​Kioxia (pvt) has indicated that in late January, it halted production on its semiconductor lines in Yokaichi City and Kitakami City in Japan after it was discovered that impurities entered the production system for the company’s 3D NAND Flash lines.  The company’s conventional 2D NAND flash production is not expected to be affected and no time frames as to when the lines would be restored was given, although typically it takes ~90 days for product to go from raw wafer to finished product.  Estimates for production capacity affected are ~6.5 exabytes or about 13% of the company’s output for 1Q ’22 and ~3% of the total for the year, with the combined Western Digital (WDC) (Kioxia partner)/Kioxia NAND flash share in 3Q ’21 ~32.5%.  NAND Flash prices are expected to increase between 5% and 10% in the 2nd quarter as a result of the closures as opposed to the pre-closure forecast of down 5% to 10%, and the news caused competitors Samsung Electronics, SK Hynix (000660.KS), and Micron (MU) stock prices to jump.  This latest issues follows a number of unusual production issues that have faced the semiconductor industry over the last few months, including fires, power outages, and weather issues adding to the supply issues that were already facing the space.

The US Department of Commerce’s Bureau of Industry & Security (BIS) has added 33 Chinese companies and university labs to the ‘unverified’ list it maintains.  This list is different than the ‘entities’ list also maintained by BIS, however it does not preclude US exporters from ‘engaging’ with listed parties or that there are specific foreign policy or national security concerns with those on this particular list, only that the BIS is unable to establish the legitimacy and reliability relating to the end use or end user of the items that fall under the US Export Administration Regulations (EAR) by such parties.  The reasons for this inability could be an inability to contact or locate the parties involved, failure by those parties to demonstrate the disposition of items subject to EAR, or lack of cooperation by a host government with the BIS when making end-use checks.
While this listing leaves trade open, something the ‘entities’ list does not, transactions with those on the ‘unverified’ list require additional documentation, including a statement from authorizing officials of ‘listed’ parties, and cannot receive Ear regulation exceptions that might normally be available to those not on the list.  What all of this legalize means is that the US government was not able to verify if the products that are being exported from the US to produce products by these companies in China are going to programs supporting the Chinese military or any program that “…are contrary to the national security or foreign policy interests of the US.”  Since the US government cannot verify the end-use case, these companies and labs go on this list.  If it is later found that they violate the EAR act, they will likely wind up on the ‘entities’ list, but still have the option of verifying that their products are for non-military use, which would remove them from the ‘unverified’ list.
The listing seems to be the result of the company that owns HKC’s Chongqing Gen 8.6 LCD fab (Chuzhou HKC Optoelectronics), which is owned by HKC (0248.HK) and two Chongqing government entities, is submitting proposals to US suppliers for the purchase of analytical instruments used in the display process.  Given the ongoing trade friction between the US and China, such proposals likely triggered closer examination by the BIS, who remains unsatisfied as to verification that the end use of HKC’s products will not violate BIS rules.  HKC has three producing fabs, although not all are completely built out.  We believe the company has a 3.6% share (2022) of the global LCD panel market on an m2 basis, which would increase to ~5.3% in 2023 if they continue with current expansion plans, with ~80% of panel production oriented toward TV panels according to Trendforce. 
While HKC certainly has the opportunity to verify the end-users of products produced with such equipment, they would have to open a path to any potential display projects that would benefit the Chinese military and would likely need the approval of the Chinese government to do so, if such were the case.  That said, it seems a bit of a stretch to assume that HKC’s reason for purchasing display analytical equipment is rooted in some nefarious government activity (although it cannot be ruled out), and the risk that HKC takes in the possibility of having the company moved to the ‘enties’ list, would restrict its ability to be supplied by any US company without a special license, which would then become hard to procure.  Corning (GLW) is a glass substrate supplier to HKC, as are a multitude of other companies either in the US or allied with the US, so we expect the addition of HKC to the UVL is more of a ‘polite’ warning that it either lets the US look behind the curtain or it could face the kind of restrictions that have cut deeply into larger companies, such as Huawei (pvt) or ZTE (000063.CH).
