​Last year the Office of Information & Regulatory Affairs, a division of the OMB, noted that they were considering making a recommendation to the SEC that the Commission adopt rules that would address “lack of transparency, conflicts of interest, and certain other matters involving private fund advisers.”  The SEC filed a proposed rule in March that would, under the Investment Advisers Act of 1940, require registered investment advisers to private funds to provide transparency to their investors regarding the full cost of investing in such funds and said funds performance, along with the requirement that private fund advisers obtain an annual audited financial statement for each fund it advises.
The rule specifies that all private fund advisers, including those that are not registered with the Commission, be prohibited from engaging in certain sales practices, conflicts of interest, and compensation schemes that are contrary to the public interest and the protection of investors, such as providing preferential treatment to certain investors in a private fund, unless the adviser discloses such treatment to other current and prospective investors.
The comment period ended in April and was re-opened in May for another month, with a final action date of April of this year.  It seems the collapse of FTX (defunct) has renewed interest in the potential rules, as the SEC has opened investigations into what due diligence was done by FTX investors before the collapse, and the consider increase in capital that has flowed into the VC space over the last few years, although we suspect the SCE’s real focus is to protect pension investors and less on high-net worth investors.  Industry organizations are heartily against the proposed rules, citing the Congressional standing that private funds should not be faced with “the type of granular and intrusive regulatory requirements that generally apply to retail-level investment companies”, and while VC’s generally seem to have accepted the idea of greater regulation as the industry has developed, the cost of compliance will burden VC returns a bit, and the idea of an audit will likely set a more careful and documented review of investment candidates.  That said, it would also allow public view of VC track records and expenses, which would be beneficial to the public overall and would likely lessen the potential for issues such as those that led to demise of FTX…maybe…
 

Yesterday we mentioned the extremely poor January results from one of the two large panel LCD display producers in Taiwan, Innolux (3481.TT).  The other, AU Optronics (2409.TT) reported January results last night that were also weak, but not quite as weak as those from Innolux.  AUO reported January sales of 15.91b NT$ ($528.7m US), down 11.4% m/m and down 42.7% y/y.  Typically (5 yr. including 2022) January sales are down 20.6% m/m so from that perspective AUO saw better results, but being down 42.7% y/y shoouof as ‘good’.  While AUO does not report large and small panel detail, they do report total area shipped, which in January was 1.25m m2, down 18.8% m/m and down 37.5% y/y, which would imply that AUO continued to maintain or increase low utilization rates in January, an important point in understanding how display producers are reacting to the current demand weakness.  All in, AUO’s January monthly results were as expected to slightly better than expected.

Only a few days ago we noted that Japan Display’s (6740.JP) largest shareholder Ichigo (2337.JP), a $5.8b asset manager based in Tokyo that is a small (13%) part of a large Real Estate & Clean Energy management company, had decided to convert 658m Class B preferred shares to common stock that it received in 2020 when it bailed out JDI.  This increased Ichigo’s share of the common from 49.28% to 56.7%, giving it full control of JDI.  Last night JDI disclosed its 3Q results, reduced full-year guidance, and announced new funding which we detail below.
JDI gave 3Q (December quarter) guidance in November of last year, projecting sales of 75.6b¥ ($577.2m US) and an operating loss of 9b¥ ($68.7m US), although 3Q sales came in 7.8% lower than guidance and operating loss 1.6b¥ lower than guidance.  Management lowered full year guidance to reflect lower 3Q results and expected lower consumer electronics and automotive display weakness, lowering 2023 sales (March year) by 5% to 266b¥ ($2.03b US) and lowering the expected operating loss by 12.4b¥ to a loss of 47.3b ($361.1m US).  On a general basis lower smartphone and VR demand and higher material costs more than offset price increases, however, the company also announced a major refinancing and a change in the company’s focus.

