Samsung Expands OLED Supply Chain
TCL and it subsidiary Chinastar (pvt) purchased Samsung Display’s (pvt) Suzhou, China Gen 8 fab and panel business for $1.08b earlier this year, ending Samsung’s LCD panel production in China, but at the same time as the sale, Samsung purchased a $12% stake in Chinastar, making it the 2nd largest shareholder behind TCL. Given that the Suzhou plant had been producing ~25% of Samsung’s TV panel needs, the sale to Chinastar and the share purchase seemed to indicate that Samsung would become a substantial customer of TCL/Chinastar going forward. TCL has been providing ~15% of Samsung’s TV panel needs through both the Suzhou plant and its other large panel LCD fabs, but recently there have been rumors that Samsung will begin to purchase OLED panels from Chinastar, expanding that relationship into the OLED space.
What makes this a bit unusual is that Samsung Display has been almost the sole OLED supplier to Samsung Electronics, with Chinese panel producer BOE (200725.CH) also supplying some OLED displays, so the idea that Samsung is diversifying its OLED production base again begs the question as to whether this indicates a change in the parent’s relationship with its affiliate. In reality, this is not the first time there has been some tension between Samsung Display and Samsung Electronics.
When Samsung Display disclosed that it was intending to end production of large panel LCDs and develop its quantum dot/OLED technology, the assumption was that this was being done under guidance from Samsung Electronics. However during the early development of the QD/OLED process, Samsung Electronics’ management did not express the confidence in the project that one might have expected and at one point it was hinted that they might not be the primary customer for the new technology. Further, while Samsung Display had decided to close its large panel LCD production fabs by the end of last year, a request from Samsung Electronics has pushed out the closing of some of that production to a point later this year. While the large panel price increases that have occurred since last year have made large panel production profitable, SDC seems to have acquiesced to its parent’s wishes, while getting the short end of the stick as to OLED, should the rumors prove true.
We expect that while Chinastar is pushing to ramp up their OLED production Samsung will proceed cautiously, as it has with BOE, as consistency is a big issue with OLED production. Chinastar has one Gen 6 OLED fab that been built out to full capacity (45,000 sheets/month) and has R&D and development lines for large panel production, although we have seen little indication that the large panel lines are in commercial production, so much depends on that single Gen 6 OLED fab. TCL did indicate that in the 1st half of this year they produced more OLED displays than through all of 2020, and that they were now the 4th largest OLED producer on a global basis, which implies either they shipped more units than we expected in 2Q 4m), or the value of those shipments was higher than we expected, as based on our 2Q OLED unit volume estimates for Chinastar, they would be 5th, just a bit behind Visionox (002387.CH) when looking at composite numbers, but they are #4 when it comes to flexible OLED only, so credit where due.
What makes this a bit unusual is that Samsung Display has been almost the sole OLED supplier to Samsung Electronics, with Chinese panel producer BOE (200725.CH) also supplying some OLED displays, so the idea that Samsung is diversifying its OLED production base again begs the question as to whether this indicates a change in the parent’s relationship with its affiliate. In reality, this is not the first time there has been some tension between Samsung Display and Samsung Electronics.
When Samsung Display disclosed that it was intending to end production of large panel LCDs and develop its quantum dot/OLED technology, the assumption was that this was being done under guidance from Samsung Electronics. However during the early development of the QD/OLED process, Samsung Electronics’ management did not express the confidence in the project that one might have expected and at one point it was hinted that they might not be the primary customer for the new technology. Further, while Samsung Display had decided to close its large panel LCD production fabs by the end of last year, a request from Samsung Electronics has pushed out the closing of some of that production to a point later this year. While the large panel price increases that have occurred since last year have made large panel production profitable, SDC seems to have acquiesced to its parent’s wishes, while getting the short end of the stick as to OLED, should the rumors prove true.
We expect that while Chinastar is pushing to ramp up their OLED production Samsung will proceed cautiously, as it has with BOE, as consistency is a big issue with OLED production. Chinastar has one Gen 6 OLED fab that been built out to full capacity (45,000 sheets/month) and has R&D and development lines for large panel production, although we have seen little indication that the large panel lines are in commercial production, so much depends on that single Gen 6 OLED fab. TCL did indicate that in the 1st half of this year they produced more OLED displays than through all of 2020, and that they were now the 4th largest OLED producer on a global basis, which implies either they shipped more units than we expected in 2Q 4m), or the value of those shipments was higher than we expected, as based on our 2Q OLED unit volume estimates for Chinastar, they would be 5th, just a bit behind Visionox (002387.CH) when looking at composite numbers, but they are #4 when it comes to flexible OLED only, so credit where due.
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