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.
Click on each of the OLED display components to see suppliers for iPhone and Huawei.
*Note: the countries denote where the companies are headquartered, not the location of production.
Samsung Corning Advanced Glass
- The company is a 50:50 joint venture between Samsung Display and the US glass giant Corning.
- Corning’s Gorilla Glass is now the industry standard for smartphone cover glass.
- Corning has long been supplying BOE with display glass manufactured at Corning’s China factory in Hefei, Anhui.
Universal Display Corporation (UDC)
- UDC is a global leader in producing phosphorescent OLED (PHOLED) emitters, which are the key organic material in the emissive layer of OLED displays.
- PHOLED has much higher energy efficiency compared to alternative fluorescent OLEDs.
Universal Display Corporation (UDC)
- Like Samsung, BOE also relies on UDC for the organic materials required for OLED displays.
- Unlike rigid OLED, which uses glass for encapsulation, flexible OLED uses polymer encapsulation materials.
- Samsung’s lead in encapsulation technology allowed it to become the first company in the world to start mass production of devices with flexible OLED displays.
- Kyoritsu’s encapsulation material has very low water content (less than 0.01%), which helps to prevent moisture from corrupting OLED organic materials.
- The encapsulation is done through an inkjet printing process, for which BOE uses the equipment made by Kateeva, a US-based firm.
- Samsung-Ube Materials is a 50:50 joint venture between Samsung and Ube Kosan of Japan, and the plant is located in Tangjeong, South Korea.
- Flexible OLED displays use plastic instead of glass substrate. However, Corning carrier glass still serves an indispensable role in the manufacturing process, even though it is removed later.
- Sumitomo’s plant is co-located with BOE’s Sichuan OLED factory.
- Samsung sources the majority of its integrated circuits for OLED displays from one of its subsidiaries, making Samsung the world’s largest OLED display IC producer.
- The IC driver is the third-costliest component of OLED displays, just behind the organic materials and the printed circuit board.
- Synaptics is a US-based company but all of its products are manufactured in Asia.
- China is a key market for Synaptics, currently accounting for around half of its total revenue.