Are Displays the Next Batteries?

Why screens for phones and computers are a new tech battleground

After President Trump tweeted in April that the “WHOLE ELECTRONICS SUPPLY CHAIN” would be investigated for national security risk, it was worth asking what component after chips would attract attention. Rare earth magnets are certainly one. Flat panel displays—the screens in smartphones, TVs, and computers—are another area where economic and security concerns are coming together in Washington.

“We need to have semiconductors, we need to have chips, and we need to have flat panels—we need to have these things made in America,” Commerce Secretary Howard Lutnick has said. Congress is pushing the Pentagon to officially list BOE, China’s largest display maker, as a “Chinese military company.” Trump’s tariffs may reshape the display landscape. And the world’s two leading display manufacturers—one Korean and one Chinese—are battling in U.S. courts over unfair subsidy claims.

Why care about displays? They’re a key component in many electronic products—TVs, computers, phones, cars, etc. Better display tech has produced screens that are better, flatter, with lower power consumption. In devices like phones, displays are one of the most expensive components (as this teardown from Nikkei Asia shows.)

Not all displays are created equal. LCD displays are now older technology and therefore commoditized. OLED displays in high-end smartphones are still technologically demanding. The display industry has migrated geographically over time as the technology matured. First Japan dominated production of displays, then Taiwan, now Korea and—increasingly—China (source here).

Global LCD market share

Global OLED market share

(Source: https://www2.itif.org/2024-chinese-display-innovation.pdf)

Producing cutting edge displays requires huge outlays on R&D and capital expenditure. The economies of scale have meant that generally a handful of firms dominate the market. You could think of displays as a cousin of semiconductors: both the engineering and the economics are similar. So, increasingly, are the politics of their production.

China’s BOE has been rapidly expanding its market share, threatening the viability of all non-Chinese firms (mostly Korean, Taiwanese, and Japanese.) One recent report argued that “Displays are the New Batteries,” suggesting that coming Chinese dominance of displays posed economic and national security risks. BOE in response commissioned a consultant to write a report with the opposite conclusion.

How should we think about the risks of Chinese dominance of the display market? The “Displays are the New Batteries” argument has four main prongs:

1. The Chinese state heavily subsidizes BOE

There’s no doubt about this. It’s not only that a state entity is the largest shareholder of BOE.

BOE also benefits from staggeringly large government subsidies. For example, one new BOE fab in Chengdu is 47% owned by various state-backed entities, according to Nikkei Asia. The Korean and Taiwanese governments certainly try to support their display firms, but never on the order of taking half the equity stake in a new display fab. So it’s certainly true to say that Chinese display firms benefit from uniquely large subsidies—a critical advantage in a capital-intensive industry.

As you’d expect, this influences pricing. As HBS Professor Willy Shih has noted, BOE and other Chinese firms price their displays as if they didn’t have to consider capital costs—because they generally don’t. Non-Chinese firms that raise money at market rates struggle to compete.

2. BOE has military connections and supports civil-military fusion

Well, of course—BOE is a Chinese company. It must support civil-military fusion when asked. On the spectrum of tech companies’ ties to the Chinese military, however, does it have deeper ties than you’d expect from a partly state-owned firm? I’m not sure.

3. Displays are militarily critical

True, though military demand is a tiny share of overall demand. According to the BOE-funded report, “global display sales for military use were USD 1.33 billion in 2024. This is relatively negligible compared to the total global display industry, which was estimated to be worth over USD 156 billion in 2024.” In this regard, the display industry is like semiconductors: militaries need chips but most chip companies don’t really need militaries.

Displays are also like semiconductors, though, in two other ways. First, the Defense Department has some unique demands for high-tech displays. Second, because of that, DoD has played an important role in funding next-gen display technologies, sort of like the role DARPA played in driving chip advances.

So like in chips, there are deep ecosystem relationships between display tech and defense application. That should make us nervous if the industry’s center of gravity shifts to China.

4. China’s scale creates opportunities for coercion

After China’s rare earth magnet cutoff this spring, the threat of coercive supply disruptions isn’t a hypothetical threat. Across the supply chain, we should be vigilant about overreliance on Chinese suppliers. In assessing dependency risks in any market, there are several questions to ask:

1. What’s China’s market share?

2. How easily can the product be stockpiled?

3. How easily can new supply be brought online?

4. How much economic output depends on the product, and where is this output located?

In rare earth magnets, China had ~90% market share, auto companies had failed to stockpile, new supply will take years, and the entire Western manufacturing base needs magnets. So China could cause significant manufacturing disruption in the West at minimal cost to itself.

