More BOE Penalty Box Speculation…
The same South Korean trade publication that we noted in our 5/4/2022 note was hinting that BOE (200725.CH) was in the Apple penalty box over changes made to circuit design without Apple’s permission, is back with similar speculation that BOE’s display production participation in the iPhone 14 could be reduced or eliminated, even after BOE officials visited Apple’s headquarters to plead their case. A number of scenarios are presented in the most recent article by the South Korean media source, the most extreme being that BOE’s 30m unit OLED display order (6.1” panels) would be given to Samsung Display (pvt) (20m) and LG Display (LPL) (10m), who are already expected to be producing the iPhone 14 Pro and Pro Max displays in late June or early July, and that BOE would be limited to producing legacy iPhone (12 & 13) OLED displays for the remainder of this year, likely a total of 20m units, 10m of which have already been produced. Less aggressive scenarios push back BOE’s iPhone 14 OLED display production until early next year and limit it to 10m units, assuming that they are fully reinstated by Apple by the end of this year.
As we noted previously, BOE struggled during 2021 to pass the stringent qualification requirements that Apple imposes on its OLED display producers and was given legacy OLED replacement screens initially as a test to make sure the company was able to meet yield goals. This was then advanced to producing actual iPhone 13 and 1`4 OLED displays when BOE finally was able to qualify production, but within a relatively short time the story of BOE’s design change seemed to indicate that BOE was in the penalty box with Apple and had been suspended from further production, leading to a drop off in BOE’s flexible OLED unit volumes in February and March (unconfirmed).
Given the source for this most recent speculation is South Korean, where both SDC and LGD reside, and that the Chinese trade press has made innumerable statements about how BOE’s inclusion in the Apple OLED display supply chain marks the end of South Korea’s domination of the OLED business, we are reticent to take it at face value until the data becomes available. It would be surprising for a panel producer to make a change in design, even for a legacy product without getting approval or qualification from the customer, especially Apple, but it is certainly possible that such a change was made and is now causing BOE to bear the consequences. Any negative scenario will hold back BOE from becoming a primary supplier, as can be seen from the years it took for LG Display to gain full OLED display qualification at Apple after it failed to meet production quotas back in 2019.
As we noted previously, BOE struggled during 2021 to pass the stringent qualification requirements that Apple imposes on its OLED display producers and was given legacy OLED replacement screens initially as a test to make sure the company was able to meet yield goals. This was then advanced to producing actual iPhone 13 and 1`4 OLED displays when BOE finally was able to qualify production, but within a relatively short time the story of BOE’s design change seemed to indicate that BOE was in the penalty box with Apple and had been suspended from further production, leading to a drop off in BOE’s flexible OLED unit volumes in February and March (unconfirmed).
Given the source for this most recent speculation is South Korean, where both SDC and LGD reside, and that the Chinese trade press has made innumerable statements about how BOE’s inclusion in the Apple OLED display supply chain marks the end of South Korea’s domination of the OLED business, we are reticent to take it at face value until the data becomes available. It would be surprising for a panel producer to make a change in design, even for a legacy product without getting approval or qualification from the customer, especially Apple, but it is certainly possible that such a change was made and is now causing BOE to bear the consequences. Any negative scenario will hold back BOE from becoming a primary supplier, as can be seen from the years it took for LG Display to gain full OLED display qualification at Apple after it failed to meet production quotas back in 2019.
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