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BOE recently suddenly appeared on the hot search list, due to a message from foreign media.
On May 7, South Korean media outlet The Elec reported that apple had removed Chinese display maker BOE from the supply chain of the iPhone 13 after discovering a design change to its OLED panel.
The Elec report also shows that BOE has been supplying OLED display panels for 6.1-inch iPhone models since last year, but since February, the company has only produced "a small number" of OLED panels for iPhones.
Therefore, some domestic media are spreading the news that "Apple has excluded BOE from the industrial chain", but other aspects of the information show that Apple officials have not responded, and BOE will not comment on it.
Another foreign media report said that BOE's factory in Sichuan is still operating, BOE may be currently studying a solution to meet Apple's requirements, and Apple's use of BOE screen may be seen as a means of trying to pressure Samsung, and it is basically impossible to terminate the cooperation.
Judging from the current information, we still don't know what the final outcome of this matter will be.
The latest news on May 12 shows that the latest Axon 40 Ultra flagship model of ZTE Tianji, which is supplied by BOE, will be officially sold on May 13, with a starting price of 4998 yuan.
BOE has provided ZTE with the industry's top flexible full screen based on the high-end flexible display technology brand f-OLED, and this model is currently the only machine that realizes the camera under the screen that is almost invisible at the technical level, and has a forward-looking position in the field of mobile phone screen technology.
This is seen by the outside world as a powerful response of BOE to industry rumors.
But in fact, from the latest quarterly financial report disclosed by BOE, it can be seen that the LED panel business with boe's traditional advantages is currently at the bottom of the cycle, and the growth of new businesses such as flexible panels and OLED is still in the climbing stage.
At present, it can be confirmed that in the context of the bottoming of the OLED panel price cycle, finding and consolidating the "second growth curve" product is the only feasible way for BOE to get out of this cycle.
1, deeply trapped in the price cycle
On April 29, BOE released its financial report for the first quarter of 2022, which attracted attention from the outside world.
According to the financial report data, BOE achieved operating income of 50.476 billion yuan in the first quarter of 2022, an adjusted increase of 0.4% year-on-year; net profit attributable to the mother was 4.389 billion yuan, an adjusted year-on-year decrease of 16.57%.
This is the first time that BOE has ushered in a decline in net profit attributable to the mother after experiencing high growth in 2021, which is the first time that BOE's profit has declined in nearly 7 quarters. Superimposed BOE's gross profit margin in the first quarter of this year was 21.38%, down 6% from the same period last year, which shows that BOE's entire panel growth cycle has bottomed out.
After all, in 2021, BOE's scale net profit has achieved a rapid growth of more than 400%, and it has been regarded by many as BOE's "hard work and finally get the right to speak in the industry".
However, it is worth noting that since the third quarter of 2021, the company's attributable net profit growth rate has begun to slow down. From more than 80% in the second quarter of 2021 to about 70% in the third quarter, and then to just 60% in the fourth quarter, behind the decline in growth, it actually means that BOE's mainstream business has encountered a lot of trouble.
In the first half of 2021, the semiconductor display industry continued to maintain a high degree of prosperity. Mainly in the context of the development of the Internet of Everything, the ubiquitous screen has brought a sharp increase in demand, so that the price of products in the semiconductor display industry continues to maintain an upward trend, and the high prosperity of the industry continues.
Graph /Photo Network, based on VRF protocol
This is an important reason why BOE can maintain a four-fold growth rate in 2021. But success is also cycle, and failure is also cycle.
The data shows that since the second half of 2021, the semiconductor display industry has experienced some structural fluctuations after a long period of high prosperity. By the fourth quarter of 2021, the price of TV and IT LCD products in the industry has fallen to varying degrees, especially the price of 32-inch LCD TV products has dropped by more than 30%.
Since 2022, the market demand has gradually declined, and the price of LCD panels has continued to decline.
According to Omdia data, in February this year, the monthly revenue of global large-size LCD panels fell by 6.8% month-on-month and 6.18% year-on-year to $6.089 billion. Among them, the monthly revenue of BOE, Innolux and LG large-size LCD panels decreased by 16.83%, 14.10% and 5.51% respectively year-on-year.