• Ichigo will lend JDI 20b¥ to repay a short-term loan JDI had with INCJ (Innovation Network Corporation of Japan), a quasi-government corporate partnership that invests in a variety of industrial and technology related Japanese companies, bringing Ichigo’s loans to JDI to 48b ($366.5m US)
• Ichigo will buy 53.7b¥ of JDI debt from INCJ, and will do a debt/equity swap at 45¥, eliminating all debt owed to INCJ by JDI, while INCJ will return all Class A preferred (convertible) shares to JDI at cost, which will be cancelled by the company
• Ichigo will forgive 15b¥ of JDI debt.
• JDI will issue 173.6B in warrants to Ichigo (45¥) to finance growth through 2026.

Management also revealed plans for the company’s growth after the above financing, and while some of the goals are vague, JDI does have some products that are rather unique and could help the company to bring itself to profitability.as the global economy and the display space begin to recover.  One such product is eLEAP, an OLED display production process that does not use FMMs (Fine Metal Masks) in order to create OLED sub-pixels.  This reduces OLED material waste and the cost of both the cleaning and replacement of FMMs that are typically used to produce OLED displays, while allowing for more precise material placement which increases the amount of light generated and improves OLED display lifetime.  The eLEAP process is not limited to Gen 6, as is conventional FMM deposition, with the company receiving it first order this month and full production scheduled for fiscal 2024, with Samsung Display (pvt) the rumored (unconfirmed) interested customer.
JDI’s plans also tout its expertise in IGZO backplanes, ultra-high resolution displays, transparent displays, and automotive displays, however the competition in those areas is fierce, particularly automotive, a segment where many display producers have focused as the consumer market slowed last year.  JDI will also reduce its smartphone production footprint and is expected to allocate 10b¥ of the newly raised capital to synergistic M&A.  Here’s the full breakdown of how the new capital will be allocated:

• 50b¥     R&D to Fund Continued Creation of Global No.1 Technologies
• 37b¥     Bolster Working Capital
• 30b¥     Bring eLEAP, HMO, HUD, Metaverse, and Other JDI Proprietary Technologies to Mass Production in Scale & Fund Sustainability Initiatives
• 20b¥     Further Build Out JDI Proprietary IP
• 15b¥     Launch Rælclear, LumiFree, & Other New Businesses
• 10b¥     Targeted M&A in Synergistic Businesses
• 10b¥     DX (Digital Transformation) Investments

All in Ichigo now controls 78.2% of JDI’s voting rights and has allowed the company to eliminate all debt but has also increased its own risk level in that JDI might not be able to reach its fiscal 2026 goals.  JDI’s CEO, Scott Callon, is also the Chairman of Ichigo, and a specialist in real estate financing and restructurings, but the display space is a quirky one and there are only so many refinancings that can be done before competition and industry cyclicality take their toll.  Hopefully this new financing round takes a bit of pressure off of JDI for a while and lets the company exploit its technology, particularly on a licensing basis, but JDI has a lot to prove over the next few years.

​Innolux (3481.TT), one of Taiwan’s two major LCD large panel producers reported January sales of 12.597b NT$, or $419.2m US, down 21.8% m/m and down 47.5% y/y.  Over the past 5 years Innolux has averaged a 9.2% decline in sales between December and January, putting January ’23 far below the average, although a bit better than the -24.9% m/m decline seen in January 2020 at the beginning of the COVID-19 pandemic.  Excluding 2020, the current results, in absolute terms, are the worst since we began tracking Innolux sales in 2010.  Large panel shipments were 7.75m units, down 20.5% m/m and down 37.5% y/y, the lowest since 2010’s 4.1m units, while small panel shipments were 20.51m units up 8.0% m/m but down 10.9% y/y, the lowest small panel unit volume since 2019.
Our focus on Innolux is due to the fact that listed Taiwanese companies are required to release month results which gives a bit more color into CE display trends than typical quarterly results.  While AU Optronics (2409.TT), the other major Taiwanese large panel supplier, we expect similar results as the display market heading into the Chinese New Year holiday was working toward continuing the reduction of inventory levels heading into 1Q ’23.  As January and February are typically seasonally weak, we expect little change in February, with March usually the first positive m/m sales period. 
As we noted previously, we expect large panel (TV) prices to remain stable or increase slightly over the next month, which could work toward a slight improvement in February results for display producers, but the question remains as to what drives TV set demand going forward, and for how long will panel producers maintain low utilization levels..  We expect little change in TV set or panel demand in 1Q, so the real question is whether display producer managements will cut prices again to stimulate 2Q sales.  We expect that will not be the case, and managements will deal with 2Q results above those in 1Q but still lackluster and rely on 3Q to bail out the 2023 year, under the assumption that the global economy will have recovered enough to support a more positive holiday season.  It is a lot to hope for, and there is much that needs to happen to make it work, but we are still quite early in the year which allows for that hope to remain alive.

