Mending Fences?
Samsung Electronics (005930.KS) and BOE (200725.CH) are rivals, not quite directly but Samsung Electronics’ affiliate Samsung Display (pvt) competes head-to-head with BOE in the small panel display market and to a lesser degree in the large panel TV space. As we have noted, Samsung Display has been at loggerheads with BOE over IP issues and after a recent partial win concerning BOE’s misuse of Samsung trade secrets and IP, Samsung Display continues to fight BOE in the courts. That said, Samsung Electronics also has issues with BOE. As the largest TV set producer, Samsung Electronics, requires that those who use “We supply to Samsung Electronics” in their advertising, pay a royalty. In 2022 BOE, who was the second largest supplier of TV panels to Samsung in 2021, refused to pay and Samsung has reduced BOE’s share as a TV panel supplier considerably since that time as they continued to battle over the royalty situation.
It seems that the President of Samsung Electronics TV division is scheduled to visit China in the middle of May, and BOE officials are expected to visit Samsung in Korea, with both expected to try to negotiate an agreement between the two on both panel prices and royalties. The idea is that BOE can either lower panel prices to compensate Samsung or can leave panel prices the same and pay the royalty.
While this seems reasonable, it might not be to BOE, who is also a major supplier to LG Display (LPL), Samsung’s local rival. LGD has recently sold it’s last LCD TV panel plant (Guangzhou, China) to Chinastar (pvt), also a supplier to both Samsung and LG (066570.KS). The large panel product that was being purchased from the LGD Guangzhou fab before the sale, would now become purchases from Chinastar. Samsung has an internal requirement that no supplier of key materials can represent more than 30% share, and that means that it will have to maintain that 30% restriction, keeping it from purchasing panels from the Guangzhou fab now under the Chinastar banner. While there are other large panel producers, such as AUO (2409.TT), Innolux (3481.TT), HKC (248.HK), and CHOT (pvt) that Samsung already buys panels from, Samsung tends to go with suppliers that have large capacity, leading to a secure supply, without violating the share limit..
At least to a degree, this puts BOE in the catbird seat or at least gives it some room to negotiate with Samsung, as Samsung Display is out of the large panel LCD business and supplies only QD/OLED TV panels to its parent which make up only a small portion of Samsung’s TV panel needs. This leaves Samsung Electronics to outsource all of its LCD TV panel purchases. As they cannot increase purchases from Chinastar without overstepping their limit, BOE is the obvious choice if they can come to an agreement over royalties.
It seems that the President of Samsung Electronics TV division is scheduled to visit China in the middle of May, and BOE officials are expected to visit Samsung in Korea, with both expected to try to negotiate an agreement between the two on both panel prices and royalties. The idea is that BOE can either lower panel prices to compensate Samsung or can leave panel prices the same and pay the royalty.
While this seems reasonable, it might not be to BOE, who is also a major supplier to LG Display (LPL), Samsung’s local rival. LGD has recently sold it’s last LCD TV panel plant (Guangzhou, China) to Chinastar (pvt), also a supplier to both Samsung and LG (066570.KS). The large panel product that was being purchased from the LGD Guangzhou fab before the sale, would now become purchases from Chinastar. Samsung has an internal requirement that no supplier of key materials can represent more than 30% share, and that means that it will have to maintain that 30% restriction, keeping it from purchasing panels from the Guangzhou fab now under the Chinastar banner. While there are other large panel producers, such as AUO (2409.TT), Innolux (3481.TT), HKC (248.HK), and CHOT (pvt) that Samsung already buys panels from, Samsung tends to go with suppliers that have large capacity, leading to a secure supply, without violating the share limit..
At least to a degree, this puts BOE in the catbird seat or at least gives it some room to negotiate with Samsung, as Samsung Display is out of the large panel LCD business and supplies only QD/OLED TV panels to its parent which make up only a small portion of Samsung’s TV panel needs. This leaves Samsung Electronics to outsource all of its LCD TV panel purchases. As they cannot increase purchases from Chinastar without overstepping their limit, BOE is the obvious choice if they can come to an agreement over royalties.
RSS Feed