Korean companies shut down panel production lines, leaving patents in jeopardy

Korean companies plan to withdraw from the LCD panel field, and global production capacity continues to concentrate in China

According to a report by Seoul Economic Daily on May 27, Choi Joo-sun, president of Samsung Display (SDC), the display division of Samsung Electronics, said that the company is considering withdrawing from the production of liquid crystal display (LCD) panels by the end of 2022. After shutting down the LCD production line, Samsung Display will focus on producing smartphone OLED panels and next-generation TV displays. LG Display, another display panel manufacturer in South Korea, has also released news about shutting down its LCD production line from time to time.

Among the two mainstream products in the panel market, LCD and OLED, OLED is superior to LCD in terms of blackness and contrast, while LCD is superior to OLED in terms of price and service life. According to data from CCID Research Institute, in the Chinese market, LCD accounted for about 78% of the market share in 2019, while OLED accounted for about 20%. According to CITIC Securities' forecast, global display panel shipments will reach 3.468 billion pieces in 2022, of which LCD panels will exceed 2.5 billion pieces, still accounting for 73%.

Figure 1 China’s panel display market structure in 2019

Data source: CCID Research Institute

At present, Chinese LCD manufacturers continue to further deploy high-generation LCDs. In 2020-2021, domestic manufacturers such as BOE, CSOT, HKC, and CEC have successively put into production 8 production lines of 7 generations or above.

In this context, global production capacity in the field of LCD panels will continue to concentrate in China, and my country's dominant position will be more solid. DIGITIMES predicts that by 2025, my country will account for 71.6% of the global LCD panel production capacity, Taiwan's share will slowly decline to 22.6%, while South Korea and Japan's share will quickly shrink to less than 10%.

Figure 2 Global LCD production capacity forecast in 2025

Data source: DIGITIMES

Samsung focuses on foreign patents and has a good reserve, while LG is weak in defending domestic patents

According to Jiwei Consulting, Samsung has more than 40,000 patents in the LCD display field, of which 16,063 are valid patents, mainly distributed in the United States, South Korea, China, Japan, Europe and other countries and regions. Among Samsung's valid patents in the above-mentioned major regions, the number of patents with a remaining life of 6-10 years and 10-15 years is the largest, 5,341 and 4,719 respectively, accounting for 63% of the total; and the number of patents with a remaining life of less than 10 years exceeds half of the total, accounting for 57%.

Figure 3 Geographical distribution of Samsung LCD valid patents

Statistics are from IncoPat patent database, and the graphics are from Jiwei Consulting

In terms of distribution in China, Samsung owns 2,120 valid LCD patents in China, of which 787 have a remaining lifespan of 6-10 years, accounting for 37%; there are 1,479 patents with a remaining lifespan of less than 10 years, accounting for 70% of the total valid patents.

Figure 4 Distribution of remaining life of Samsung LCD valid patents

Statistics are from IncoPat patent database, and the graphics are from Jiwei Consulting

LG has nearly 50,000 patents in the LCD display field, of which 27,940 are valid patents. The distribution of these patents is similar to that of Samsung, mainly in South Korea, the United States, China, Japan, Europe and other countries and regions. Unlike Samsung, Samsung's main market is the United States, while LG ranks first in South Korea. In addition, compared with Samsung, LG's LCD valid patents have a shorter overall remaining life, with 20,783 patents with a remaining life of less than 10 years, accounting for 76%.

Figure 5 Geographical distribution of LG LCD valid patents

Statistics are from IncoPat patent database, and the graphics are from Jiwei Consulting

From the perspective of distribution in China, LG owns 3,586 valid LCD patents in China. The largest number of patents have a remaining lifespan of 6-10 years, with 1,400 patents, accounting for 39%. The number of patents with a remaining lifespan of 11-15 years and 0-5 years is roughly the same, at 971 and 929 respectively. The number of valid LCD patents with a remaining lifespan of 16-20 years, that is, applied for in the past five years, is relatively small, with 286 patents, accounting for only 8%.

Figure 6 Distribution of remaining life of LG LCD valid patents

Statistics are from IncoPat patent database, and the graphics are from Jiwei Consulting

It can be seen that, whether from a Chinese or global perspective, LG's patent holdings in the LCD field have shown a clear downward trend in the past 20 years, which may be related to LG's early transition to other display technologies such as OLED.

Korean companies are about to launch a patent war, and domestic companies are in urgent need of responding in advance

Although Korean manufacturers led by Samsung and LG are gradually withdrawing from LCD production, they hold a large number of related patents. After shutting down their production lines, whether they will use their patent advantages to initiate infringement lawsuits against domestic manufacturers in order to continue to maintain their influence in the LCD industry and obtain direct benefits is something that domestic display panel manufacturers cannot underestimate.