​Hermes of Paris (pvt) is among the most well-known global luxury item brands, generating $9.7b in sales in 2021.  The company has a broad variety of products ranging from watches to fragrances, but is best known for its leather work, particularly women’s handbags, and the 1984 release of the “Birkin Bag” set a high water mark for status and quickly became collector’s items, with certain custom Birkin’s selling at auction for over $380,000 and a number of publications citing the fact that the value of Birkin bags has increased at a rate higher than that of the S&P 500.  
A digital entrepreneur by the name of mason Rothschild decided that he would create NFT assets under the name “Metabirkins”, starting with “Baby Birkin” a digital image of a 40-week old fetus on top of a transparent version of a Birkin bag on his website, the success (the original NFT sold for $23,500 in May of 2021 and was resold for $47,000) of the Baby Birkin prompted Mr. Rothschild to create additional Metabirkins which he offered on OpenSea (pvt) in December 2021 using the Metabirkin trademark and advertised the NFT’s on the Metabirkin website, with links to OpenSea, Discord (pvt) and a number of other similar sites, using the Birkin mark, the Hermes mark, and the slogan “Not your mother’s Birkin” and stated “MetaBirkins are a tribute to Hermes’ most famous handbag, the Birkin, one of the most exclusive, well-made luxury accessories.”
After a letter was sent to the site by Hermes, a disclaimer was added, stating “We are not affiliated, associated, authorized, endorsed by, or in any way officially connected with the HERMES, or any of its subsidiaries or its affiliates. The official HERMES website can be found at https://www.hermes.com/”, although the disclaimer was not posted on any of the NFT sales sites.  On December 26, 2021, however OpenSea removed the MetaBirkin NFTs after receiving notice from Hermes and Mr. Rothschild moved the collection to Rarible NFT (pvt) and continued to advertise the MetaBirkin digital assets, also adding the NFTs to the LooksRare (pvt) marketplace, again using the MetaBirkin trademark, and a similar offering on Zora (pvt).  As of January 6, 2022 total sales of MetaBirkin NFTs were $1.1m, although Mr. Rothschild had complained publicly that there were a number of ‘counterfeit’ MetaBirkins being circulated on NFT platforms.
With Hermes requesting a jury trial, only days ago, the jury came back with three guilty verdicts, one for trademark infringement, one for trademark dilution, and one for ‘cybersquatting’, the practice of registering company or brand names, in order to sell them, and awarded Hermes $133,000.  Most important however was “4th” verdict, “Having found the defendant liable for trademark infringement and/or trademark dilution and/or cybersquatting, we the jury find that the First Amendment protection does not bar liability”.  This links the MetaBirkin NFTs to strict trademark rules rather than those re4lating to artwork, which has been the mantra for NFT ‘creators’ since their inception and will end Mr. Rothschild’s plans to create 1,000 MetaBirkins for which he was to receive $450 each and 7.5% of secondary sales.  We assume his legal team will appeal the ruling, but we expect, at least for now, it will send a message to the NFT community that it cannot infringe on public trademarks.

