Samsung vs. BOE

South Korea vs. China: Comparing the OLED Display Supply Chains of Samsung and BOE

South Korea’s Samsung is the global leader in manufacturing OLED displays for smartphones, enjoying a market share of over 90% in terms of sales. However, Samsung faces rising challengers, including its compatriot LG and China’s BOE. We focus on BOE because it likely poses the biggest long-run challenge to Samsung, for two main reasons. 

First, as a state-owned enterprise, BOE enjoys access to concessionary state financing, while many of its overseas competitors do not. Since OLED display manufacturing is extremely capital-intensive, the ability to secure capital is a big advantage. For example, BOE’s OLED production drive has already cost over $10 billion, most of which was borrowed from state banks. Second, BOE can better access end users of its products because Chinese smartphone brands are becoming dominant. For instance, Samsung’s share of the Chinese smartphone market has dwindled to 2% amid competition from the likes of Huawei, Oppo, and Vivo, who have also increasingly turned to BOE as their OLED display supplier.

This case study examines the Apple iPhone Xs Max (OLED display supplied by Samsung) and the Huawei Mate 20 Pro (BOE) to compare the supply chains of the South Korean incumbent and its Chinese challenger. Although both supply chains are highly concentrated in East Asia, there is a key difference. Samsung’s supply chain is almost entirely vertically integrated, while BOE still relies mostly on foreign suppliers.

• Cost: Samsung’s major advantages over BOE are cost and yield. An estimate posits that for Gen 6 mobile OLED displays, a 1% improvement in annual yield rate will save $20 million annually. Although BOE has managed to improve its yield rate from as low as 10% in early 2018 to between 50% and 70% in 2019, Samsung’s yield rate is 80%. So, BOE’s costs are still higher, but it is closing the gap.
• Capacity: Samsung currently controls over 90% of global manufacturing capacity for smartphone OLED displays. Although BOE is quickly catching up, the Chinese company will still have less than half of Samsung’s capacity in 2022.
• Downstream Relationship: Samsung’s dominance over smartphone display manufacturing has caused many of its customers to worry about potential over-dependence on a single supplier. Thus, many device makers are now looking for alternative suppliers as a hedge. And some of them, like Huawei, are turning to BOE.