Can boe supply meet Apple??

Image source @ Visual China

Text | New to science and technology

Ten years ago, if any listed company could be shortlisted as an Apple supplier, it would inevitably show this matter vividly in various public documents. Even if a confidentiality agreement is signed, it will be implied by almost explicit words such as "international major customer".

Because entering the fruit chain not only means that a large number of orders bring about a rapid expansion of revenue scale, but also the industry's recognition of the company's strength and the high valuation in the capital market.

In the past ten years, from memory chips, lens modules, precision parts, to glass covers, fuselage frames, etc., with Apple as the axis, a number of domestic supply chain enterprises have grown rapidly.

According to statistics, since 2011, the overall revenue compound annual growth rate of the domestic apple industry chain has been about 35%, and the compound annual growth rate of net profit attributable to the mother has been about 20%, even exceeding Apple's own growth rate.

However, the ultra-high elimination rate of 30% of the fruit chain makes these domestic suppliers have to minimize their dependence on Apple, because once they are kicked out in the next second, it means that the performance decline plus capital flight, OFILM is a typical example.

However, in the entire Apple supply chain, screen panel companies are just the opposite. In view of Apple's harsh requirements for screen panels, the panel supply of iPhone series products has always relied on South Korea's Samsung and LGD.

Until recently, foreign media reported that the domestic BOE has signed a supply agreement with Apple on the iPhone 14, and will start supplying OLED panels in June, and the supply is expected to reach 50 million units, about 25% of the supply of iPhone 14 displays.

For Apple, the addition of BOE can weaken the dependence on Samsung and LGD to a certain extent; and for BOE, being recognized by Apple on the screen panel, in addition to being able to obtain stable profits, to a certain extent, also means that its products have reached the top level in the industry.

But BOE, which ranks among the first-class screen manufacturing companies, should understand at this moment that the difficult road has just begun.

01 5 years of metamorphosis

Since 2013, Apple has made its list of the top 200 core suppliers public every year, and these 200 companies account for 97%-98% of Apple's procurement, production and assembly expenses.

By consulting public information, it can be found that IN 2017, JD.com began to appear on the list, and in the following years, the relationship between BOE and Apple was stable, and it was not absent.

2017 is also a turning point in the screen industry market and technology.

iPhone X equipped with OLED screen turned out, after the iPhone in addition to the iPhone XR, iPhone11 two low-end machines continue to use the traditional LCD screen, all other models have turned to OLED screen.

Apple's approach has accelerated the application of OLED technology, and has also caused other mobile phone manufacturers to follow suit, and OLED screens have become the standard of high-end models of major manufacturers.

However, at that time, BOE, in terms of OLED technology and production capacity, could not meet Apple's requirements, and could only win orders for iPad, MacBook, Apple Watch and other products with slightly lower requirements. The market and the most anticipated iPhone series orders from investors have been monopolized by Samsung and LGD.

However, Apple's diversification strategy for the supply chain can be traded with any company that can meet the technology they need in order to increase the number of suppliers, improve the stability of product supply, and gain an advantage in price negotiations.

For this reason, at that time, the industry commented that "Apple may join hands with BOE in order to contain Samsung and LGD", a South Korean display industry related person said, "since 2017 OLED was first applied to the iPhone X, Apple has been concerned about the high proportion of supply of Korean companies", and said that "Apple is very likely to achieve its supplier diversification strategy by increasing the supply of BOE OLED panels".

BoE has supplied screens for Huawei's Mate series and P series high-end flagship mobile phones for many years, and has full practical opportunities to improve its technology and is ready to supply Apple at any time.

Since then, when BOE has joined the supply of iPhone series panels, there is no official information to verify. But a series of news in the industry after 2020 shows that the relationship between BOE and Apple is very ambiguous.

In 2020, the foreign Apple Insider community has news that BOE has twice accepted Apple's quality review in order to obtain Apple's iPhone 12 panel order. The first review was conducted in September and October of that year, and the results were not passed. When the market was disappointed, the news ushered in a reversal, and a number of authoritative domestic media said that BOE will begin to supply Apple with the OLED screen panel of the iPhone 12 within December.

In October 2021, the Nikkei Shimbun said that BOE began supplying a small number of OLED displays for the 6.1-inch iPhone13 at the end of September, and plans to increase shipments soon, and is waiting for the final review process, focusing on the durability of the screen. But BOE's board secretary office responded that the company could not comment on the information of a single customer.

