On November 16, the news that BOE (000725.SZ) took a stake in Honor was exposed.
Honor said: "Honor's current revenue, profits and operating cash flow are growing steadily, and a diversified ownership structure has always been the development principle that Honor adheres to. Honor has also always adhered to the principles of openness and collaboration, and is committed to uniting industry chain partners to bring product innovation and experience leaps to users, and to better serve global consumers."
As the OLED panel manufacturer with the largest domestic production capacity and the domestic mobile phone brand with the highest domestic market share, this investment will strengthen cooperation between the two parties, which will help expand BOE’s OLED panel “exports” and help Honor ensure the supply of screen resources.
China Business News reporter saw in QiChacha's database that Honor Terminal Co., Ltd. has six new shareholders, including BOE, CICC Qizhi (Shanghai) Equity Investment Center (Limited Partnership), Rosy Fable Asia L.P., Comprehensive Reform and Win-Win (Hangzhou) Equity Investment Fund Partnership (Limited Partnership), Guosen Capital Co., Ltd., and Shenzhen Baoan District Investment Management Group Co., Ltd. However, BOE’s specific shareholding ratio in Honor was not shown.
Zhou Hua, chief analyst of CINNO Research, told China Business News that according to public information, on November 16, Honor obtained strategic financing from BOE through a private placement. BOE and Honor are respectively the OLED panel manufacturer with the largest domestic production capacity and the domestic mobile phone brand with the highest domestic market share. BOE's investment in Honor will strengthen the cooperation between the two parties.
Zhou Hua analyzed that after Huawei's mobile phone shipments dropped significantly in recent years, although BOE has actively expanded customers such as OPPO, vivo, Apple, and Samsung, the volume of orders has never been comparable to its huge production capacity. According to CINNO Research data, BOE's OLED production line utilization rate was only 44% in September this year, while the average domestic OLED production line utilization rate during the same period was 59%. In October, these two values were 54% and 62% respectively. BOE's OLED utilization rate is lower than the average level of domestic companies. Therefore, investing in a leading domestic terminal brand will help consolidate its status as a primary supplier or even a sole supplier. In addition to mobile phones, Honor's terminal business also covers tablets, laptops, TVs, etc., which can provide BOE with a large number of order needs.
"For Honor, as its volume continues to expand, it is also important to obtain stable and reliable sources of panels." Zhou Hua believes that this kind of binding partnership between panel manufacturers and terminal manufacturers was quite common in the early stages of the development of the domestic OLED industry. Since then, it has loosened to a certain extent as competition has intensified. However, at a time when each company is still unable to solve the profit problem after increasing its production capacity, further strengthening the binding relationship through equity participation is also an option for powerful manufacturers.
Chen Jun, deputy general manager and chief analyst of Sigmaintell, also analyzed to China Business News that BOE’s investment in Honor can better lock in some customer resources and is also an extension of the industry chain. For Honor, obtaining a stake from BOE can better protect the core resources of OLED screens, which has certain benefits for both parties.
Another person in the industry who did not want to be named believed that there were pros and cons to this. The benefits are the growth of the industrial chain and stable cooperation. There is also precedent for cooperation between Apple and JDI. Screens are a core resource, and terminal companies are also willing to strengthen the competitiveness of the supply chain in this area. The disadvantage is that it may affect BOE's cooperation with other customers, and it may also affect Honor's cooperation with other panel manufacturers. They are expected to have to do some maintenance in their diverse customer relationships.
On November 16, BOE’s stock price remained flat, closing at 3.68 yuan per share. As of press time, BOE has not yet made an official response to China Business News reporters on relevant issues.
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