​As promised, Samsung Electronics (005930.KS) officially announced the price and delivery schedule for one of the two additional sizes of their QD/OLED TV line, the 77” (Model 77S95C) model.  The sets will begin shipments on February 14 if pre-ordered at the advertised price of $4,500, which is slightly higher than the original price of Samsung’s top tier Mini-LED/QD 75” set that it released in March of last year and considerably higher than our early estimate of $3,000[1]  While this price might seem high when compared to the current price of the 2022 55” and 65” QD/OLED sets, which are now selling for $1,450 and $1,800 respectively, we note that the initial price of the 55” and 65” sets, released 326 days ago were 42% and 40% higher.  If we follow that logic, in 342 days (January 1, 2024) the price of the 77” model should be $2,655, or 41% below the initial.
Of course there re a lot of factors that will affect the price reductions for the 77” model, along with further reductions for the 55” and 65” models, and a potential 49” model that has yet to be announced officially, so we use that number only as a guideline that has considerable room for change.  However, it does serve to wait for the initial enthusiasm from “Gotta be the first” buyers to wane, as on an unofficial basis, it took about 46 days for the price of the 55” model to decline by 12.1% on Amazon (AMZN) and was near it current all-time lowest price in a bit under 230 days (End of October 2022). 
One point to consider is that on a per square inch basis, the 77” model sells for $1.78/in2, roughly between the initial price/in2 of the two earlier models, which means Samsung used the earlier models as an initial pricing reference for the 77” model.  With the 55” and the 65” QD/OLED models now selling for $1.12/in2 and $1.00/in2, our $2,655 estimate ($1.05/in2) does not seem outlandish, so if you can wait until the 2023 holiday season to buy the 77” QD/OLED Samsung TV, you should be able to save a substantial amount relative to today’s pre-order purchase price, or you can hope that Samsung announces a lower priced version of the 77” model (Model 77S90C?) later this year as rumors have suggested might be the case.


[1] Note: Our estimate was based on the current prices of the two existing (55” & 65”) models.  Samsung has priced the 77” set at a premium starting price, although we believe it will decline as noted above.

Way back in June of 2019 we noted that a small California-based company known as Mojo Vision (pvt) was in the process of developing a contact lens with a Micro-LED display that was to be 1/50th of an inch across, with a pixel density of 14,000 ppi (pixels/inch) that would allow users to see images and data superimposed on the user’s vision, without the use of AR glasses.  The company, which had raised $108m at that juncture, had the backing of Motorola (MSI), Google, LG Electronics (066570.KS) and Hewlett Packard (HPE), was in stealth mode at the time and we had little contact until last year when it showed a prototype of its AR contact lens, which included a power management chip, a communication module, motion sensor, accelerometer, gyroscope, magnetometer, and micro-processor, along with the Micro-LED display in a breathable plastic shell..

​ 
Unfortunately the target market, the visually impaired, proved to small to support the necessary product development, so the company shifted focus toward the development of ultra-high-resolution displays based on Micro-LEDs and recently indicated that it had developed the technology far enough to reach a pixel density of 28,000 ppi, using sub-micron sized blue Micro-LEDs and quantum dots for color shifting.  As 14,000 ppi already would be the highest pixel density display available, the push to 28,000 ppi would be a significant leap ahead.  Mojo Vision has also developed the necessary backplane and bonding technology and advertises the ability to manufacture 300mm GaN on Silicon at high volumes.
Along with the shift in focus comes a 75% workforce reduction, as the contact lens project required further funding that became scarce as the company tried to miniaturize the battery and processor to include them in the device, as the prototypes used external power and processing, so Mojo Vision is added to the list of those that have tried to develop such a device, including Google’s parent Alphabet () that abandon a contact lens development project that could also monitor glucose levels in a user’s tears.  Hopefully Mojo Vision can capitalize on their Micro-LED technology, which seems closer to actual availability than the contact lens concept and would certainly be a step forward for Micro-LED AR displays if it can be produced commercially at a reasonable cost.

