The U.S. government’s new restrictions on Huawei scheduled to take effect on Sept. 15 will cover display driver ICs as well as semiconductors and foundries. Under the circumstances, South Korean display panel suppliers such as Samsung Display and LG Display decided to stop supplying their high-end smartphone panels to Huawei as their display driver ICs cannot be manufactured without U.S. equipment and software and Apple is a more important client for them.
At present, most display driver, touch and power management ICs are manufactured based on ARM’s blueprints and the restrictions will block the chips from going to Huawei. In other words, the South Korean companies’ display panel supply to Huawei will lead to no smartphone anyway. There are currently no alternatives to display chips based on ARM’s design. Although Huawei recently launched a new business unit and is working with SMIC to develop display driver ICs, its efforts are unlikely to bear fruit in the near future.
The impact of the restrictions on the South Korean display industry is expected to be smaller than that on the semiconductor industry. Last year, Huawei accounted for 3.2 percent and 11.4 percent of the annual sales of Samsung Electronics and SK Hynix, respectively. On the other hand, Huawei has procured most of the smartphone display panels it uses from Chinese suppliers.
Huawei is expanding its business with BOE, the largest panel manufacturer in China, and testing panels of local suppliers such as Visionox, Tianma and CSOT as potential alternatives to Samsung Display and LG Display. In the second quarter of this year, Samsung Display accounted for 72.7 percent of the global smartphone OLED display market, followed by BOE (11.9 percent) and LG Display (4 percent). In that quarter, Huawei purchased a large quantity of panels from BOE prior to the restrictions and this led to BOE’s market share improvement on a shipments basis. LG Display is likely to narrow the gap in the third quarter, when new iPhones will debut.
In the meantime, market research firm Strategy Analytics said in its recent report that Huawei’s global smartphone market share might fall to 4.3 percent next year and yet other Chinese manufacturers, such as Oppo, Vivo and Xiaomi, would be able to take its place.