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Business trends

China breaks into Samsung's OLED dominance

Visionox and BOE hope new facilities close gap with smartphone display leader

OLED Visionox
Visionox opened the new OLED smartphone displays factory in Hebei Province, China

LANGFANG, China -- Chinese companies are opening state-of-the-art factories that can mass-produce OLED smartphone displays in an effort to break up Samsung Electronics' near monopoly in the field.

A total of 10 facilities are expected to be built in China over the next three years at a cost of about $4.5 billion apiece.

One is a cutting-edge factory opened by the startup Visionox in Hebei Province on May 17. The facility, which boasts a capacity of 60 million smartphone displays a year, cost 26.2 billion yuan ($3.95 billion) to build, including local government subsidies.

Following pilot production, mass output is expected to kick off by the end of next year. "With 6,000 engineers and [OLED] licenses, we can rapidly begin mass production," a confident Vice President Xiuqi Huang said.

Visionox, formed in 2001 from an OLED project team launched in 1996 at Tsinghua University, is the sole player in China with a track record of stable mass production of OLED displays. At its facility in Suzhou, Jiangsu Province, it turns out screens for shipment to Chinese smartphone makers such as Oppo.

The new facility is located in Hebei's Gu'an, a special economic zone sponsored by Chinese President Xi Jinping. Previously nothing but farmland, real estate concern China Fortune Land Development transformed the area into an industrial "city" with brand-new condo buildings and a huge man-made lake in just a few years.

The real estate developer plays a key role in the Visionox group. Visionox Technology, an affiliate listed on the Shenzhen Stock Exchange, is managed by Wang Wenxu, the head of China Fortune Land. By building Visionox's OLED display facility in Gu'an, Wang apparently seeks to turn the economic zone into a center of cutting-edge industry in China. The facility sits on a site big enough to fit 15 baseball stadiums, and the building itself is 1km wide.

Visionox says it has roughly 3,500 OLED-related patents. The factory has an exhibit area for showing off the company's latest technologies, such as an OLED smartphone that resembles the iPhone X and bendable panels for automotive use.

Visionox has built up design and production know-how by hiring many engineers away from Samsung and Taiwanese companies, industry sources say. This has enabled it to beat Beijing-based BOE Technology Group, the world's top shipper of LCD screens for TVs, in realizing mass production of OLED displays.

With Beijing's China Manufacturing 2025 initiative, regional governments have been pouring subsidies into factory construction projects, and display companies are boosting their OLED output around the country as they did with LCD panels.

BOE's prototype flexible OLED panel (Courtesy of BOE)

For its part, BOE brought online a new OLED factory in Chengdu, Sichuan Province, last year. And even though this facility has yet to comfortably mass-produce OLED panels, the company is building a pair of $4.5 billion plants -- one in Mianyang, Sichuan Province, that is slated to come onstream next year and another in Chongqing set to open in 2020. BOE is confident that it will be "capable of boosting OLED capacity as well," in the words of a senior executive.

Elsewhere, China Star Optoelectronics Technology, a part of electronics group TCL, is building a massive facility in Wuhan, Hubei Province, similar in scale to Visionox's facility. Tianma Microelectronics, which has acquired NEC's display business, is preparing for mass output in Wuhan as well.

Flush with cash from local governments, Chinese players are eager to make big investments. But it is uncertain whether they will be able to keep defect rates as low as Samsung has. The technology gap won't close that easily, said a Japanese engineer who previously worked at the South Korean giant.

The plans to open big OLED plants are fueling worries about a supply glut, given the forecast for weak demand after disappointing sales of the OLED-equipped iPhone X. But OLED displays are bendable, and their broad use will be key.

Supply of OLED displays is expected to come to 1.24 billion units in 2022, eclipsing demand that is forecast to reach 1.06 billion units, according to research company Display Supply Chain Consultants.

Samsung, which has capacity equivalent to more than 300 million smartphone screens, has already decided to scale back its investment plans. Many Chinese players are emerging companies with insufficient technologies, pointed out a researcher at the Chinese Academy of Sciences. Some 90% of the factory construction plans are being paid for by regional governments, so their failure could have disastrous implications for taxpayers, he warned.

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