In fact, such operations are not unfamiliar to giant companies in the industry.

According to the Korea Times, after LG Electronics officially announced its withdrawal from the smartphone business on April 5, a senior executive said the company is still studying how to use wireless patents, and the revenue generated by patent litigation is expected to contribute to the continued growth of LG's related performance. The report pointed out that LG will initiate patent litigation against smartphone manufacturers around the world that have not signed licensing contracts with it.

Therefore, domestic manufacturers need to pay close attention to whether Samsung and LG will follow suit and initiate patent lawsuits against domestic display panel manufacturers.

It is worth noting that LG has used its LCD patents to initiate patent infringement lawsuits against Hisense, NEC, ViewSonic, Chunghwa Picture Tubes, Tatung Corporation and other companies in mainland China, Japan, the United States and Taiwan.

On November 4, 2019, LG Electronics sued Hisense Group and its subsidiaries in Hong Kong and the United States in the United States for infringing its patent rights of US Patent USRE046795E "Backlight unit and liquid crystal display including the backlight unit". After being sued, Hisense Group filed a request with the Patent Trial and Appeal Board (PTAB) on July 20, 2020, requesting that some claims of the above-mentioned patent in question be invalidated. However, the PTAB made a ruling on January 28, 2021, ruling that the patent in question is valid. At present, the patent infringement case between LG Electronics and Hisense is still ongoing.

In addition, there are LCD patent licenses between Samsung and domestic manufacturers. In 2013, eight LCD patents whose applicants were Japan's Panasonic and Hitachi were licensed to BOE, a leading domestic display panel manufacturer. Later, these eight patents were transferred and the patent holder was changed to Samsung. The transfer does not break the license, and after the patent holder changed, the two parties to the license also became Samsung and BOE.

Aijiwei intellectual property consulting experts believe that although Samsung and LG will continue to actively develop OLED, Micro LED and other technologies after shutting down their LCD production lines, the two Korean manufacturers, especially LG, still have a large number of valid LCD patents with high maintenance value and short remaining lifespan. There is an expectation of triggering a patent war through various means to restrain market development, and it is even possible that some patents will flow into NPE (Non-Practicing Entity). We need to be particularly vigilant about this.

Although there is still a big gap between the global layout and the leading Korean companies, domestic LCD manufacturers have a large number of patent reserves, which are mainly concentrated in China. For example, BOE and TCL Huaxing Optoelectronics have far more LCD patents in China than Samsung and LG. Taking BOE, TCL Huaxing Optoelectronics, Shenzhen Tianma and HKC as examples, the patent situation of domestic mainstream LCD manufacturers is as follows.

Figure 7 Patent distribution of mainstream domestic LCD manufacturers

Statistics are from IncoPat patent database, and the graphics are from Jiwei Consulting

However, the number of patents is only one aspect of innovation protection and cannot be used directly to determine technological leadership and infringement. In addition, compared with Samsung and LG, there is a clear gap in the global layout of patents among domestic mainstream LCD manufacturers. Among the four domestic manufacturers, BOE has made a certain amount of LCD patent layout in the United States, South Korea, Europe, Japan and other countries and regions. Although HKC has a small number of LCD patents, about 20% of them are deployed in the United States, and it has currently formed 210 valid LCD patents in the United States. The valid LCD patents of TCL Huaxing Optoelectronics and Tianma Microelectronics are highly concentrated in China, and Tianma Microelectronics does not even have an effective overseas LCD patent layout.

Figure 8 Global layout of domestic manufacturers’ LCD patents

Statistics are from IncoPat patent database, and the graphics are from Jiwei Consulting

In view of the precedent of Hisense being sued by LG for patent infringement in the United States, domestic LCD industry chain companies should be vigilant and plan ahead. Aijiwei intellectual property consulting experts believe that Samsung and LG have been deeply involved in the global market LCD field for many years, and they must have corresponding patent layouts in key technologies. After shutting down the LCD production lines and markets, if the two Korean giants maintain their profits and influence through patents, it will cause considerable trouble for domestic manufacturers. On the one hand, it has never been easy to deal with patent infringement lawsuits initiated by industry giants. If the timing is accurate, it may also affect the commissioning or listing process of new production capacity; on the other hand, once the infringement is established or forced to settle, part of the profit will inevitably be handed over. Either result is a heavy blow to domestic manufacturers. Therefore, it has become a necessary and urgent response strategy to start patent sorting, patent stability analysis and risk investigation of core technologies in the corresponding fields in advance.