​OLED stack materials are likely a bit too esoteric for most investors and rightly so, with names like Tris[2-phenylpyridinato-C2,N]iridium(III) or Bis[2-(1-isoquinolinyl-N)phenyl-C](2,4-pentanedionato-O2,O4)iridium(III), such materials likely remind most of High School Chemistry and the embarrassment of not being able to define a co-valent bond when asked, but in some cases those materials can be quite important.  Not only do the materials in an OLED stack make a difference to the display, but they are key to a number of companies that produce and license those materials, such as Universal Display (OLED), NEolux (213420.KS), Hodogaya Chemical (4112.JP) or Idemitsu Kosan (5019.JP).   
OLED stack composition differs with each producer and there are a considerable number of subtleties that go into stack structure and the materials used for each category, but the most important is the emitters, those materials that produce the light that illuminates the display.  There are a number of types of emitters, but the broad categories are fluorescent and phosphorescent, with all but blue emitter material being phosphorescent.  Phosphorescent OLED emitters produce 3 times the number of ‘excitons’[1] as fluorescent OLED emitters and are therefore able to generate significantly more light, but are not available in blue, which makes the RGB (Red, green, blue) OLED stack one with red and green phosphorescent OLED materials and a blue fluorescent material.  Universal Display holds the IP for the use of phosphorescent OLED emitters based on a  number of heavy metals, and all commercial OLED producers use UDC’s phosphorescent OLED emitter materials and licenses same.
This gives UDC a considerable amount of leverage in OLED emitter pricing, but at the same time must maintain long-term supply relationships with its customers, particularly Samsung Display, LG Display (LPL), and BOE (200725.CH).  As part of those relationships, UDC develops new phosphorescent OLED emitter materials that it presents to its customers for evaluation, with the hope that these new phosphorescent emitter materials will be incorporated in the customer’s next OLED display stack iteration to improve the display.  But there is a bit more to the process, and that is phosphorescent OLED emitter pricing.
When a customer agrees to be supplied  by UDC the specific materials under the agreement are priced at an initial rate/kilogram and a schedule is derived that sets volume based points at which the price of the material declines until it reaches a ‘terminal’ value at which point it remains, so profitability for UDC, and likely other stack material suppliers can be dependent on the ratio of ‘new’ Phosphorescent OLED emitters the company sells relative to how much ‘old’ material the company sells, as each new material purchased sets that material’s price point back to the higher level and starts the price declination process again.
Given that in most quarters Samsung is UDC’s biggest customer, we pay attention to any information concerning Samsung Display’s plans for changes to its OLED stack as they correlate, at least to a degree, to a portion of UDC’s emitter material sales, and while it is difficult to decouple the various OLED stacks that SDC uses for each of its smartphone displays, we note that those changes can be part of the cause and effect that push UDC material sales in a particular direction.  A successful Galaxy smartphone using a new stack can generate incremental material sales for UDC, while the long-term use of an older stack material set could generate less. 
There is of course, a balance between a low volume product like the Samsung Galaxy Fold series that will likely update stack materials each year and lower price tier Samsung OLED displays that use older OLED emitter sets but generate higher volumes, so changes to SDC’s OLED stack materials can influence material suppliers and this year it seems that SDC has decided to upgrade stack materials in some models and not in others.  The Galaxy S21 used the M10 stack set and it looks like the Galaxy S22 will use the same, while the Galaxy S22+ will be updated from last year’s M10 stack to the newer M11, resetting the price, although surprisingly the Galaxy S22 Ultra, which has become a replacement for the Galaxy Note series which Samsung has discontinued, will not be upgraded from the M11 stack to a new emitter material set.
As this is the top of the Galaxy S Series, SDC is likely trying to contain costs against the rising cost of silicon and components to maintain the price of the S22 Ultra at last year’s level while maintaining margins.  In theory this could have some impact on UDC’ material sales this year, but would likely be a relatively small influence against and upgraded stack for Samsung’s foldables and the next iPhone iteration, which is also expected to see a new material stack.  We also take into consideration the expansion of LG Display’s OLED TV unit volume and BOE’s increased OLED display unit volume with Apple (AAPL) this year, so we expect any SDC material sales imbalances will be short-lived or barely perceptible, but we will know more tonight when UDC reports 4Q results and (hopefully) give guidance for 2022.


[1] Quasi-particles that releases light energy (photon)  for a short period before returning to a normal electrical state.

