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BOE Reports 1stHalf Revenues up 26% Y/Y
September 09, 2019
 
BOEhas been the most aggressive Chinese’ panel producer in terms of capacity adding both Gen 6 flexible OLED and Gen 10.5 LCD fabs.  The company released its 1H results; a 26.6% (Y/Y) increase in 1H revenue, offset by the 43.9% drop in net profit, and a drop in gross margin from 19.2% to 16.8%, although their gross margin that is better than most display makers.  The revenue is a result of those capacity increases, but while those sales increases they do not tell the whole story.  Other key points are that the company received $160.8m (US$) in government subsidies during the period and that net profit was $232.8m, of which only $91m was actual net profit, excluding extraordinary items, such as the subsidies and gain/loss from hedging derivatives.  When excluding these items, the net profit margin is 1.2%.
 

BOE was the supplier for the Hisense dual panel TV mentioned previously and lowered expectations for flexible OLED shipments this year from 50m units to a range of 30m to 50m units, and hinted that the 3rd phase of their Chengdu OLED fab, which was expected to ready, could be delayed until a more stable flexible OLED market occurs. The delay in the phase 3 timeline in Chengdu is significant in the near-term, and indicates the depth of the slowdown in the smartphone space, but will have little effect on BOE’s push toward becoming an iPhone supplier in 2020.  BOE is also building two additional small panel flexible OLED fabs in Chongqing and Fuzhou, and is ramping production at its Gen 6 OLED fab in Mianyang (phase 1). 
 
BOE is facing the same issues as other panel producers, and even as being a supplier (along with Samsung Display) of flexible OLED panels to Huawei’sMate 30 family, they could be questioning their expansion plans, especially with Huawei being the target of more stringent sanctions by the US government.  Although, BOE is ~33% owned by the Chinese government through various state-owned funds, weak performance would not be tolerated when new funding for expansion is needed.