Honor (pvt) is an unusual smartphone brand in that it is state-owned, having been sold to the Shenzhen government (98.6%) and a group of Honor’s former distributors and partners (1.4%) by its former parent, Huawei (pvt), in order to shield the company, formerly Huawei’s mid-range smartphone line, from US trade sanctions that have severely limited Huawei’s ability to compete in the smartphone market.  In making the split, which raised ~$15b for Huawei, Honor no longer had access to Huawei’s vast IP, huge R&D budget, or Huawei’s marketing, but at the same time is no longer burdened by the US trade restrictions that have cost Huawei much of its smartphone business.
The ~7,000 employees became responsible for their own product development and marketing in November 2020 and was able to release its first purely ‘Honor’ smartphone in early 2021 and has climbed to a ~4.8% share of the global smartphone market heading into 4Q 2021.  More to the point Honor has just released its first foldable smartphone, with a delivery date of January 18, which puts it in with the likes of Samsung, Huawei, Oppo (pvt), Xiaomi (1810.HK), and Motorola (MSI), all of whom have foldables which range in price from ~$925 to almost $2,200.  While the Honor Magic V does not have an official price, it is expected to sell for between $1,500 and $1,600, putting it in roughly the same price category as the Samsung Z Fold 3.
All in, there is nothing outstandingly different about the Honor Magic V relative to other foldables, but as a first entry for a relatively new company, without the resources of Huawei, it’s a good start.  While Honor does have a good following in China, they still face intense competition from other Chinese and outside brands, so their success in the foldables realm is not assured.  That said, they do have the Shanghai government as their primary funding source, which gives the local government a large vested interest in Honor’s success, which certainly will not hurt when it comes to allocating resources, particularly financial ones. 

​As the Metaverse hype continues into 2022, we expect big fish to swallow small fish as the need to build a Metaverse infrastructure resonates with any company that is even related to media.  The most recent rumor-mongering, and there are plenty of Reddit (pvt)-based sources in the VR space, says China’s internet giant Tencent (700.HK) is ripe to purchase gaming smartphone producer Black Shark (pvt), a five year old company whose largest corporate shareholder is Xiaomi.  The company has released a number of gaming smartphones over the last few years and has earned a reputation as a high performing gaming device, but there are questions as to whether Tencent will continue to produce Black Shark smartphones if it makes the acquisition.
The deal, which is said to be valued between $408m and $424m, has the blessing of Xiaomi, as an investor in the company, but while the Black Shark company store advertises its phones, and a variety of accessories, the word is that Tencent is more interested in the company’s VR capabilities as part of a developing ecosystem for VR overall at Tencent.  While there is little about Black Shark’s VR gaming expertise the company promotes itself as working toward developing a gaming ecosystem including hardware, software, and service, so we have to assume that Tencent sees a layer of product expertise that is not visible directly.

​Samsung (005930.KS), along with a number of other smartphone brands, has a trade-in/trade-up program that allows existing and potential customers to trade in various smartphone models toward a new phone.  Included are many popular Samsung Galaxy Models like the S8+ ($610 rebate) or the Galaxy Note 8 ($720 rebate), even including older models like the Galaxy S6 ($100 rebate) or the 2016 Galaxy J1 ($10 rebate).  In order to ‘convert’ Apple (AAPL) or other branded smartphone users to Samsung, the rebate program also includes many other phones, like the iPhone 6s+ ($330 rebate)  or even the elderly (9/2013 release date) iPhone 5c ($50 rebate).  Also included are select models from Huawei (pvt), LG (0065930.KS), Oppo (pvt), Sony, and Xiaomi (1810.HK).
That said, Samsun has begun to expand its trade –in/trade-up program to other devices including laptop and watches, now including Samsung products and laptops and wearables from LG, Lenovo (992.HK), ASUS (2357.TT), HP (HPE), Dell (DELL) and Apple.  While a full rebate list for the US is not available, returning a Galaxy Watch 2 or Watch 3 when you purchase a Galaxy Watch 4 gives you an $83 rebate and incentives on other than Samsung laptop brands command a premium as high as $125 to convince the potential buyer to switch to the Samsung brand.  The program in South Korea is administered by Mintit (pvt), a company we mentioned in our 12/27/21 note, that operates trade-in ATMs for smartphones.  The company will pick up the used laptop and perform an inspection and then informs the user of the rebate price being offered, returning the device if physically unacceptable or if the user decides the offer is not high enough.  Samsung plans to expand the program further this year as it launches new products.