At that time, the outside world agreed that BOE only supplied OLED panels for the standard version of iPhone 12/13 in 2020 and 2021, and mostly used for official flips and after-sales screen changers.

After that, more and more news came out of BOE's two flexible AMOLED production lines Chengdu B7 and Mianyang B11, which were considered to be designed for Apple to supply OLED panels. News of BOE's entry into mainstream suppliers also came out.

In the 2021 performance report, BOE pointed out that the shipment volume of flexible OLED has increased rapidly, and the business development has made an important breakthrough, and the single monthly shipment in December exceeded the level of 10 million.

The research report released by Southwest Securities also shows that in 2021, BOE OLED has achieved the import of mainstream mobile phone brand customers, and the shipment volume of large customers in the United States has increased to about 10%. In 2022, the company's share of key customers is expected to increase to more than 20%.

In addition, the recent Korean media Chosun-biz has signed an OLED panel supply agreement with Apple on the iPhone 14, and the supply is expected to reach 50 million units, which is about 25% of the supply of iPhone 14 displays.

Shipment time, shipment breakthrough, and changes in the share of large us customers all point to the fact that BOE has become the mainstream supply chain of iPhone series OLED panels. OLED has always been the main battlefield of Samsung and LG, the two display giants.

02 Start a war on OLED

OLED screen due to pixel self-illumination characteristics, compared to LCD screen can be made thinner and lighter, and can further improve the brightness and contrast, mobile phones, TVs, computers, game handhelds, portable displays and other more electronic products using OLED screen, the industry also agreed that OLED screen to replace LCD screen is the general trend.

According to Omdia's latest data, the proportion of OLED TVs in the global TV market (based on sales amount) will increase from 7.4% in 2020 to 10.0%.

According to CINNO Research's survey data, the global market AMOLED smartphone panel shipments in 2021 are about 668 million pieces, an increase of 36.3% year-on-year. By the end of 2021, 40% of the world's smartphones have been replaced by OLED screens, and this proportion is expected to exceed 55% in 2022.

OLED's industrial position is related to market share, number of production lines, technological maturity, and supply chain. At present, the market presents a super two-strong pattern of Samsung, BOE and LGD. In horizontal comparison, although BOE has the potential to catch up with LGD, there is still a certain gap with the overlord Samsung.

First of all, in terms of production capacity, there are currently 14 production lines in BOE, of which 3 are 6th-generation OLED production lines, and the planned production capacity is 48K/month, while the production capacity of Samsung's Asan A3 can reach 135K/month, and the two 6-generation production lines of A4+A5 reach 300K/month; but the production capacity of BOE's three production lines is much higher than the current LGD's monthly production capacity of 77.5K.

Secondly, in terms of technological maturity, BOE has previously revealed that the yield of OLED products in mature production lines in 2021 has reached more than 80%, although it is a greater improvement than the yield rate of about 60% in 2020, but it needs to be improved compared with more than 85% of LGD and more than 94% of Samsung's yield rate.

The nature of the gap is determined by the core technology and the supply chain. Technically, there is no technical obstacle in the front plate section and the packaging section of BOE, but in the most difficult backplane section evaporation link, BOE still has a gap, which is also the key to affecting the OLED yield rate.

In the evaporation process, the glass substrate used for evaporation must fit tightly with the fine metal mask (FMM), and the expansion slot opening of the FMM must also be accurately fitted with the anode pattern on the glass substrate, otherwise it will cause poor color mixing problems. Therefore, the key factor that determines the yield of the evaporation process is the precise fit and fit of the FMM to the glass substrate.

The control of FMM tensile network accuracy is the main means to solve the evaporation target pixel displacement, which needs to be summed up according to the evaporation experience of the accuracy change law of the metal mask, and in the process of the net to be compensated accordingly, the current domestic OLED panel companies including BOE are lacking FMM's net precision data, the net compensation is not accurate enough, resulting in deviations in the set.

In addition, BOE is currently not as stable as Samsung and LGD in the supply chain, especially in display drives.

OLED driver chip can be regarded as the OLED panel "brain", its main role is to control the OLED panel display, the reliability and stability of the drive chip seriously affect its final display effect.

At present, the degree of localization of OLED driver chips is low, mainly based on Korean and Taiwan manufacturers. According to research agency data, Samsung Display exclusive supplier Samsung LSI and LGD's LX Semicon occupy 90% of the market share, and BOE OLED display drivers are provided by LX Semicon.