Ai is a bit far afield from our usual hunting ground, consumer electronics, but recent stories in the press about ChatGPT have sparked interest from some of our readers toward the topic, and without even stretching a little, we can easily draw the increasing connection AI has to consumer electronics.   Most consumers’ perception of AI is a large bank of servers, lights flashing, churning over billions of data points in order to arrive at a conclusion, but that is only one part of the AI story, and usually the part that has little to do with consumer electronics.  But some form of AI is built into many consumer electronics products and performs numerous functions, some of which we never see or hear, while others are commonplace.
Among the most common “AI” tools is the spell checker usually included in word processors, an outgrowth of Ralph Gorin’s 1971 SPELL program that checked letters in a word against a list of correctly spelled words by comparing single or adjacent letters, and while early spell checkers were limited to Mainframes, they migrated quickly to PCs in the early 1980’s.  These relatively simple systems were based on a comparisons, which would imply that the more words to compare against the more accurate the checker, but it was found that as the word lists grew over 100,000 the number of misspellings increased. 
The problem facing early spell checkers is that they were not able to discern context, so they faced difficulties with words that sounded the same but had different spellings and different use cases, such as ‘there’ and ‘their’.  As local computing power and storage increased, systems were designed that could evaluate context by comparing phrases or sentences against grammatical rules that were embedded in the system and could determine the correct spelling of a word based on both the word list and the rules, but data scientists found that as processing power and storage increased further, they could enter millions of data points that AI systems could ‘look at’ to better understand context, not only for language, but for almost anything, leading to the development of AI algorithms that fall into three classes.
Supervised – The most common category, where labeled data is feed to a system and is used to train the system to predict outcomes as it is given new data.  Typical systems uses decision trees that test the data using sophisticated ‘if…then’ nodes to move through the decision process until a conclusion is drawn that is based on all of the tagged data that the system has seen.  Systems like these are the basis for systems that have been in the press in recent months, such as those that can ‘paint’ a picture based on the style of a particular painter, having been fed the digital images of all of that artists work.  The system can create an image based on the user’s request using the characteristics it has recognized for that artist.  In its simplest form we asked an AI art generator to paint a picture of daisies in a vase using a generic style and Figure 1 is the result.
Unsupervised – This category does not use tagged data, so the algorithm must evaluate the relationships between the data points without specific definitions, which they tend to do by creating clusters of similar data around central data points, and using a number of methodologies to evaluated the clustered data.
Reinforcement – This category is a bit like training an animal, as the system uses an ‘agent’ to perform an action within a certain ‘environment’, and then rewards the agent when the action is completed.  The agent uses the reward (positive or negative) to help it with the next iteration of the action until the environment ends the process, just as rewarding an animal for a correct response helps the animal to understand what the correct response is.

​CE products vary widely in their use of AI systems, from virtual assistants such as Amazon’s (AMZN) Alexa  or Apple’s (AAPL) Siri to embedded Ai systems such as those in your TVs.  Virtual assistants ‘learn’ about your behavior based on the tasks they are asked to perform, so, in theory, they should be able to respond to requests with increasing accuracy as they learn an individual’s patterns.  TV AI is more technical in that it can sample incoming images for patterns and make adjustments on-the-fly to emphasize or de-emphasize a particular aspects of the image based on the user’s settings, or remove ‘noise’ or scale an image from one resolution to another.  These systems can process images on a pixel-by-pixel basis and with TVs generating ~30 frames each second, that comes to 14.9b pixels that can be processed each minute, but the AI component also ‘learns’ about each image, rather than comparing to a built-in list as in older sets, and can make better adjustments based on what it learns.
Both of the applications mentioned are common to CE products and in many cases are integral to their function, but AI continues to develop and will become more integral in CE products and daily life.  Having a background in the music industry, we were intrigued by Google’s (GOOG) MusicLM system, a bit less sophisticated than the artistic systems mentioned above, but nonetheless amazing in its ability to create music from text.  In its simplest application the words “acoustic guitar” or “flute” generate the following sound clips[1]:
 https://google-research.github.io/seanet/musiclm/examples/audio_samples/10s_samples/instruments/acoustic-guitar.wav,
 https://google-research.github.io/seanet/musiclm/examples/audio_samples/10s_samples/instruments/flute.wav
but more interesting is how it generates clips from the text “blues”, “West coast Hip-hop”, “East coast Hip-hop”, or “Reggae”
 https://google-research.github.io/seanet/musiclm/examples/audio_samples/10s_samples/genres/blues.wav
https://google-research.github.io/seanet/musiclm/examples/audio_samples/10s_samples/genres/west-coast-hip-hop.wav
https://google-research.github.io/seanet/musiclm/examples/audio_samples/10s_samples/genres/east-coast-hip-hop.wav
https://google-research.github.io/seanet/musiclm/examples/audio_samples/10s_samples/genres/reggae.wav
However things get even better when the system gets more complex text that does not specify a genre but a caption, such as “beach in the Caribbeans” or “escaping prison”,
https://google-research.github.io/seanet/musiclm/examples/audio_samples/10s_samples/places/beach-in-the-caribbeans.wav
https://google-research.github.io/seanet/musiclm/examples/audio_samples/10s_samples/places/escaping-prison.wav
with applications in TV, gaming and advertising quite obvious.  Not only is the system able to create genre related music or even contextual music, but it has also learned about diversity across all forms of music and with the same text token “progressive rock guitar solo” came up with a number of different guitar solos based on its learned data.
https://google-research.github.io/seanet/musiclm/examples/audio_samples/diversity-samples/progressive-rock-guitar-solo/same-text/0.wav
https://google-research.github.io/seanet/musiclm/examples/audio_samples/diversity-samples/progressive-rock-guitar-solo/same-text/1.wav
https://google-research.github.io/seanet/musiclm/examples/audio_samples/diversity-samples/progressive-rock-guitar-solo/same-text/2.wav
 