In our note yesterday (“Phishing for NFT’s”) we mentioned some of the potential risks facing those who participate in the NFT ‘Art’ market, particularly in China where government warnings and likely intervention seem to have little effect on NFT enthusiasm.  Proof of how ‘enthusiastic’ NFT investors are in China comes today with buyers on OpenSea (pvt) snapping up an entire collection (1,000) of what were obviously crudely drawn facial sketches posted by the “Domestically Made Conscience NFT Project”, that were listed as ‘specifically prepared for Chinese people’ with the assurance that the team behind the project ‘will not scam their fellow countrymen’, despite the project’s sole purpose being to ‘sell pictures’.
It seems that the items are now trading on OpenSea at a value of ~$537,000, while the developers have warned that they are thinking of taking the money they made and closing the project.  It seems that the whole concept was to satirize the idea that almost anything can have value in the virtual world given that the sketches could be drawn by almost anyone with a few hours of art class or cartooning instruction, which went a bit more viral than expected, and while those who bought the original collection will still need to sell them before they can actually receive value for their speculation, after paying fees and conversion costs, it does point to how the virtual world is akin to 3 Card Monte, a popular NYC con around the 1980’s where the dealer used shills to excite marks into a game that was rigged and impossible to win.  While NFT related headlines and endorsements from influencers and celebrities are acting as NFT shills, there is a point at which either the cops come and break up the game or somebody points to the fact that the emperor has no clothes.

When anyone over 30 mentions ‘NFTs’ to a younger person, they tend to get a look of scorn or pity, with the assumption that the younger generation is hip to all that is blockchain, crypto, and Metaversey, but that is not always the case and in China, where the government’s efforts to slow or stifle the growth of cryptocurrencies and similar virtual financial products have met with modest success, even the younger generation is getting caught up in the new “Wild West” of the virtual world.
It seems that Niq Chen, a senior at Tongli University in Shanghai, told a group on Discord (pvt) that he had lost an NFT ‘object’ worth ~$48,000 through a scam.  While the government has banned cryptocurrency trading and mining, the idea that one can get rich quickly with little physical effort seems to be appealing to those who are willing to chance the use of virtual currency and NFTs on platforms outside of China, such as OpenSea (pvt), which is not available on the Mainland.  The platform is a repository for virtual collectibles, particularly artwork and ‘other stuff’ that can be viewed and purchased using virtual currency and NFTs. 
While the site is careful to provide a list of partnered ‘wallet’ companies, a talented scam artist could spoof an e-mail to exhibitors or collectors, which is what happened to young Mr. Chen, who fell prey to such a scam and lost a good chunk of his NFT assets.  He even tried to convince the buyer of his NFT that it was sold illegally and tried to buy it back, but the new holder refused saying that he did not want to lose the asset after getting such a good deal.  Since the entire transaction, illegal or not, was done across blockchain, there is no way to change or cancel the transaction, nor did the buyer believe he did anything wrong, having purchased the asset at a discount, albeit from an illegitimate source.  Hopefully the fact that OpenSea has frozen the asset while investigating will convince the new owner that it might be in his best interests to sell back the asset at cost.
One might expect that Mr. Chen would walk away from such an experience with an attitude that might preclude his expansion in the NFT world, but it seems not, as he has proclaimed that he will continue to pursue NFT art as a career path and states “I already cannot do without the community,” which would give a hint as to the real basis for such investing is in this case, companionship, with Discord having upwards of 150m monthly users.  Mr. Chen is not alone in his partial misery, as only a week ago, 17 OpenSea users had NFT assets stolen in a similar phishing attack, netting the scammer ~$1.7m in Etherium crypto from the items that he has already sold and there have been numerous other scams that seem legitimate, but move assets out of their digital wallets to disappear into the ether. 
A number of countries police crypto and NFT transactions to look for money laundering, which is ripe for abuse, but there are very few rules about crypto-fraud and we are constantly hearing of scammers who buy investor lists and call to promise a quick return on their investments and disappear with the proceeds after investments are made.  This is still the very ‘Wild West’ and being such, even those who profess to be hip to crypto-jargon and the ways of NFTs are getting caught up in the scammers net, just like the old timers who used to buy penny stocks over the phone.  The virtual world is shiny and new but has the same dark underbelly that “Mary from Amazon” touches on when she wants to make sure you actually purchased that iPhone 12, or the guy from “Credit Services” needs to ‘confirm’ your credit card account number.  “There is no free lunch”[1]


