BOE seem to be making progress toward establishing a firmer relationship with Apple, barring an legal issues[1].
One additional point.  Samsung recently won the exclusive contract to supply both the display and the hinge to Apple’s foldable phone in 2026, although LGD and BOE are expected to supply the non-foldable display on the device, although the proportions have yet to be decided.  We expect this will improve SDC’s production share with Apple despite the relatively small number of units to be produced, as the foldable display will carry a significant premium.


[1] Samsung recently won an ITC ruling that could make it more difficult for BOE to supply certain displays in the US.

It seems that according to informed sources in Japan, Sony (SNE) has decided to adopt the latest advancement in LCD technology in a big way.  The system, known as RGB (mini) LED is another push against OLED technology, which has been gaining recognition in IT devices.  Although this technology has been shown at shows over the last few years, it was officially introduced at CES this year, with Hisense (600060.CH) showing a 116” model and Samsung (005930.KS) a 115” model.  TCL (000100.CH), an early supporter of mini-LED/QD backlighting technology is thought to be developing an RGB mini-LED product for consumer release as part of its high-end line.
The purpose of RGB mini-LED backlight technology is to create a brighter set with more vivid colors while still using LCD technology, as opposed to the more expensive OLED process, which is known for its deep blacks and rich colors.  Given the vast LCD infrastructure that has been developed over the last decade, LCD display producers are always looking to find better ways to compete with new or emerging display technologies and RGB LED is that next step.
In a typical mini-LED LCD TV, the backlight is made up of white or blue LEDs arranged in zones. As the light from these LEDs determines the maximum brightness of the set, one would think that the LEDs for such a backlight should be big and bright, but that is not always the case. 4K TV sets have over 8 million pixels, each able to generate a small part of the complete video frame, with their brightness theoretically based on the amount of light behind them (the LED backlight array).  However, when the scene has both dark and light images, large LEDs leak light into dark pixels and turn them gray instead of black.  In order to reduce this effect, mini-LED backlights use small LEDs grouped in zones that can be turned on or off zone by zone.  While the zones don’t line up against the light and dark parts of the image, the fact that there can be many individually controlled zones, improves the light leakage issue.  Further, each zone is comprised of multiple strings of LEDs (strings are a group of LEDs that work as one) that can be controlled string by string. 
Logic holds that as the number of zones increases, the preciseness that the backlights can provide to the display’s millions of pixels improves, but more zones usually means smaller and more LEDs overall, which is why mini-LED sets tend to be more expensive than generic LED backlight sets.  Behind all of these LEDs that are constantly being turned on and off (and many levels between) is the system that controls them.  The basis for this system is the video processor, a specially designed chip that accepts video information before it hits the screen and reformats it to to the zone closest to that pixel set.  Typically video processors look at this information on a frame-by-frame basis, which means they see brightness  information on every pixel 30 times each second.  Just one data point for each pixel would generate ~248 million data points each second so these processors are specially designed to provide a high-speed data stream.  All of that data is passed on to the LED drivers whose channels are connected to the LED springs.  Based on that massive amount of information, the LED zones are lit to try to correspond to the light and dark parts of every frame.
It’s a complex system that moves at millions of bits/second, but it’s all black and white.  As the light from the LEDs passes through the liquid crystal pixels that open or close to create an image, on top of the pixels is a color filter, essentially a sheet of red, green, and blue dots.  Each LCD pixel is made up of three sub-pixels, each of which correspond to a red, green, or blue dot on the color filter.  By adjusting the amount of light that passes through the three LCD sub-pixels, each pixel can create any color.  There is a problem however, in that the color filter is subtractive and reduces the overall brightness of the display as it subtracts two primary colors to create one from white LED light. 
This system is the basis for every LCD TV, with Mini-LED backlight systems adding more LEDs to the mix, but what about the RGB LED backlight systems mentioned earlier?  In order to reduce the subtractive effects of the color filter, display engineers decided that using colored LED backlights would reduce the amount of ‘filtering’ the color filter needed to do to create colors, and RGB LED backlights were born.  But it is not as simple as it sounds.  Now the video processor not only has to figure out what light level each string much have (30 times/sec.) but now has to figure out how to mix the three color strings in each zone to get closest to the color of that particular section of the image frame.  Once it does those calculations for each zone and string for each frame, it sends the data to the drivers that generate the electrical charge.  This means that instead of one white string in a particular zone, there are now three strings (RGB) and one driver now becomes three drivers.
  

​This is where the trade-off of cost vs. quality becomes important.  Driver ICs represent ~20% of the cost of the backlight system, so increasing the number of drivers increases the system cost and while the total number of LEDs can remain the same; in order to maintain the same number of zones in an RGB system, the number of LEDs could triple.  The processor, which now handles considerably more information processing would likely need an upgrade, so the bottom line is that the cost of an RGB LED backlight system for LCD TVs will be higher than those currently used.
Sony does have an advantage over other brands, making it more obvious why they seem attracted to this new technology.  They are the top of the premium TV price tiers and can absorb the higher cost more easily than some.  As of now, with the only available RGB LED sets being over 100”, the additional cost means little, but it will when the technology gets down to smaller size TVs.  Since the point is to compete with OLED, RGB LED TVs need to be at or below OLED premium levels, which will be difficult at the onset, so this new technology will need to prove itself in the quality arena  which is Sony’s wheelhouse.  More than likely Samsung and TCL will have the largest number of RGB LED backlit TV sets in terms of models, while Sony will have the premium (most expensive) sets, once this technology enters mass production (2026), but there has to be a meaningful difference in visual quality to measure up to the higher price, and that will be up to the consumer to decide.  The current price of the Hisense 116” model in the US is $30,000 as is the 115” Samsung model.  A ‘regular’ 115” Mini-LED TV is ~$20,000 and the largest LG (066570.KS) OLED TV (97”) is $18,000.  Sony has a 98” LCD set that sells for ~$6,200 (MSRP).