QD III.5
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​One point that we feel obligated to make concerning quantum dots is safety.  The highest efficiency quantum dots are based on Cadmium Selenide.  Cadmium is a metal similar to zinc, however it is extremely toxic to humans and the environment, with indications that cadmium mining operations going back to pre-WW II had contaminated water sources, leading to health problems for local populations.  It is one of only 6 materials banned by RoHS (EU Restriction of Hazardous Substances) and is considered a carcinogen by the International Agency for Research on Cancer.  There are alternatives to using Cadmium in quantum dots, with Indium and Zinc among the alternatives, although they do not have the same characteristics. 
While both Cadmium based and Cadmium free QDs are produced, we found it unusual that there was a very significant disparity between where each type of QD is used.  According to the largest supplier of QDs globally, Cadmium free quantum dots are used in almost all display products produced by non-Chinese display producers, while Chinese display products seem to use Cadmium based QDs.  There is a cost to using Cadmium free QDs, as they tend to be more expensive and less efficient, but are free of toxic materials, so one might look at the trade-off between the development and use of Cadmium free QDs as one that has slowed the overall development of QDs over time.  That said, we would rather see the development of Cadmium free QDs as a global standard than a bifurcated development scenario even if it extends the developmental timeline. 

​CES is certainly a place for CE companies to show not only what they sell, but also what they are working on.  In the XR space (combined AR and VR) there are a number of companies, both large and small, that have announced XR headsets but have not quite released them, and by released, we mean a date and price where the devices can be bought by retail customers, not on a future ‘Gofundme’ date or a pre-order book.  One company that we were hoping would be releasing their latest VR headset was Pimax (pvt), a relative small VR development company out of Shanghai.   Pimax has been releasing VR headsets since 2016 with the goal of moving the display resolution to 4K and beyond with each successive model.
Starting in 2016 with a headset containing a single LCD 1920 x 2160 display and ending with the 11/30/20 release of a model (Pimax 5K Super) with a dual LCD display having 2560 x 1440 resolution.  What makes the company unusual is they have been promoting a very high resolution model (Pimax Reality 12K QLED) based on a Mini-LED quantum dot LCD display, that, if we were to believe the promos, would have a single eye resolution of 5760 x 3240 (1200 ppi), far above the highest currently available.  This device also includes a horizontal FOV (Field of View) of 200⁰  and a vertical FOV of 135⁰, with the average VR headset FOV around 100⁰ and the limit of human eye at 220⁰ horizontal and 135⁰ vertical.   Not only would this be a spectacular FOV and highest VR resolution available, it would also have the highest screen refresh rate at 200Hz, making it the all-around best VR headset to date, all of which comes, according to the company, with no image distortion, which is usually the result of expanding FOV.
Unfortunately, after stating that they would have a booth at CES and offering discounts if you buy at the show, they did not show up at CES, citing COVID-19 travel restrictions as the reason, leaving only the hope that this device will not be one of the many that fall months or even years behind the initial announcement date of October 2021.  With expectations for 2022 XR unit volumes to expand by between 55% and 67% and the promise of new AR/VR display technologies such as Micro-OLED and even Micro-LED leading the 2022 charge, we hope others do not fall by the wayside or postpone releases.  As we have noted, for the Metaverse to work, even at a limited level, VR headset technology has to advance quickly, with less hype and more ‘reality’ behind it.  Hopefully there will be less space between announcements and releases with some of the larger companies, although the long-awaited Sony (SNE) Playstation VR2 was again shown at CES but no release date or price was given.  