[1] “The Moon is a Harsh Mistress” – Robert A. Heinlein  - 6/2/1966

​Display technology continues to improve, adding a diverse cadre of technology types and ever more sophisticated techniques for delivering the best possible image for the lowest price.  That said, there are certainly times when new technology does not always have a practical application, at least for consumers.  One such development is transparency, or the ability to create an image that does not block what is behind the screen it is displayed on.  There are certainly uses for such displays, particularly HUDs (Heads-Up-Displays), which are beginning to appear in automotive applications, in digital signage, where they are the most useful, providing images and information without blocking product or store real estate, and in AR (Augmented Reality), where images are superimposed on a transparent glass or plastic lens.  Some transparent-like systems are not truly transparent in that they project an image on a transparent optical member or in front of your eye using mirrors, but what we are speaking about here are transparent displays, ones that generate images using LCD or OLED technology but have a transparent rather than a solid (black) backplane.
The degree of transparency is a key factor in determining the effectiveness of such displays, with transparent LCD displays having considerably lower transparency than those using OLED technology.  As OLED is a self-emissive technology, it requires no backlight and can therefore contain less material that would block light passing through the display.  Transparency between 35% and 40% is not unusual for transparent OLED displays while transparent LCD displays, because of the backlight, have lower transparency metrics.  There are other important factors in evaluating transparent displays, such as the accuracy of color, viewing angle, and brightness, but these are common to almost any display, with transparency making some of them a bit more important.
Given that LG Display (LPL) is the sole producer of mass produced large panel OLED displays, the company has produced a number of transparent models that are used primarily in signage applications, however, the South Korean trade press is citing an alleged proposal LG Display has made to its parent LG Electronics (066570.KS) to launch a retail oriented transparent OLED TV.  The proposal is said to be based on a fixed 55” transparent OLED display to be released next year, with a few modifications to the ones used in commercial applications (Figure 2), such as a strengthened glass cover.  That said, we find it a bit difficult to pinpoint residential applications where constant transparency would be useful.  Perhaps in the kitchen while watching a recipe video and monitoring kids playing near-by, but its difficult for us to come up with applications on a residential level that would benefit from transparent TV technology.
Xiaomi (1810.HK) released a 55” transparent OLED TV in 2020, with the display produced by LG Display, which sold for $7,200 but while generating considerable excitement among electronics influencers, sold very few units and not surprisingly so.  We are not surprised that LG Display is pursuing such a device in order to further fill its large panel OLED fabs and justify the expense of past transparency R&D, but we would be surprised if LG Electronics would take on such a project as the end market would be rather small.  We are sure there are other residential applications that we have not thought of that LG marketing will tick off in their proposal, but as a mass market device, we would rather see the time spent on other developments.

​While we still have some time before Samsung’s (005930.KS) 2022 Mini-LED/Quantum Dot TVs actually become available, we checked in again to see if the pricing of the 2021 models has changed for President’s Day, a state holiday (formerly known as Washington’s Birthday) that is observed in only 38[1] of the states in the US on the 3rd Monday in February.   The results were mixed, with 40.0% of TV prices in the 35 we track increasing, 14.3% decreasing, and 45.7% remaining the same. There was almost no rhyme or reason to those changes, although that leads us to believe they are likely inventory related, but the only identifiable pattern being the price increases on almost all of the low-end quantum dot models, which saw some aggressive discounting during the Super Bowl.  Other than that President’s Day does not seem to be a time to take advantage of TV discounts, at least not this year.


[1] Not Observed in: Delaware, Florida, Iowa, Kansas, Kentucky, Louisiana, North Carolina, Rhode Island, or Wisconsin.  Georgia & Indiana celebrate Washington’s Birthday on December 24th and New Mexico celebrates President’s Day on the Friday after Thanksgiving.

RCEP, or the Regional Comprehensive Economic Partnership, is a free-trade agreement that has been bandied about among Asian-Pacific nations for over 10 years, with over 30 sessions of negotiations during that time period.  The countries shown below have accepted the results of the negotiations and all but three (below) have submitted final ratification of the agreement, although the treaty took effect on 1/1/2022 for those who have fully endorsed the pact.  When all have signed, the agreement would cover ~30% of the global population and ~30% of global GDP, making it one of, if not the largest trade bloc in history, although India bowed out of the negotiations tacitly in 2019 and while still leaving the possibility open, is not part of the group.  The US was also a potential member but dropped out of the negotiations under the previous administration’s direction.
The objective of the plan is to specify a number of rules, procedures, standards, services, and remedies between the member countries by establishing a free trade area that will ‘progressively liberalize and facilitate trade in goods among the parties through progressive elimination of tariff and non-tariff barriers on substantially all trade goods among the parties,’ by creating a mutually beneficial economic partnership framework.  The agreement goes on for many pages, much of which is specifics about things like what constitutes the basis for a product’s origination location, details of payments and transfers, and the redress for subsidies that might create an unbalanced trade situation,
While it is difficult to anticipate what such an agreement could do for the Asian-Pacific economy, a Brooking’s note projected that the agreement could raise global national incomes by an annual $186b in 2030 and raise trade among members by $428b and non-members by $48b, with the greatest benefits likely falling to China, Japan, and South Korea.  RCEP overlaps with a number of other Asian-Pacific trade group agreements as shown in Figure 1.  We expect it will take quite some time for tariffs and other trade barriers to be reduced to zero, however having a framework and a system for redress will at least give process to a very complex but higher beneficial agreement for the members.

