(#6) Business Model Battle: From Panel Manufacturing to Ecosystem Building

Editor’s Note: As display technology matures and panel production capacity approaches saturation, competition in the global display industry is evolving. Price wars and capacity races no longer decide the outcome; instead, success depends on high-level business-model design and the ability to build ecosystems. From South Korea’s vertically integrated conglomerates and China’s manufacturing-to-service transformations to the standards set by U.S. tech giants, a full-scale “battle of models” for industry dominance and value capture is underway. This article analyzes the strategic paths of major players and the underlying logic that will shape the next decade.

I. Vertical Integration: Samsung’s Closed-Loop Empire — Strengths and Pressures

Samsung Display exemplifies a near-complete vertical integration model. Its advantages stem from control across the value chain: upstream materials (Samsung SDI, Samsung Electro-Mechanics), midstream panel fabrication, and downstream end products (Samsung Electronics). This integration enables technological synergies, cost optimization, and faster iteration.

Key strengths

Rapid technology deployment: Advances such as QD-OLED can be rolled out quickly across Samsung’s TV and monitor lines without depending on external customer adoption.
Internal hedging: Losses in panel manufacturing can be offset by profits from Samsung’s device businesses during industry downturns, improving resilience.
Closed-loop feedback: End-user data flows directly back into panel and materials R&D, accelerating product refinement.

Current challenges

Customer trust and allocation: When Samsung supplies premium panels to both internal and external customers (Apple, Sony, etc.), external partners worry about fair access to capacity and cutting-edge tech.
Internal demand ceiling: Slowing smartphone growth limits Samsung Electronics’ ability to absorb high-end panels, forcing Samsung Display to expand its external customer base.

“Samsung is walking a strategic tightrope,” says Daniel Kim, Head of Asia Technology Research at Macquarie Securities. “It must balance its roles as a leading supplier to Apple and as a top smartphone competitor. With external revenue surpassing 55% in 2024, Samsung Display must transition from an ‘internal service division’ to a global solutions provider — and changing a closed-loop culture is the hardest part.”

II. From Mass Manufacturing to Scenario-Based Services: BOE’s “Screen IoT” Experiment

BOE, the world’s largest LCD manufacturer by shipment area, illustrates China’s strategic response to a “post-scale” environment. Its core approach — Screen IoT — extends beyond panels into integrated hardware-software solutions that combine displays with AI, big data, and IoT for vertical scenarios such as retail, healthcare, and transportation.

Transformation practices

Smart retail solutions: BOE supplies digital signage plus content-management platforms, customer-flow analytics, and interactive marketing tools. In one deployment for a French supermarket chain, screen sensors analyze shopper movement to optimize merchandising and boost sales.
Medical displays and digital hospitals: Through acquisitions of U.S. medical-equipment firms, BOE applies its display expertise to medical imaging (ultrasound, endoscopy) and aims to build integrated digital hospital solutions.
Ecosystem investments: BOE’s investment arm backs upstream innovators — driver chips, Mini/Micro LED transfer, AR optics — to strengthen its solution ecosystem.

“BOE’s shift mirrors the broader upgrading of China’s manufacturing base,” notes Timothy Zhao, Head of Industrial and Technology Hardware Research, Asia Pacific at Goldman Sachs. “It leverages scale, capex capability, and government relationships to move downstream into higher-value solutions. New businesses may account for only ~15% of revenue today, but their success will determine whether BOE is seen as a cyclical manufacturer or revalued as a smart IoT technology company.”

III. Ecosystem Definers: Apple, Google, and Microsoft’s Soft Domination

Tech giants such as Apple, Google, and Microsoft follow an Ecosystem Definer model. They typically don’t build panels themselves, but they shape the industry by setting hardware standards, crafting operating systems, and building developer platforms.

Apple — the “Shadow Designer”

Specification authority: Apple’s display requirements (ProMotion adaptive refresh, XDR dynamic range, Vision Pro microdisplay specs, etc.) set industry benchmarks, driving suppliers’ R&D and capex.
Deep supplier partnerships: Apple secures supply and innovation through prepayments and joint development agreements with suppliers like LG Display and Samsung Display.
Vertical control through software and silicon: By developing display driver chips and image-processing engines (e.g., in the M-series), Apple controls the pipeline from signal to pixel — preserving a differentiated user experience and ecosystem moat.