Displays are somewhat different. China’s market share in LCDs (ie, less advanced displays) is racing higher, though still far from 90%. Stockpiling is unrealistic and bringing online new supply takes time. But I’d posit that less Western economic output depends on access to LCDs. TV and other electronics output would collapse, but many TVs are assembled in China anyway. In other words, China would bear much more of the cost than it did with the magnet cutoffs. For OLEDs (more advanced displays) China’s market share isn’t as high as LCDs, though it is still growing rapidly.

In sum, I’d put overdependency risk of displays as “lower than rare earth magnets, but trending rapidly in a worrisome direction.”

The direction of travel is striking. Here’s a chart from a report I published earlier this year via AEI on the electronics supply chain. This shows equipment spending by country. Equipment spending is a pretty good proxy for production capacity growth. It’s almost all in China.

One recent forecast suggests that basically all display equipment spending in 2025, 2026, and 2027 will be in China. If this trend continues, China will rapidly approach rare earth-levels of market share in display production.

Of course, the upside to Chinese subsidized production is lower prices. If the Chinese financial system provides below market prices for capital, display consumers (that is, all of us) benefit from below-market prices for displays. Prices have indeed trended downward.

But we ought to have learned to be careful with the “don’t worry, prices are falling” argument in favor of tolerating Chinese industrial subsidies. There’s the multi-trillion-dollar macro-level problem that Brad Setser, Michael Pettis, Matthew Klein and others have documented, ie, that the flip side of Chinese industrial subsidies is Chinese underconsumption that both makes Chinese households poorer and—because they buy less than they otherwise would—sucks demand from the world economy and contributes to deindustrialization from the Midwest to the Mittelstand to Malaysia.

But there’s also an industry-specific reason not to accept the “lower prices make Chinese subsidies ok” argument. Unlike toys and t-shirts, displays are a manufacturing segment with many links to cutting-edge engineering. Today, like in chips, complex display making equipment and chemicals are largely produced by Western firms. As China dominates display manufacturing, we must assume it will win market share in sophisticated upstream segments, too, at the expense of the Western advanced chemicals and manufacturing firms that currently supply the display industry.

Moreover, BOE’s expertise in displays will have spillovers in other sectors. Recent headlines show that BOE is not only doing serious R&D in display tech, but also in adjacent spheres like solar and semiconductors.

A recent report from Stephen Ezell of ITIF assessing the innovativeness of BOE and the Chinese display industry in general gave it high marks. BOE’s R&D spend suggests the same: it reportedly spends around $2 billion annually on R&D, which is in the same ballpark as what Samsung Display spends. In other words, BOE’s advances aren’t mostly about technology copying or theft (though US courts say this has happened) but about BOE’s state-backed financial model allowing R&D spend equivalent to the industry leader. BOE looks a lot like Huawei: state-funded and also capable of innovating near or at the technological frontier.

So I see two grounds for concern about BOE. First, that Chinese state subsidies are leading us toward a display market with overdependence risks on China. Second, that these market distortions will undermine R&D spending in the West and cause future innovations to occur in China.

What is to be done? The options aren’t great.

1. Chips Act-style subsidies. Yet the U.S. would be starting from a worse position than in semiconductors. We had substantial chip production before the Chips Act, even though market share was declining. We have hardly any display capability.

2. Component-level tariffs—that is, tariffing not only imported displays but also Chinese-made displays integrated into devices like phones and TVs. However, component tariffs would only make sense, I think, on China. Imposing them on Korea, Taiwan, and others, would undermine the effort to build up non-Chinese manufacturing scale needed for efficient production.

3. Market access restrictions on Chinese firms. A provision called Section 5949 restricts federal procurement of products with certain Chinese chips inside. We could do the same for Chinese displays. Market access restrictions have the benefit of being reciprocal—Beijing uses similar tools to encourage its own producers.

None of these are a silver bullet. But doing nothing doesn’t seem like a sustainable approach either.

For the future: I’m working on a deeper dive on the Pentagon’s mid-1990s effort to build a display industry domestically—and why it failed.