S. Korean display industry poised to post strong Q3 figures amid fears over Chinese competition

Operating profits for Samsung Display and LG Display are anticipated to be three times higher than figures the same period last year

(graphic by Kim Seung-mi)

Samsung Display and LG Display are poised to record strong third quarter figures this year thanks to a boom in OLED sales.

But the South Korean display industry is currently on edge over recent reports that the Chinese company BOE plans to supply smartphone OLED panels to Apple — a service previously monopolized by South Korean companies.

Market projections shared Monday based on financial figures as of Thursday estimated Samsung Display and LG Display’s respective third quarter (July to September) sales at 7.2 trillion won (US$6.17 billion) and 7.6863 trillion won (US$6.59 billion).

Operating profits were estimated at 1.5 trillion won (US$1.28 billion) for Samsung Display and 676.5 billion won (US$39.9 million) for LG Display.

Sales were more or less the same as or slightly higher than during the same period in 2020, while operating profits were more than three times higher for both companies. In the third quarter of 2020, Samsung registered 7.32 trillion won (US$6.28 billion) in sales and 470 billion won (US$403 million) in operating profits; for LG, the respective figures were 6.7376 trillion won (US$5.78 billion) and 164.4 billion won (US$141 million).

The rapid rise in projected profits for Samsung Display was based on the launch of Samsung Electronics’ third-generation foldable phone and the iPhone 13, while an increase in OLED TV panel sales amid a post-COVID-19 trend toward larger, more exclusive models boosted projections for LG Display.

Official third quarter figures for LG and Samsung are set to come out on Wednesday and Thursday, respectively.

It remains unclear whether the improved performance will continue, as Chinese competitors that previously focused exclusively on inexpensive panels have been increasing their technological capabilities at an impressive rate.

A case in point can be seen with the reports that BOE, China’s top-ranked display company, will be supplying panels for Apple’s iPhone 13. While neither Apple nor BOE has made an official announcement, foreign news outlets have recently published reports that BOE shipped 6.1-inch OLED panels last month for use in the iPhone 13.

Industry sources said that BOE had previously supplied iPhone 12 panels solely for refurbishment due to quality issues. Samsung provided 100% of OLED panels for the iPhone 11, and the two South Korean businesses had competed against each other on the iPhone 12, with LG supplying panels for one of the four models in its lineup (regular, Mini, Pro, and Pro Max).

The arrival of a new player in the high-end panel market stands to impact the profits of the two South Korean panel companies that had previously held sway.

The growth of Chinese companies is also visible in market share figures. According to the market research service Omdia, smartphone OLED market leader Samsung Display’s market share has been in decline, dipping from 86.3% in 2019 to 79.3% in 2020 and 75.5% as of Q2 2021.

In contrast, BOE’s market share more than doubled from 3.6% in 2019 to 10.5% as of Q2 2021. China Star Optoelectronics Technology, China’s second-ranked display company after BOE, also grew its market share from 0.8% last year to 3.5% as of Q2 2021.

LG has the large TV OLED market more or less to itself, but its smartphone panel market share for the second quarter in 2021 amounted to just 6.3%.

Many South Korean industry observers said it was too soon to overestimate the competitiveness of Chinese panel makers.

“Even if it’s true that BOE is supplying iPhone 13 panels, Samsung Display is in a league of its own in the smartphone OLED market, so I’m not expecting any real changes in the near future,” said one industry source.

But it’s difficult to deny that if the number of supplies increases, Apple could lower the cost of panels supplied by South Korean companies.

Another industry source said, “In the past, Apple basically had no choice about using [expensive] Samsung and LG panels [due to their technological capabilities], but once they have BOE as a third option, they’re going to try to ignite a pricing competition.”

In a telephone interview with the Hankyoreh, Kiwoom Securities analyst Kim Ji-san said BOE’s arrival as an iPhone panel supplier was “expected.”

But he added, “While the competition between South Korean companies and BOE may intensify in the mobile [iPhone] sector, Apple and other companies are also going to use OLED for their tablets and laptops in the long term.”

“If you take that market growth into account, Samsung and LG stand to reap greater benefits,” he said, suggesting the market is focusing less on the negative impact of a new market entrant than on the positive aspects in terms of OLED market expansion.

By Sun Dam-eun, staff reporter

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