Panel pricing was down 0.2% in August, a modest move after July’s 2.4% decline.  TV panels were the standout, with no change for the month, far from our expectations of a 2.0% to 3.0% decline.  It seems that after the 4.7% decline in July for TV panels, brands are using the lower prices to get inventory levels closer to targets, which, as we noted previously, have been lowered for the year.  Seeing some demand strength (or perhaps a lack of pricing pressure), Chinese panel producers are pointing toward raising utilization rates from their recent upper 70’s% to 85% to 90% through September, to try to save 3Q after the weak July, but they run the risk of overbuilding into a 4th quarter that has little clarity for demand as to real demand.
While TV panels showed at least some price resilience, IT panels (Monitors, Notebooks, Tablets) did not, declining 0.1% for the 3rd month in a row.  If you remember, IT products were to be the 2025 ‘saviors’  at the start of the year, yet demand has fizzled out as the complexities of tariffs and other macro issues make consumers wary.  Small panel prices (Mobile) dropped by more than expected (down 2.4% m/m against expectations of down 1%) in August, making the 4th month in a row of negative mobile panel pricing.

While volatility, for the most part, has been low this year, Figure 1shows how actual panel pricing performed thus far, against the 5-year averages.  In January, panel prices grew more than the average, but February, March, and April saw pricing movements below average.  May was better than average, followed by June and July where pricing was below average.  In August and September (forecast), while negative, pricing outperformed the averages.  We note that the 5-year averages for the last three months of the year are negative, indicating weaker pricing potential.
All in, August was a weak pricing month, albeit one where TV panel pricing was flat, but better than expected.  We expect TV panel pricing in September to be flat on brand stocking demand, but concern over an inability to discount enough during the holidays to attract buyers continues to overhang the market.  Chinese panel producers are reacting on a very short-term basis and increasing utilization but run the risk of flooding the market and creating a weak 4th quarter.  They want to show profitability for the year in order to justify both short-term fab purchases and expansions, but are also focused on pointing out how they dominate South Korean producers concerning market share.  It is hard to balance both.

July panel shipments declined by 3.7% m/m but were up 7.4 y/y and on a cumulative basis (7 months), shipments are still up 7.9% for the period.  TV shipments increased 6.7% m/m, the only category to do so.  As we noted above, TV panel prices declined substantially in July, pushing brands to use the opportunity to bring order levels closer to full-year targets, while IT panel shipments saw little momentum as demand remained weak.

In terms of producers, of the major large panel producers, 3 of 8 saw a m/m increase in panel sales while the remainder saw decreases, with LG Display (LPL) the big m/m loser, down 30.6% m/m, after two relatively strong months.  Sharp (6753.JP) saw a m/m increase in sales of 4.9% and HKC (248.HK) saw a 5.0% m/m increase, while all others saw m/m decreases.

​Last week we noted that Taiwanese panel producers AU Optronics (2409.TT) and Innolux (3481.TT) had been ‘suggesting’ to employees that they might extend their weekends or holidays as demand for CE products, particularly TVs, slowed in 2H.  Many companies have cited the tariff related pull-ins as the cause for the reduced demand, and while panic has not set in yet, suggestions of this type are becoming more common, along with caution concerning 2H expectations.
This puts a number of panel producers who were basking in profitability during the early part of this year in a more questionable position for the full year.  This cautious attitude seems to have spread a bit to South Korea where LG Electronics (066570.KS) is offering voluntary retirement packages to workers in its MS Division (Media & Entertainment Solutions) that is responsible for TV set and appliance sales.  The packages are surprisingly generous, with severance of up to 3x current salary (based on tenure), along with tuition support for children..  Such packages are being offered to those over 50 years old or those with poor performance records, something the company has not done since 2022 and 2023.
LGE saw some impact from weaker TV set demand in 2Q, with operating profit taking a more than 46% drop y/y, leaving the MS division as the only one that saw an operating loss for the quarter.  As both LGE and Samsung Display (pvt) no longer produce LCD TVs, they are dependent on Chinese and Taiwanese producers for TV set displays and modules.  The tariff uncertainty and the control over pricing that Chinese LCD panel producers have over the market have made it difficult for LGE to compete with Chinese brands in many markets, and as demand slows, LGE’s  ‘early retirement opportunities’ seems to indicate another road of belt tightening as 3Q develops.   Most pure play CE companies are feeling at least some pressure as they move closer to the holiday season, unless they happen to have a finger in the AI ecosystem.
To us the bigger question is  not 3Q, but whether the tariff mishigas will continue in 2026.  If that is the case and we get another year of tariff deadlines, postponements, and threats, we do expect that affected companies will begin to accept this ‘new order’ and resign themselves to the fact that they will have to pass on the tariff costs to consumers, rather than eat the cost in the hope that things will be resolved soon.  We are hoping this scenario does not play out and most tariff issues are resolved this year, but with more than 3 years to go with the current administration, there is always the chance another bogey will appear and disrupt the CE space once again.