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BOE Delays MP at its Wuhan Gen 10.5 Fab
March 02, 2020
 
Efforts by BOE Technology to ramp up the output from its 10.5G line in Wuhan have been undermined by the coronavirus outbreak, which is pushing back the company's goal of reaching full capacity by February 2021. BOE kicked off official operation of the Wuhan 10.5G plant - its second 10.5G fab - in November 2019 focusing on production of 65- and 75-inch LCD TV panels. BOE's original roadmap had the plant's capacity at 30,000 substrates/month in its first-phase volume production starting one quarter after initial trial production, then reaching 90,000 substrates by year-end 2020 and full capacity at 120,000 substrates by February 2021. However, the 10.5G fab is currently operating at about 10,000-20,000 substrates a month, which pushes the initial 30K ramp back by at least 1 quarter so that orders for delivery in the second and third quarters will be similarly delayed.
 
DigiTimes Research reported shortages of some key components with the most critical ones including PCBs, backlit units (BLUs) and polarizers. Most panel makers are utilizing their components in stock for production that will support their operations for 4-6 weeks till mid- or end-March, with only 70% of their orders being fulfilled. While acknowledging its short-term sales performance may be affected by the outbreak, sources at BOE said that the impact will be limited due to slow shipments in the off-peak season in the first quarter and expects shipments to start picking up from the second quarter onward, driven by increasing demand for large-size applications and international sports events. BOE also expects the outbreak to not have much impact on its AMOLED panel business. 
The firm's AMOLED panels have been used for production of Huawei's foldable smartphone Mate X, Lenovo's (Motorola) foldable model Razr, OPPO's 5G phones and some models of Intel-based foldable notebooks, noted the sources.
 
 
Initial expectations for the fab were far more conservative than the rest of the industry, based on conditions in the display space, BOE’s ability to ramp such a fab, and feedback from suppliers.  We had expected BOE to have a run rate of 12k sheets/month in 1Q (or 36k total), and 21k/month run rate (64k total) for 2Q, and right now it seems that BOE is producing between 10k and 20k sheets/month, perhaps ~25% above our 1Q expectations, but far closer to reality than BOE’s earlier expectations.  Not to say we knew the virus was coming, but history, if nothing else, has taught us that rarely do new fabs ramp as expected, and rarely do they produce at the rates projected for the first few quarters of production.  Whether we have to change our expectations for Q3 and Q4 is still an open question, but we expect the Wuhan fab might have a rockier start than even we thought.
 
On a more positive note, BOE is said to have decided to install a number of module assembly lines in its Gen 6 OLED fab in Mianyang, which would likely be the fab that would be producing for Apple (AAPL) should BOE be officially selected for the next generation iPhone.  This is not a confirmation that BOE will be included in OLED panel production for the iPhone, but we believe BOE has at least been qualified by Apple as a potential supplier, which would be the first step toward becoming a primary supplier.
 
JNTC a South Korean firm that has been developing cover glass as part of a JV with BOE itself (since June 2019) has begun mass production of curved cover glass, which will be sold exclusively to BOE for the Huawei P40 Pro smartphone.  The JV is currently capable of producing 3m (unconfirmed) units/month, while JNCT is able to produce 1m units/month from its plant in Korea and an additional 5m units from its plant in Vietnam.  JNTC owns 30% of the JV while BOEVT, BOE’s ODM affiliate Hong Kong) owns 70%, who is focused on the design and production of LED TVs and monitors. JNTC is expected to begin an IPO on the Korean exchange next month and was the original supplier of 3D cover glass to the Samsung Galaxy Note 4 (released in 2014) and the S7 Edge and Note 7, all of which used Gorilla Glass, assumedly processed and formed by JNTC for Samsung.  Currently the company Samsung Display is expected to account for ~60% of sales while LG Display and BOE are expected to account for 30% and 10% respectively.
 
BOE recently decided to invest in OLED module lines exclusively for Apple and is planning to construct 10 new module lines at its B11 OLED plant located in Sichuan. BOE will have an entire assembly line from panel to module as it has Gen 6 flexible OLED fab at B11 plant. BOE’s decision to invest in module lines does not indicate that BOE has signed a contract with Apple. It will be able to supply OLEDs once it passes Apple’s strict evaluation. The reason why BOE’s recent investment is still drawing interests is because its investment is a follow-up decision from its recent communication with Apple. “We heard that Apple recently asked BOE to make necessary preparations regarding supply of OLEDs.” said multiple representatives from the industry who are familiar with BOE’s situation. There is now a greater chance for BOE to become one of Apple’s OLED supplier. Apple currently has high level of dependence on Samsung Display. Samsung Display was the only OLED supplier for iPhone X and it also owns most of supplies of OLEDs for iPhone 11 series. As a result, it is urgent for Apple to diversify its OLED suppliers.
BOE needs to raise the level of importance of OLED within its entire businesses. Although BOE has become the world’s leading display maker by surpassing South Korean display makers, its position within the OLED industry is relatively weak. As a result, it is important for BOE to put emphasis on next-generation high value products such as OLED, QLED, and microLED. From: Yun, Geonil | [email protected]