In this context, BOE, which takes large-size LED panels as its main business, has a double decline in revenue and profit is an conceivable fact.
"BOE has been betting on the technical iteration of LED large-size screens, and most of BOE's funds have been spent on the research and development of large-size LED technology and the exploration of production line iterations in recent years." Industry veteran Li Yuxuan told "Tanke Deep Technology".
In his view, in fact, BOE did this because it was greatly influenced by Samsung, "Samsung was crazy to expand production capacity at that time, using the advantage of production capacity to lower prices, so as to obtain market competitiveness." ”
But he believes that the current LED chip and panel industry has entered the competition for small-size high-definition screens, "with the popularity of screens such as mobile phone tablets, small-size high-precision high-tech screen technology has begun to become the core of competition, and because of the high technical content of these screens, their price may not be lower than that of large-size LED panels." ”
"However, BOE does not want to eliminate its core technology so quickly." Li Yuxuan said that in the past two years, BOE has made a series of strategic adjustments to try to find more use scenarios for LEDs. So, has BOE succeeded in "defending the ring"?
2. BOE's response
In 2021, BASED ON THE IOT STRATEGY, BOE created a new "1+4+N" development architecture: "1" is the display device; "4" refers to the four main fronts of IoT innovation business, sensors and solutions, MLED and smart medical engineering laid out in the process of IoT transformation.
BOE also invested in the Chengdu car display base project to increase the number of car display to expand the application scenarios of LCD display. Previously, BOE also laid out a variety of display technologies (such as Mini-LED backlight products). Li Yuxuan said.
In his view, the models now established by BOE, including the release of 81-inch and 105-inch 5K ultra-high-definition widescreen displays by IoT terminal commercial displays; smart whiteboards, solar energy boards and other applications have made market breakthroughs.
However, these are after all an extension of the traditional LED business, and with the gradual intensification of this market competition, BOE's gross profit margin in this field is also gradually declining.
In this situation, BOE has set its sights on OLED.
In early April, BOE Chairman Chen Yanshun said in an interview with the media that BOE will ship nearly 60 million OLED panels in 2021, and the global market share will reach 17%, becoming the world's second largest OLED manufacturer.
Graph /Photo Network, based on VRF protocol
At the briefing meeting after the release of the first quarterly report, when asked by the research institution "where does the motivation for the company to maintain good operating conditions come from", BOE executives also emphasized that "the flexible AMOLED business is one of the main growth points of the company's performance in the future", and pointed out that the flexible AMOLED shipments in the first quarter increased by nearly 50% year-on-year, and the market share continued to increase compared with the end of 2021.
But the problem is that BOE's investment in flexible screens is still too late, and Samsung is a pioneer in this field, and it has occupied a technical advantage early.
In 2020, when Huawei launched the MATE 40 series of mobile phones, the greening on both sides of its screen was criticized, because the OLED flexible panel provided by BOE could not overcome the arrangement of Samsung's patents, and could only use the "Zhou Dongyu arrangement" developed by itself, which caused such a situation. (Editor's note: "Zhou Dongyu arrangement" actually refers to the standard RGB arrangement used by some OLED screen manufacturers, named because its pixel arrangement resembles Zhou Dongyu's duckling emoji.) ）
Although the follow-up BOE has changed - in the latest glory model, BOE adopts a drill-like structure, such green edges are no longer visible, but compared with Samsung's new generation of flexible screens, the quality of BOE's top OLED flexible screens is still worse than a bit.
In fact, when the BOE large-size LED panel production line quickly went to production capacity around 2015, Samsung has seen the trend that the price cycle of LED large-size panels may bottom out, so it began to increase its efforts to develop OLED flexible screen products.
In Samsung's view, instead of "shirtless fighting" with BOE in the LED large-size panel market, and even having to rely on price reductions to "hurt each other" to seize market share, it is better to expand to a new market and lay its own technical advantages from the beginning.
Although BOE is also aware of this and has gradually caught up in this field since 2017, the trend of Samsung leading has long been built. Through the barriers built by technology, BOE will not be able to break through for a while and a half, and there is no way to quickly kill blood in such a new market.
This is actually the reason why people's confidence in the CURRENT BOE financial report shows the decline of the LED panel is not high.