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​AU Optronics (2409.TT) held a ceremony to officially begin its capacity expansion project at its Kunshan, China Gen 6 LCD fab.  While the expansion itself is relatively small, adding an estimated 9,000 to 10,000 sheets/month to the fab’s current 27,000 sheet/month capacity, we expect AUO has a further plan to add an additional line of the same capacity at a later date, for a total of 45,000 sheets/month.  We expect there will be other upgrades to the fab, which began production in 3Q 2016.  Based on equipment timelines, we expect the initial expansion to be completed in September of this year. 
AU Optronics has been relatively conservative toward capacity expansion over the last few years, looking more toward developing leading edge products than garnering market share, the opposite tract of Chinese LCD panel producers who have been expanding capacity despite the risk of cyclical overcapacity that has plagued the display industry over much of the industry’s recent history.  While AUO has spent ~$367m for equipment purchases to upgrade LCD production facilities in Taiwan since the end of August last year, much is going toward upgrades rather than capacity (other than Kunshan), which has allowed AUO to maintain a key position in a number of premium panel markets.  While this philosophy might not have looked good during the rapid panel price increases seen in late 2020 and early 2021, the true test comes when the effects of weaker panel pricing drives down profitability for those in the commodity panel space, while premium product pricing is affected to a lesser degree, which we believe is the case currently.
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Yesterday Samsung (005930.KS) announced its latest Galaxy flagship smartphone and tablet lines, the S22 (smartphones) and the Tab S (tablets).  As these items were leaked to the point where there was little that was not known about them, it seems a waste of time to spend much time on same, so we show only the differences between the new models (S22 series) and the old models (S21 series) for comparison.  We see the main difference between last year’s models and this year’s models as the ability to store the S-Pen in the S22 Ultra, which was not possible with last year’s model, along with the details below, most of which are minor adjustments or silicon upgrades   Prices remain the same.  Categories that are blank indicate no change for that model y/y and categories that are missing also indicates no change.

​Smartphones are expensive so putting down somewhere between $500 and $1,200 for a new phone can be a strain for many that find themselves with a damaged phone or one that barely works, so the good folks at US carriers give buyers the option of paying full price for the phone at purchase, or spreading payments out over what is usually a 24 month or 30 month period, encouraging folks to look at the purchase of a new phone or an upgrade as a minor expense added to their carrier bill.  The deal helps the customer, but also tends to keep customers from moving to another carrier, as the entire balance comes due if the carrier account is closed.  Carriers have offers that pay off your previous phone contract balance if you switch, but there are always ways in which the new carrier gets paid back for that up-front incentive, usually with an extended contract.
All of these financial mechanics are in place to keep customers from moving from one carrier to another, so a new phone payment plan adds to the user’s tendency to stay with that carrier at least until the phone is paid off, which helps carriers with ‘churn’, but it looks like Verizon (VZ) has just added itself to the list of carriers that want to make you even stickier, by extending that new phone payment contract to 36 months.  No longer does the customer have the choice of a 24 month or 30 month contract, given only the 36 month payment schedule or the option of paying full price.  Of course you can pay off the entire amount at any time during the life of the contract, but you cannot pay more than the normal monthly amount, even if you want to shorten the contract length, and once you pay off the entire amount any promotional credits you were receiving will end.