While the datasets for 5G are still relatively small, which leaves us without reliable historic data, as 5G matures, we would expect growth rates to fall into more seasonal patterns similar to the mobile phone market.  January 5G data seems to indicate that we are beginning to see such a pattern, albeit at much higher y/y growth levels, as typically slower smartphone growth months January and February begin to affect 5G device expansion.  January saw only 1.5% 5G m/m device growth, the slowest monthly growth since 5G deployments began, while 5G smartphone m/m growth was 3.1%, slower than January ’21 but still up 115.3% y/y, with most other 5G device types seeing little or no growth m/m.  We would expect February results to be similar, while we would expect March to see a return of m/m growth across many of the device categories.

​China has taken a relatively hard stance toward cryptocurrencies and their supporting ‘organizations’, above and beyond the usual bans on ‘inflammatory content’ or ‘processes antithetical to the cultural and personal well-being of the Chinese population’, but when it comes to the manifestation of the Metaverse, it is much harder for the Chinese state to codify rules, given the ephemeral nature of the Metaverse itself.  That said, the China Banking & Insurance Regulatory Commission issued a ‘Risk Reminder’ yesterday that presented warnings about potential illegal fundraising schemes that seem to be surfacing as the Metaverse garners headlines.
“Recently, some lawbreakers have rubbed off on hot spots (Google (GOOG) translation) and absorbed funds in the name of "Metaverse Investment Project" and " Metaverse Chain Tour ". They are suspected of illegal fundraising, fraud and other illegal and criminal activities,” is how the article began, and then went into more specifics as to what the scams were and what to watch out for, with the first being the fabrication of false Metaverse investment projects, such as game publication, artificial intelligence and virtual reality projects that publicize high returns in order to raise funds, although that seems of little difference from the multitude of scams that US investors face whenever a technology fab comes to the forefront.
The note goes further, citing those that claim “you can make money while playing games”, with the warning that the exchange of virtual currencies and the purchase of the game equipment needed to ‘farm’ such high return schemes is both costly and garners the risk that such operators may close the game at will (this has happened recently) and made it almost impossible for players to retrieve both their original investment and any profits that they might have thought they made.  Then the warning heads into one of our favorite areas, that of Metaverse ‘real estate’, where the ‘lawbreakers’ exaggerate the expectation of virtual real estate price increases and artificially create ‘the illusion of panic buying’ to induce trading, but the most telling is the reference to virtual currencies’ that criminals induce the public to buy in anticipation of it becoming ‘the Metaverse currency’ in the future, while manipulating the price and setting withdrawal rules that generate high fees or make it almost impossible to cash out.
While there doesn’t seem to be anything mentioned in the note that we haven’t seen at least a few times, it seems a bit more comprehensive that the warnings we have seen from the FTC, which are focused on scams where unsuspecting  folks are conned into making various payments (IRS, utility company, outstanding tickets) by converting their hard-earned cash into crypto at an ATM (they will provide you with the nearest one and stay on the line as you make the transaction) when they will send you a QR code that will transfer the money into their account, forever lost to you.  Since that would likely trigger wire fraud, it would be relatively easy to prosecute should the fraudster be found, but rules about some of the more esoteric schemes mentioned in the Chinese note have yet to be written or even contemplated.  Warnings are a start as they alert at least a part of the population to such antics, but there are many across the globe that are gullible enough to believe that they can get something for nothing and will give fraudsters a whole new platform in which to work.  If you haven’t seen “Glengarry Glen Ross” then you are ripe for a Metaverse scam.