​In previous notes we have spoken about quantum dots and some of the current and future applications that present themselves for quantum dots, but in all of the application mentioned previously the dots have been stimulated optically, that is by the light coming from another source.  In some cases it was from LEDs (QDEF film or Mini-LED/QD), in some cases it was from OLED (QD/OLED), and in the future it could be from micro-LEDs, but in each of these applications, the quantum dots were shifting colors as they were being stimulated by optical sources.  Quantum dots have another characteristic that gives them a potential life even further down the road and that is the ability to be a self-emissive light source without being stimulated by another optical source.
Quantum dots are similar to OLED materials in that they can be made to ‘luminesce’ when stimulated by an electrical voltage, without the necessity of being ‘pumped’  by a light source.  In such a circumstance they produce the same narrow band color that they would in an optically stimulated situation, creating the ability for an RGB display.  That said, just as it was difficult for researchers to come up with a mechanism (stack) for OLED materials that could produce stability and consistency over the life of the device, it is the same for quantum dot EL materials, and such a device continues to be researched by a number of companies and educational institutions across the globe.
When it comes to making quantum dots for EL (Electro-luminescence) applications there are different challenges than those facing engineers designing materials for light-pumped applications.  In order to produce an efficient QD EL material, large numbers of QDs must be squeezed into a small space, which makes their shape, a result of the ‘shell’ that is used to protect the quantum dot materials, a focus point.  As ‘dots’ would imply spherical partials, that has been the typical shape for quantum dots but some have found a way to create a cube shell, which allows for more stable and more easily packed QDEL materials.
But there are still obstacles to overcome for EL QDs, and that tends to come down to the balance between  material efficiency, the ability to convert as much of the electrical energy put into the material to light, and the lifetime of the material itself.  Again similar to OLED materials, there is a balance with each new Quantum Dot structure that shows the relationship between applying additional voltage and the light output of the material.  At a certain point, increasing the voltage produces little or no additional light, making the device actually less efficient, while also reducing the lifetime of the material, so QD EL developers are always looking toward developing new QD materials and structures that  have a high efficiency and a long lifetime..
Thus far such materials are still in development, although red QD EL materials that have a lifetime and efficiency that can meet commercial specifications are becoming available from industry leader Nanosys (pvt), with a full stack (RGB) potentially available in 2024 and commercial production in 2025.  While there are certainly a number of obstacles that need to be overcome before such materials can compete with other display modes, the progress seen in developing QD EL materials over the last few years leads us to believe that quantum dot EL materials will find a place in the display world alongside quantum dot applications used today, and can present another way in which displays might improve and become even more pervasive than today.

​If nothing else China’s largest LCD producer BOE (200725.CH) is persistent.   The company has been trying to enter Apple’s OLED display supply chain for over two years and finally has qualified to become a 3rd supplier to Apple for iPhone OLED displays (see our note 11/8/2021) late last year.  While the company is in the early stages of its flexible OLED relationship with Apple, it seems BOE is not wasting any time about pushing forward toward increasing that relationship.
According to local South Korean press, BOE is modifying the 3rd phase installation of its B12 Gen 6 OLED fab in Chongqing, to be able to produce flexible IT panels, rather than smaller flexible smartphone panels, as are  the other two lines at the B12 fab.  Expectations are that they will adapt the line, which is expected to begin equipment installation at the beginning of 2Q, to handle displays up to 15”, above the ~10” size used in the iPad.  The line is also expected to be able to manage a tandem (2 stack) OLED structure, different than the single stack used in smartphones.
BOE would again be in contention with Samsung Display (pvt) and LG Display (LPL), who are also small panel OLED suppliers to Apple, with Samsung dominating the flexible OLED tablet in laptop market.  Both SDC and LGD are said to be developing Gen 8 OLED fab capabilities in order to expand their ability to supply larger OLED displays to Apple and others, while BOE’s B12 fab is Gen 6, leading some to believe that the BOE B12 Phase 3 line is a pilot for a for a Gen 8.5 fab to be built in the future. 