To be fair, AT&T (T) also has such requirements, and existing Verizon contract terms remain in effect despite the change, but the new terms apply to all Verizon devices including tablets, hotspots, laptops, and smartwatches, and if you damage your phone during the payment period and don’t have a protection plan, you have to either pay off the damaged phone in full or continue to pay for the damaged phone for the entire contract life, even if you have to but another phone.    Its all a numbers game for the carriers so a longer contract means a greater return/user.  Caveat Emptor… read your contract before signing…

Earlier this week we mentioned the BOE (200725.CH) LED display that was the basis for much of the Winter Olympics Opening Ceremony, considered the largest in the world (uncertified as of yet), although Guinness certifies the display at Resorts World in Las Vegas as the largest, but there is contention in the world of massive LED displays, as Samsung Electronics (005930.KS) claims that its “Infinity Screen” at SoFi Stadium is “the largest videoboard ever created in sports” and is the only dual-sided, center-hung videoboard.  The Samsung display, which hangs 122 feet above the field, is 70,000 ft2, which is smaller than the abovementioned displays, but is certainly unique in shape and is 1.2 times longer and 1.5 times wider than the field itself and weighs 2.2m pounds. 
The oval display has 4K resolution and HDR10+, with pixels spaced 8mm (0.31 in.) apart, and works with the 2,600 other large format displays and ribbon boards positioned around the stadium, but what good is video without sound, so Samsung has placed 260 “JBL by Harman” speakers in the display frame, which it claims is equal to 1,500 home theater systems.  Of course, JBL (pvt) is owned by Harman (pvt) who was purchased by Samsung in 2017.
All in, there seems to be no end to the expansion of LED video walls across the globe and the competition for ‘largest’ will continue as LED modules become less expensive and more sophisticated, along with the control systems and software needed to bring them to life.  Years from now these displays will likely look a bit simple as LED technology moves to smaller die and micro-LEDs, but it sure looks different than 120 years ago (see below) when the best you had was lots of light bulbs and a guy whose job it was to replace the ones that burned out each day.
https://news.samsung.com/us/game-on-how-infinity-screen-samsung-will-bring-sundays-big-game-life/

Display panel pricing is a touchstone for the CE space as displays tend to be the largest cost single component in almost all mobile devices and many static CE products.  Predicting such prices on a monthly basis takes a combination of data from a number of sources, and while conversations with suppliers, assemblers, and buyers add to the calculations, much of such prognostication is based on trends and a gut sense of the balance of tension between buyers and sellers.  In recent months, after a long spate of price increases, panel prices have been declining, and in some cases at a rapid case, so the art of predicting panel prices has moved from being one where actual prices and expectations are only off by 0.25% or 0.5% to one where the difference can be 3% or 4%.
That said, as we have noted previously, TV panel prices began the downward pricing cycle in July of 2021 and have been declining precipitously since, while IT panel (Notebook, Monitor, Tablet) panel prices continued to rise.  This pushed panel producers to accelerate a move from TV panel production to IT panel production to maintain margins, but that ‘lemming-like’ move also has consequences, that of oversupply, and IT panel prices have also been on the decline since last July, albeit at a much slower pace than TV panels.  There are however resistance points when it comes to panel pricing, at that point is cash cost, at which point the producer has to decide whether to take an order that will generate little or no gross margin.  Although cash cost varies with each producer, on a general basis the last time TV panels reach cash cost across the industry was in September of 2019, and since then there has been the usual cost reductions that panel producers work toward each year, along with both general inflation and the effects of component shortages, which we expect nets out as a panel cash cost a bit above the 2019 level.
The industry usually looks at the approach of cash costs for a particular panel type as the point at which panel prices stop falling, and rightly so in many cases as taking on money losing production tends to be done only when it is necessary to fulfill a commitment to a large customer, and with TV panel prices nearing cash costs, expectations are that prices will stop falling.  This hope is fueled by the fact that there is less TV panel production than a year ago (the shift to IT), which tightens the market a bit, but there is also that balance between buyers (TV set producers) and sellers (panel producers), which was heavily in favor of panel producers until last July, forcing set manufacturers to eat the higher cost or raise prices and lose consumers.  Historically, such a shift takes time to reset and has a tendency to encourage panel buyers to keep pushing for lower prices, even when they know they ‘sense’ that panel producers are hurting, and panel producers are also both competing with others and are want to keep as much of the fab utilized for as long as possible, so while cash cost levels are an indicator that TV panel prices ‘should’ stop falling, that can be a simplistic look at a complex equation.