​Chinese OLED panel producer Tianma (000050.CH) has indicated that it has started production runs at irs T18 fab in Xiamen.  While this is likely test run production, it is ahead of our ramp schedule and while it will be a number of months before the fab will be at full (phase 1) capabilities, it will likely take considerably longer for Tianma to fill this fab’s capacity.  The fab itself consists of two 15,000 sheet/month flexible OLED production lines and additional room for a third line, for a total of (phase 1 and 2) of 48,000 sheets/month and has an estimated cost between $6.8b and $7.6b when completed.  Tianma runs a Gen 5.5 OLED fab in Shanghai that is primarily producing rigid OLED displays, another Gen 6 OLED line in Wuhan that was built for a full capacity of 37,000 sheets/month, but is not fully built out, and a Gen 4.5 pilot line used for R&D.
Last year Tianma began the year shipping ~1m OLED display on a quarterly basis, increasing that to between 2.2m and 2.8m as the year progressed, which gave them a share under 2% of the small panel OLED market, so the Xiamen fab will add to that share as it ramps production , however based on Tianma’s capacity last year, which based on a 6” display base, would have been ~154m units, so based on our estimates of ~9m units shipped last year, the  company’s OLED fabs are considerably underutilized or have extremely low yield rates.  This makes it more necessary for Tianma to build out customer relationships or improve yield rates in order for the new fab capacity noted above not to depress profitability further, which leads us to expect a later start for the second phase of the Xiamen fab. 
Tianma also runs a number of LCD fabs which provide much of its sales volume, although the newest Tianma LCD fab went on line in late 2017, and while all of its LCD assets are likely fully depreciated, they are heading into their 5th year of production and are likely in need of upgrades in order to compete with some of the newer LCD fabs in China.  This makes building expensive small panel OLED fabs that are producing at low utilization rates even more risky as capital has to be allocated to upgrade the LCD side in order to provide steady income, while the spending for OLED produces losses.  That said, in China the display industry is funded by the Chinese government at the provincial or city level primarily, and while those capital flows have shifted a bit toward semiconductor capacity, we expect Tianma will continue to be support with subsidies and financing from government entities until the Xiamen fab is completed, and while early individual stockholders might be happy with the results (initial price – 4/1/1995 - $1.82), current stockholders would be less so as over the last 2 years the stock has fallen from a peak of $17.90 in February 2020 to its current price of $12.07, not quite at its low (January 27,2022 - $11.83) but close to it.

​Few of us worry about cell service, with the US covered by 2G, 3G, 4G and now 5G coverage in all but the most remote locations, and smartphones are enough of a status symbol that unless you keep your vintage smartphone covered, it would be hard to keep from being publicly embarrassed when using an old smartphone.  But there are those that do, and that will be getting more difficult soon.  As of February 2022 AT&T (T) will shut down the remainder of its 3G network, T-Mobile (TMUS) will shut down Sprint’s 3GCDMA network on March 31, and its own 3G network on July 1, while Verizon (VZ) will end its 3G network on December 31 of this year.
The bulk of 3G network users would be older smartphones but there are also older tablets, watches, medical devices, SOS (“I’ve fallen and I can’t get up”) services, and security systems that still operate on 3G, so it is incumbent for folks to check the operation of such services to make sure they are not disconnected.  Here’s a list (certainly not complete) of phones that will not work by the end of this year (or earlier).  AT&T provides a way you can look up your phone’s model to see if it will still work on their network, while T-Mobile says it will contact all affected subscribers.  Verizon gives a number to call to check.

• HTC Desire 500.
• Samsung Galaxy Trend Lite.
• Archos 53 platinum.
• Samsung Galaxy Trend II.
• Samsung Galaxy S3 mini.
• Caterpillar Cat B15.
• Sony Xperia m.
• Wiko Sync Five.
• Wiko Darknight.
• Samsung Galaxy Xcover 2 phone.
• Huawei Ascend G740.
• ZTE Grand S Flex.
• Lenovo A820.
• Huawei Ascend Mate.
• ZTE V956.
• UMi X2.
• Huawei Ascend D2.
• Samsung Galaxy Core.
• Faea F1.
• THL W8.
• ZTE Grand X Quad v987.0
• ZTE Grand Memo.
• Samsung Galaxy Ace 2.
• LG Lucid 2.
• LG Optimus F7 phone.
• LG Optimus L3 II Dual.
• LG Optimus F5 phone.
• LG Optimus L5 II.
• LG Optimus L5 II Dual.
• LG Optimus L3 II.
• LG Optimus L7 II Dual.
• LG Optimus L7 II.
• LG Optimus F6 phone.
• LG Enact.
• LG Optimus L4 II Dual.
• LG Optimus F3 phone.
• LG Optimus L4 II.
• LG Optimus L2 II.

·        LG Optimus F3Q phone
·        Iphone 5 or older