After all, in 2022, BOE's latest technology of flexible AMOLED, that is, mobile phone curved screen, the shipment target is set at more than 10,000 pieces, basically achieving full production, but the current flexible screen production line is still in a state of loss.
For the mature OLED market, the Guolian Securities Research Report shows that in 2021, boe AMOLED output and sales volume were 855,000 square meters and 836,000 square meters, respectively, an increase of 59% and 67% year-on-year, the production and sales rate was as high as 98%, and the single monthly shipment of flexible OLED panels exceeded the tens of millions for the first time in December 2021.
However, at present, whether it is OLED or AMOLED, although the growth rate is relatively fast, it is still very small compared to the scale of traditional LED core business. According to the 2021 annual report, the revenue of BOE's LED business is more than 9 times that of other emerging businesses.
In other words, BOE's "second curve" has not yet been cultivated, and the "first curve" has encountered a crisis of both income and price decline.
3. What should BOE do?
According to a report by CBN in April, Gao Wenbao, executive vice president of BOE and CEO of the display business, revealed at the performance exchange meeting that BOE now has three flexible OLED panel production lines in production, but the Chongqing flexible OLED production line is still in the process of initial product verification and climbing, and the current production capacity is at a reasonable level.
He finally said: "OLED investment is very large, coupled with the market's strong demand for price, profit is very difficult at present. ”
In fact, the shipment volume of BOE OLED is already very high. According to Qunzhi Consulting data, BOE OLED shipments in 2021 will be about 60 million pieces, an increase of nearly 60% year-on-year. However, it is worth noting that most of the share of the OLED market is still occupied by Samsung, and its leading position cannot be shaken in a short period of time.
According to Omdia's forecast, China's share of the OLED market last year was only 15%, which will increase to 27% this year, and Samsung will drop from 77% to 65%.
In a way, this is very similar to the situation at the beginning of the LED market.
At that time, the reason why BOE was able to break the monopoly of Samsung and achieve the world's first results now was to continuously develop and upgrade its own production line on a large scale, improve the yield rate through capacity control and quality control, and finally use the cost advantage to defeat the opponent.
Graph /Photo Network, based on VRF protocol
However, this innovation is still a "follow-up innovation", and in the end, BOE can succeed more because Samsung has abandoned the LED size panel market.
Stanislav Lem, who is known as the "master of futurology", once said when looking at innovation, "History has nothing to do with this simplified presentation, it will never show us any linear development path, only a tortuous and roundabout line to show the non-linear evolutionary trajectory."
Professor Li Shanyou, the founder of Chaos University, also feels the same way, he once said in his speech that whether or not to overcome discontinuity is the first reason for the rise and fall of enterprises, and the first cause of innovation.
In his view, any industry is not progressing along a straight line, but along the "double S curve". The fault between the two S-curves represents a leap in technological development. Whether or not this discontinuity can be overcome is related to the survival of the enterprise.
In addition, innovation is about solving problems. The starting point for solving the problem should be to uphold the long-term concept of development. Because only by synchronizing with social values, the choice strategy of solving problems in this way may be the optimal solution for social and enterprise development.
The same is true for BOE. BOE has been "leading the nose" by Samsung before, most of the technology is made by Samsung, BOE as a follower to make a second breakthrough and try to catch up, but this just fell into the "continuity trap" set by Samsung.
If you want to overtake in a new technology area, you must find a different path. For example, Huawei's 5G is another way in the context of Qualcomm's monopoly of 4G patents in the United States; for example, ZTE, which has just released a new machine, has perfectly returned with a technology of a screen camera.
These cases show that if companies want to surpass their competitors in areas where others have an advantage, they must "go off the beaten path" and find non-linear innovation areas.
In fact, the concept of long-term development and innovation is not the linearity of time, but the "matryoshka doll" of time. One of the clever things about judging this is that long-termist decisions tend to be closely related to trends in social development.
Therefore, the key for entrepreneurs to make innovative decisions is to learn to identify the "direction" of things on the timeline, and to learn to distinguish between large and small cycles, and to make corresponding countermeasures. The same should be true for BOE, which is in the pain of the price cycle.
*The title image in the text comes from: Visual China, based on RF protocol.