But, more important currently, given the transition mentioned above, are IT panel prices, as the IT production concentration of many panel producers is weighted toward such panel products.  This makes the effect of IT panel pricing more sensitive to the display business than might normally be the case, and the recent slowdown in demand, as COVID-19 vaccines allow for some semblance of normality, has pressured IT panel prices.  We have seen very recent trade press headlines indicating that IT panel prices in February are falling faster than TV panel prices, and while that might be attention grabbing, we went back to our data to see if such was really the case.
Aside from the headlines, we note that panel price estimates vary across a number of sources, and we use averages whenever possible.  We also deal with variations in the type of panel, which can affect price estimates, and we caution that in most cases we do not have sample sizes from sources, but here’s what we found.  Expectations for February TV panel pricing, sort of an ‘average of averages’ across sizes, indicated a decline in February of 3.0% while that same ‘average of averages’ for IT panels estimates a decline of 3.2% for February, so technically the headlines are correct in that IT panel prices in February are declining faster than TV panel prices.  That said, the question is which is worse, TV panel price declines that could put some panel producers’ TV panel business in loss mode, or the increased effects of IT panel price declines in an industry concentrated toward IT panel production? 
Neither is good, but if we had to pick one, we would say the continuing decline in TV panel prices (see Figure 7), even if they dip below cash costs, is the better of the two, as it gives TV set producers the ability to bring down set prices over the next few months, while IT panel prices are still a distance away from cash costs, giving them room to fall further, and considering the shift toward IT panel production over the last 7 or 8 months, the competition in that space could become brutal.  February is an unusual month for the display industry as the Chinese New Year tends to slow production across the industry, so the trend in March will be a bit more telling, however we expect at least the 1st half of 2022 to be a difficult one for the display space, at least from the perspective of panel producers, so we look toward any data that might help us to understand how the CE space will look in 2022.

Product announcements are a big thing in the VR world, as they are with most CE products, but moving from an announcement to an actual product release seems to be an even bigger issue that the initial product announcement.  Our A/VR database contains 15 announced VR products that have yet to be released, some that have been announced quite some time ago, but one that seems to have been even more caught up in the enthusiasm surrounding the Metaverse and VR is the HalfDive VR headset being developed by Diver-X (pvt) in Tokyo.  The company’s stated mission is to “maximize human output/experience through enabling human activity in its lowest energetic state”, which sounds like it might be on a low electron mobility display technology or a low refresh rate system, it’s not.
The company. Which is funded through a Kickstarter campaign, has come up with the idea of designing a VR headset that is not used sitting or standing, as are others, but is used lying down, a VR headset for your bed.  Yes, the headset is designed to be used while you are laying in your bed, either on your back or on your side, with the video extoling the virtues of VR in bed.  The device is specially designed to be comfortable in a reclining position, exerting little pressure from a head pillow (is Mike Lindell involved? – Just kidding…) and has both hand controllers and foot controllers.  The high-end model has a feedback system that simulates wind using two internally mounted fans and a vibration generator similar to those in accessories that can be purchased for VR systems designed to be used while standing.  The four speakers inside the helmet allow for immersive 3D sound and since the sound is processed in the headset itself, users can listen to audio or music from their smartphone, without the discomfort of ear buds.
The system operates under Steam VR (pvt), however there are questions as to whether other games would operate correctly given the unusual controllers and limited movement ability (the foot controller uses ankle twists to simulate movement), but more serious is the fact that despite the Kickstarter campaign generating $222,000 against a target of $174,000, the company has just issued the following statement, so it looks as if the project might not see the light of day or even the dark of night.  While the enthusiasm of youth certainly has driven technology to greater heights over the centuries, it doesn’t always pan out.