But TheElec reported that due to the continued shortage of chips around the world, LX Semicon's production is lower than planned, and it will give priority to providing OLED display drivers to LGD, which will lead to production problems in the iPhone OLED panel of JD.com.

Fortunately, the display driver chip process is mainly concentrated in the mature process of 28nm, 40nm, 65nm, and non-first-line foundries also have the ability to complete such chip manufacturing, Huawei and other domestic manufacturers have been developing related drivers, and I believe that BOE's problems in the supply chain will be effectively solved in the future.

03 Obstructive and long

The OLED war between BOE and Samsung and LGD has begun, and the three parties will play in the three aspects of core technology, supply chain control and industry trends, but BOE, as a rising star, needs to face more problems in the future than Samsung and LGD.

The first is the need to bear the price pressure after depreciation of Samsung and LGD OLED production lines.

Some insiders said, "After the end of peer amortization is to light up, and domestic panel manufacturers still have to bear more than 1.5 billion yuan of asset depreciation fees every year, if the price of foreign panels is reduced by 10%, then the domestic panels must follow up, once followed up means losses." ”

In 2016, shortly after the BOE 5.5 generation line was put into production, the depreciation of many Samsung 5.5 generation lines has ended, which directly led to the continuous loss of the BOE 5.5 generation line, until 2018 with the increase in demand for OLED by domestic mobile phone manufacturers, it gradually picked up.

Nowadays, Samsung and LGD's 6-generation AMOLED production line is also about to end depreciated, when BOE must once again bear the pain of price pressure.

In terms of technology, the current general understanding in the industry is that as the evolution direction of OLED panel technology, LTPO technology is already in the industry outlet.

Some analysts said that due to the exploration and improvement of mass production technology, LTPO OLED has not yet been applied on a large scale. But it is not far from large-scale application, and I believe it will be within the next two years. If LTPO technology matures further, it will be possible to completely replace LTPS backplanes.

Omdia predicts that from 2024 onwards, the flexible OLED using LTPO backplanes will exceed the flexible OLED using LTPS backsheets. It is also true that ltpo panels have been used in Samsung's flagship models and the high-end models of the iPhone.

The good news is that in November last year, it was reported that BOE was rebuilding the production lines of B7, B11 and B12 factories, and planned to transform the LTPS production line into an LTPO production line, and BOE also responded that it had the conditions to upgrade part of its production capacity to LTPO.

But unfortunately, in 2020, Samsung's Apple-specific 6th generation line already has a production capacity of 30,000 LTPO panels. In 2021, Samsung will transform Apple's dedicated line, and its production capacity will be greatly improved again.

In addition, Apple also cooperated with LGD to jointly develop LTPO screens earlier, and LGD invested in expanding the production of E6-3 in July 2021 to introduce more LTPO OLED panel production equipment. After the completion of the renovation, the production of its OLED panels will increase by 50%, and it is expected to be put into production in the second half of 2022.

Some senior industry insiders said that Samsung and LGD have LTPO backplane OLED mass production experience, and the technical gap between BOE and its OLED panel is about three years, but as the LTPO screen begins to produce, the gap will be further narrowed, and even the future will achieve overtaking.

In the industry trend, color fidelity, long life, good stability, Micro LED is regarded as the next generation and even the ultimate display solution, large-screen commercial display, wearable devices, car screens, cinema screens and AR glasses can be applied.

Just similar to the past WHEN LCD and OLED technology was just budding, now the production of Micro LED is difficult and costly, and it is necessary to design and break through a series of processes and invent new automation equipment, which also makes BOE stand on the same starting line with other players around the world.

The difference is that BOE and the domestic Huaxing Optoelectronics belong to the gradual route, starting with a simpler Mini LED. To put it simply, Mini LED is actually a micro LED with a larger size, which is also an improved version of lcd, suitable for companies with huge LCD production capacity.

On the contrary, Samsung, Sony and other manufacturers that have launched the LCD field have embarked on the road of directly investing in the development of Micro LED. Sony showcased the world's first Micro LED display at CES 2012, followed by Samsung's Micro LED product The Wall, which debuted at CES for four consecutive years from 2018 to 2021.

The emergence of emerging technologies has given domestic display panel manufacturers represented by BOE an opportunity to lead the future. But standing at this point in time, it is difficult to judge who will laugh last in this display technology revolution.