Samsung signed a prepayment agreement with San'an Optoelectronics to secure a stable and sustained source of LED chips for its production of Micro LED displays. (Image: Samsung)

Chinese LED behemoth San’an Optoelectronics today issued a document announcing that it will team up with Samsung to Co-develop Micro LED displays.

Samsung and San’an Opto signed a prepayment agreement as the establishment of their long-term partnership.

The Korean display manufacturer will give San’an Opto a prepayment of USD 16.83 million to secure a certain amount of LED chips used for producing displays. ‘There is a possibility to discuss potential expansion plans ahead of schedule if Samsung’s monthly orders demand for a chip supply over the agreed amount,’ wrote the document.

The discussion of the strategic partnership for Micro LED development between the two companies will continue.

The document said that Samsung will consider San’an Opto as its major chip supplier once the Chinese LED chip maker become able to mass produce the desired chips. At that time, these two will open up a negotiation for a new supply agreement.

Through the strategic collaboration, Samsung is looking to secure a stable source of chip supply, while San’an Opto expects to lead the Micro LED market.

The prepayment agreement starts its effect on February 5 until the end of the third year after the mass production begins. By that time, the termination of the agreement will be automatically deferred to a year later unless the two firms call a halt to the deferral 120 days before the last day.

San’an Opto includes this agreement as a factor that will be affecting its earnings for the next three years.