“Diver-X has withdrawn (cancelled) HalfDive's Kickstarter (crowdfunding) that had been implemented for some time on 1/30. First of all, I would like to apologize for the sudden withdrawal and the delay in explaining the details of the withdrawal to the supporters. (* Since the project has been withdrawn, supporters will not be billed.).
Half Dive's Kickstarter has been canceled for the following three reasons. (Arranged in descending order of impact on cancellation).
Reason 1: Significant change in product direction.  The current Half Dive specifications are to achieve our goals such as "to complete life while sleeping" and "to realize an experience close to a full dive by combining existing technologies". I came up with the idea that it was not the optimal form, and repeated hypothesis testing. (Implementation of Kickstarter is also part of the hypothesis verification.) HalfDive initially set up two use cases: "(1) VR game while sleeping" and "(2) Working while sleeping" VR.   The number of HMDs and games sold is increasing year by year, and it is said to be a so-called growth market. We are confident that VR will become the standard for VR experiences while sleeping for the reasons described below, but due to content and interface (operation system) issues, it is currently only a niche experience method. Therefore, it was expected from the beginning of the project that even if only playing VR games was launched as a use case for Half Dive, it would not be possible to obtain sufficient sales volume and profits. Therefore, I was trying to break away from niche devices by setting up use cases that can be applied not only to VR users who want to "work while sleeping" but also to all humankind. 
However, as I proceeded with development and hearing, I realized that the use case itself was actually a niche, and that sufficient function development was not possible to realize that use case. Especially when working while sleeping, it takes a lot of time and money to reach the fundamental fact that it is not the video display system (HMD) but the interface system such as mouse pointing and character input. I have. As a result, HalfDive use cases were later narrowed down to one for gaming. However, I realized that the interface system is more important than the video display system in order to realize and standardize the "VR experience while sleeping" as well as the work application, even though the development is proceeding with only one game application. I did. No matter how optimized and versatile it is for sleeping, it's the interface that, after all, is just a replacement for existing VR devices and provides an innovative experience. (To realize an interface that allows the same physical movement as before even under the physical movement restriction of sleeping) Here, we should focus on the development of the interface and combine it with the existing VR device. The feasibility of our goals is high, and we have come to think that we will have a better experience.

Reason 2 : Immaturity of the organizational structure For financial reasons, the design of the main components that determine the character of Half Dive, such as optics and display, was outsourced. As a result, it was not possible to manufacture the right components for the devices on the current market and the concept of Half Dive at the right cost when assuming general sale. In particular, the manufacturing cost of the optical system accounts for about half of the cost of Half Dive, which has been a bottleneck in mass production. The lack of in-house knowledge about the main components affected the specification review, and the organizational situation was such that the cost price increased significantly in the end.
Reason 3 : Cash flow problem Although it is related to the above organizational problem, we have not obtained such a technically optimal solution.  We did not have sufficient financial power to cover the soaring costs. And even if it considers the support from everyone on Kickstarter and additional procurement, it is not in a state where it can be sufficiently improved, and going to mass production as it is will lead to the worst case of bankruptcy and not being able to deliver the product to everyone. I decided it was likely. And although it is not enough for mass production, it was a financial condition that I could pull it once and start over, so although it is really selfish, I decided to restart in the direction with a high possibility of success.
For the above three reasons, even if you aim for Kicistarter as it is and receive your precious money, there is a possibility that you will not be able to fully provide the experience that HalfDive sings. It was canceled because it was judged that there was a high possibility that it could not be delivered and the trust of the company would be lost.
About the future of Diver-X and Half Dive
However, we have not given up on the goals of "complete life while sleeping" and "realize an experience close to a full dive by combining existing technologies" from the beginning. First of all, we will improve the cash flow and organizational structure that were mentioned as the reason for the cancellation, steadily solidify the foundation as one startup, and we will be able to properly deliver Half Dive and other new products to everyone. I would like to try again after I can build it.  In the future, we would like to not only continue the development of Half Dive and new products, but also carry out contract development. If you have any questions about hardware / software prototyping or product design, we would appreciate it if you could let us know.  Last but not least, I would like to thank all the people who supported HalfDive's Kickstarter and those who cooperated with the public relations.
