The tl;dr version: Chinese panel manufacturer Visionox is seeking financial assistance from local government by requesting share purchases as the company faces a possible nine quarters of straight losses. While there were rumors that BOE would acquire some factories from the company, Visionox is facing uncertain times, and a possible knock on effect throughout the Chinese display industry.
Visionox lost money every quarter from Q1’21 to Q3’22, and it looks like Q4’22 and Q1’23 are going to be pretty bad, too. Visionox, which operates only small- and medium-sized organic light-emitting diode (OLED) lines, has been focusing on flexible OLED production. However, according to The Elec, the company’s overall line utilization rate is low, with rates reaching just 35% in January and February, only half of the industry average of 65%. The company’s main customers for smartphone OLEDs are Honor (a spin-off from Huawei) and Xiaomi, which also relies on Visionox for smartwatch OLEDs. In addition, Visionox planned to invest in an 8th generation OLED line for its Shenzhen V4 plant, but securing financing has proven challenging, and its intention to invest in new equipment by the end of this year seems unlikely. The best the company can do is at its Kunshan V1 plant with a Gen 5.5 rigid and flexible OLED mixed use line, and Gen 6 lines at two plants, the Guan V2 and Hefei V3 for flexible OLEDs.
Chinese companies, particularly state-owned enterprises or those in strategic industries, sometimes sell shares to local governments or seek financial assistance when they face challenges or pursue ambitious projects. This is because local governments play an active role in economic development, helping to create jobs and drive growth by investing in or supporting local businesses. While government backing can help companies secure financing by signaling stability to private investors, it’s important to remember that these relationships can also lead to risks, such as governance issues or inefficiencies stemming from a lack of market discipline. The extent of government involvement varies depending on the specific company and local government. Visionox has already sought local government support last year, and the fact that it owes its OLED production lines to local government support implies that the company really needs local government support to prop it up badly.