Google and Microsoft — platform standards

Google Android: System APIs and design guidelines for foldables and large-screen devices help standardize developer practices and speed app optimization across OEMs.
Microsoft: Initiatives such as Windows Holographic and hardware security frameworks aim to set standards for AR/VR and next-generation PCs, extending Windows’ platform advantages into spatial computing.

“These tech giants are the lighthouse customers and architects of the industry,” says Amit Daryanani, senior analyst at Evercore ISI. “Their platform and procurement decisions can mobilize billions in supply-chain investment. Their returns come less from panels and more from device premiums, services, and ecosystem economics.”

IV. Emerging Models: Open Innovation Alliances and Solution Providers

As technological complexity grows, collaborative models are gaining traction: Open Innovation Alliances and specialized solution-as-a-service providers.

Examples

AFEELA (Sony–Honda JV): Sony supplies electronics and in-vehicle displays and entertainment systems while Honda contributes vehicle engineering, jointly developing intelligent EVs where Sony’s display and media expertise extend into mobility.
Germany’s “Car 2.0” initiative: Volkswagen, Bosch, and partners unite display makers (e.g., Japan Display Inc.) and software firms to standardize next-gen cockpit displays and interactions as a counterweight to vertically integrated rivals.
Solution providers: Platforms like SignageOS offer enterprises a single cloud control plane to manage heterogeneous digital signage deployments globally, abstracting hardware differences and accelerating deployments.

These collaborative and service models reduce entry barriers, distribute R&D risk, and accelerate integration across hardware, software, and service layers.

V. Financial Comparison: Profitability, Valuation, and Risks

Different models produce materially different financial profiles and valuation dynamics. The table below summarizes the core contrasts.

Business model — Representative company — Core advantages — Financial profile & valuation — Key risks

Vertical integration — Samsung
- Advantages: Rapid co-innovation, resilience via end-product hedging.
- Financials: Large revenue scale; panel margins fluctuate with end-market cycles. Valuation often suffers a conglomerate discount.
- Risks: Heavy capex; difficulty building external customer trust.
Scale manufacturing + service transformation — BOE / LG Display
- Advantages: Cost leadership, scale economics.
- Financials: Rapid revenue growth but margin pressure due to high R&D and SG&A during transformation. Market awaits proof that services deliver sustainable premium margins to re-rate valuation.
- Risks: Execution complexity and cross-industry competition.
Ecosystem definer — Apple
- Advantages: Pricing power, superior UX control, highly profitable services and hardware.
- Financials: Hardware gross margins often >35%; services gross margins >70%. Display tech contributes to premium pricing rather than stand-alone margin.
- Risks: Platform bets and supply-chain dependencies.

“The capital market is voting with real money,” observes JJ Park, a global display supply-chain analyst at JP Morgan. “Pure panel manufacturers face commoditization with P/E multiples often between 5 and 10. Firms proving ‘technology-defining’ capabilities or ‘solution premium’ are rewarded with higher multiples. This is ultimately a contest over how the industry’s surplus value is distributed.”

Expert Consensus and Strategic Implications

The display industry has entered a tiered competitive era. At the foundational level, panel makers compete on cost, yield, and core innovation. Above that, vertical integrators and ecosystem definers compete on end-to-end user experience and supply-chain control. At the strategic apex, competing technology-business paradigms vie for dominance in future computing platforms — spatial computing, intelligent vehicles, and connected environments.

Future winners are less likely to be the owners of the largest fabs and more likely to be the architects who integrate hardware innovation, software intelligence, developer ecosystems, and vertical scenario expertise into a self-reinforcing platform. For all participants, the priority should be to define their business model clearly and commit to irreversible investments in distinctive capabilities rather than chasing short-term technological fads.

— Ken Park, Vice President, Display & Semiconductor Research, Counterpoint Research; former Director of Strategic Planning, Samsung Electronics