All Diver-X employees
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If you saw the opening ceremony for the Olympic Games in Beijing, you saw what is the world’s largest LED display, and the platform on which the ceremonies were held and from which most of the lighting and images emanated.  The platform, which is 10,552 m2 or 113,587 ft2, was built from 42,000 LED modules that were developed by BOE (200725.CH), China’s largest display producer, and the China Academy of Launch Vehicle Technology (state), a state-owned subsidiary of China Aerospace Science & Technology Corp. (state), who prided the protective layers that allowed for water and ice to cover the displays.  To put the size in perspective, a standard football field is 67.7% of the size of the Olympics’ display.
According to Guinness, the largest LED display is the 7,500 m2 (80,729 ft2) display at The Palace, in Beijing, although we believe the display at Resorts World in Las Vegas was actually the largest at 100,000 ft2, but in any case, the display at the Olympics is larger than either.  While the specifications we have seen for the display show that the display has a refresh rate of 3,840 Hz, far above the 240 Hz (360Hz in one) seen in high-end gaming monitors and likely necessary to keep the accumulated lag across the display from becoming noticeable.  According to the same data, the resolution of the display is stated to be 29,800 x 15,096, but we take that with a grain of salt as to whether that number is for an individual module or the overall display.   All in, the display was extremely effective and coordinated with both a secondary vertical screen and the ‘light-sabre’-like hand-held devices that created some of the more spectacular effects during the ceremony.  For those that missed it, here are highlights from NBC Sports.
https://youtu.be/E3cLX07PD8c
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​With Super Bowl LV! Coming this Sunday, we thought it might be a good time to check on TV prices, given the “Deals, deals. Deals…” type advertising that is being promoted on just about every possible media type.  Since we have detailed historical data for Samsung Electronics (005930.KS) Mini-LED/QD TV line (2021 only as 2022 sets have been announced but not priced of released) we updated that data to see if the deals being offered for the Super Bowl are as good as some of the advertisements proclaim.
As we have previously noted there are 35 TV set models in the group we have been following, consisting of 6 8K Mini-LED/QD TVs, 11 Mini-LED/QD 4K TVs, and 18 QD only 4K TVs.  Pricing was released on May 20, 2021 and we have collected data 21 times since then, with the last being yesterday.  While two models were at their highest price, the $15,000 98” (QN98QN90AFXZA), a set that has not changed price since its initial release, and the least expensive QD only 32” model, which currently sells for $500 and has for most of its life, but dropped to $400 during the period around Black Friday.  Aside from those two, 22 of the 35 models are at their lowest price since release, although only 5 of those are lower than any previous low price, including those reached during the holidays, so while the discounting seen for the Super Bowl has brought many models down to their lowest prices, only 5 of those are lower than at any point in the model’s history.
We do note that the current discounts seen for Samsung’s 2021 Mini-LED/QD line are considerable against the previous pricing (1/18/22) in some cases, ranging from a low of 0.0% to a high of -26.7%, most have been seeing increases after the November/December holiday period, so while those discounts look good on a percentage and dollar basis, most are back to the same spot seen during the holidays.  We also note that Samsung has announced their new 2022 line, although pricing and release dates have not been set, so there is some incentive for discounting to move older inventory to make way for the new line.  All in, while not the perfect time to buy a TV set (ideally, the period around Black Friday), prices are certainly better than they have been for the last few months, down an average of 25.8% across the line, against original pricing and the biggest single period drop (-8.0%) (period/period) during any pricing period, including the 7.1% drop seen October 20, which began the holiday discounting.  Of course, the last two pricing periods saw increases of 4.9% and 4.2%, so in most cases prices are just back to their previous lows, but the data says its not a bad time to be buying a TV, especially a relatively high end TV as long as it doesn’t cut too deeply into the chips and dip budget.