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BOE’s new production capacity has been continuously turned into a profit
In the "2016 Semi-Annual Results Announcement," BOE revealed that the net profit attributable to shareholders of listed companies during the first half of the year reached between RMB 4.5 and 4.5 billion, successfully turning losses into profits while achieving consecutive quarters of positive main business earnings. BOE noted that in the first half of 2017, the company continued to focus on integrating hardware and software, enhancing technological innovation across products and applications, promoting efficient management practices, and boosting the value-added capabilities of its production lines. These efforts resulted in consistent full-line sales, higher yields, improved product quality, and maintaining high market shares across key product segments. Additionally, the semiconductor display industry saw a significant improvement in business conditions compared to the previous year, driving substantial growth in the company's operational performance.
Since BOE initiated its push for capacity expansion in 2008, the average annual investment has consistently surpassed RMB 10 billion. Over the span of less than a decade, cumulative investments have approached RMB 100 billion. Yet, until last year, BOE had barely turned a profit through two rounds of the LCD industry cycles. During this period, it earned the nickname "the soy sauce apprentice" from the overseas panel industry due to its lack of financial success.
However, with the global manufacturing sector shifting toward mainland China, particularly in mid-to-low-end products where the majority of the world's production capacity has concentrated, overseas panel firms have begun divesting their production capacities. This has led to the loss of downstream markets, with much of this capacity now being absorbed by Chinese enterprises, either as foundries or through shutdowns and sales of facilities.
Driven by the needs of local Chinese terminal brands, only three large-sized panel makers and three small-sized panel makers have successfully navigated the industrial technology learning curve, amassing considerable factory operation experience and cultivating a skilled workforce. Many of these professionals have relocated to mainland China, taking on global panel production responsibilities and establishing a robust industrial foundation.
BOE's new production capacities have also become the primary target for low-end monitor and LCD TV manufacturing globally. Even Samsung has had to outsource most of its mobile phone LCD panel production to BOE. Market demand has driven BOE's economies of scale, leading to enhanced profitability.
Starting from the previous year, besides Longteng Optoelectronics, other domestic panel manufacturers have followed BOE's cooperative model with local governments and industrial funds, entering a phase of rapid capacity expansion. Cities like Hefei, Fuzhou, Shenzhen, Wuhan, Xianyang, Kunming, Guangzhou, and regions such as Sichuan and Chongqing have actively invested in building panel or terminal factories, setting up new display panel lines locally.
BOE has also benefited from the recovery in liquid crystal cycle prices. It has secured corresponding sales prices internationally, gained marketè¯è¯æƒ based on shipment scale, and leveraged local cost advantages to serve customers, improving profitability.
Moreover, BOE is constructing and planning two 10.5-generation high-definition panel production lines. Upon completion, this will significantly boost its market share for high-end products, elevating product profitability to an international leading level. Technological breakthroughs in TDDI LTPS products for mobile phone high-end panels, along with the growing demand for comprehensive screen display technology, will help BOE transition its mobile phone panel business from merely the largest shipment volume to a competitive profit advantage within the industry.
Despite Japanese or South Korean panel companies and terminal brands shifting toward OLED high-end products to capture more profitable markets, leveraging technological differentiation to compete with LCD production capacity, OLED display material and process limitations mean it will take at least five to ten years to match the current efficiency levels of LCDs.
During this period, BOE can maximize its capacity efficiency, transforming into the largest manufacturer of TV, monitor, and mobile phone panels. This mirrors China's white goods, TV, and mobile phone manufacturing industries, which have absorbed most of the world's production capacity. Unlike before, where the global assembly capacity was handled by foundries, now the focus is shifting upstream to components and global capacity transfers.
In summary, BOE's strategic investments and operational excellence have positioned it as a dominant force in the global display industry, with a promising future ahead.