It is hard to call a sales increase of 23.5% y/y and an operating income up 52.5% y/y a miss, but Samsung Electronics’ (005930.KS) 4Q preliminary results came in a bit below consensus, at least on the operating income side, while sales were on target.  No detail was given but we suspect that advertising costs for Samsung’s foldable line and costs associated with Samsung Display’s (pvt) QD/OLED ramp could be responsible for the lower than expected operating income.  Samsung’s memory and smartphone business (including foldables) are likely the sales drivers for the quarter.  Samsung will report full results on January 27.

Basic electrical components are often ignored in lieu of silicon based devices such as microprocessors, memory, and LEDs, but resistor, capacitors, inductors, and similar basic devices such as circuit boards and wiring are such an integral part of consumer electronics that the sum total value of such components can be a substantial part of the BOM of CE devices.  That said, looking at a typical PC would reveal that ~50% of such a device, including components, would be made up of various metals, some of which have been in high demand and seen unusually large price increases in 2021.

​As to the components themselves, our focus has been on MLCCs (Multi-layer Ceramic Capacitors),a physically small component that is essential to a number of CE devices, particularly 5G smartphones and electric vehicles.  Growth rates for MLCCs vary from ~5% to ~8% over a 5 year period and the extended lead times seen in 2021 seem to be continuing into 2022, although as those MLCC producers that have such expertise have shifted production away from large size MLCC that are used in heavier equipment, such as MRIs or industrial power supplies, to smaller sizes used in smartphones or similar mobile devices.  While the market remains tight and lead times long, this has kept the industry from falling into a more severe shortage, although prices have risen as those with low inventory levels are forced to pay up and order higher levels to gain traction with producers.  While the char below shows PPI for a number of basic passive components through mid-2020, the trend has changed little since then.

[1] Prices are based on OTC and CFD financial instruments and are for reference only

​As we noted yesterday, the announcement of Sony’s (SNE) adoption of Samsung Display’s (pvt) QD/OLED TV panels, a positive for the technology, and the ‘non-announcement’ of same from SDC’s parent Samsung Electronics (005930.KS) was a bit confounding, given the close relationship between the two.  The lack of such an announcement from Samsung prompted questions being posed to the head of Samsung’s DX division at presentations last night, which resulted in a statement that shed some light on the question.  Simply put, it was stated that the quantity of QD/OLED displays available to Samsung was not enough for the company to make such an announcement, meaning that SDC’s yield still remains low, not an unusual circumstance for a new display technology, and something we mentioned as a possibility in a number of previous notes on QD/OLED.  “It (QD/OLED set) will be revealed when the quantity is secured, “was the summary statement.
A bit more confusing was a statement concerning the rumored purchase of regular (WOLED) OLED TV panels from LG Display (LPL) by Samsung to fill out their TV line this year.  Samsung stated that “We are reviewing the possibility”, leaving the deal open to continuing negotiations, but was viewed by some as a denial when paired with the comments on QD/.OLED.   While price has been mentioned as a stumbling block to the negotiations between the two competitors, we expect SDC’s yield improvement timeline is really the gating factor, as Samsung wants to fill the OLED TV set gap with something this year.  If SDC is able to deliver volume, there would be little need for Samsung to purchase LG’s OLED panels, unless they use them for a low-tier OLED TV product and the QD/OLED for the premium OLED offering.  The head of LG Electronics (066570.KS) stated that the company would ‘welcome’ Samsung’s entry into the OLED TV market under the idea that it would serve to expand the OLED TV ecosystem, although LG would ‘maintain its superiority’ even with the new competition…