 
While this is only a single AI application, there are many, including the famous/infamous ChatGPT and its many clones, that will find their way into CE applications regardless of whether we believe they are useful, helpful, legal, moral, or justified as they represent ways in which content can be created without the expenses associated with human involvement.  We have given up moralizing about the potential ‘disintegration of society’ that AI has the potential to cause, since almost all generations have heard the same thing about some technological change (TV, video games, CDs, etc.), and society has found a way to adapt to the change.  However, as only a small portion of humankind has the desire to challenge the validity of textual or visual media, it will take some time before we understand how AI will affect the fabric of human creativity.  Will it turn us into a society of eloi[2], allowing AI to keep us docile with a constant supply of curated entertainment, or will it free us from the burdens of everyday life, allowing our creativity to blossom?  Honestly, we don’t have a clue but to paraphrase Bette Davis “Fasten your seatbelts, it’s going to be a bumpy ride.”


[1] These sound clips reference the Google MusicLM site links for each file.  Ctl+Click should play each individual file.

[2] “The Time Machine” – H.G. Wells 

We have previously mentioned a potential decision process at Samsung Display (pvt) that needs to be made if the company is to expand its QD/OLED production capabilities at its Asan, Korea fab.  The QD/OLED fab, the company’s first, has a capacity of 30,000 sheets/month, which limits the total available capacity that can be produced for the QD/OLED display product.  SDC has two primary QD/OLED TV panel customers, parent Samsung Electronics (005930.KS), and Sony (SNE), both of whom have active retail consumer QD/OLED TV products .  Sony has two currently available models, a 55” and 65” but withheld new TV model announcements at CES in order to focus attention on other products, while Samsung Electronics has the same size models (2022 series) but has announced it will add 49” and 77” TV models this year.  SDC also produces 34” QD/OLED displays, which are used in an Alienware (DELL) QD/OLED monitor and a 49” QD/OLED display that will be used in Samsung’s upcoming 49” QD/OLED monitor.
Samsung Display has said little about its plans for expansion, after facing serious yield issues in the 1st half of 2022, which limited SDC’s ability to deliver displays to both parent Samsung and Sony.  This led to such a small number of displays being delivered to Samsung Electronics that Samsung was unable to prominently feature the technology in its 2022 TV lineup, and the sets were under promoted for much of the year.  As the year progressed, SDC was able to solve the yield issues and increased deliveries, but the TV environment remained weak, which we believe limited Samsung’s desire to increase marketing dollars and left Samsung Display with questions as to the future of the technology.  Toward the end of the year, SDC’s yield improved to the point that they were able to lower the panel price to Samsung, and there was then a bit of hope that Samsung would more fully back the product in the back end of last year as it made the consumer price point more attractive and boosted sales.
While Samsung nor SDC has revealed how many QD/OLED units were produced and/or sold last year, we expect, while disappointing overall, the price points reached in 2H made the product attractive to consumers and Samsung became more interested in using QD/OLED as a part of its TV line-up going forward, but given that Samsung ships 40m to 50m sets each year, shipments of QD/OLED TVs represented roughly 1% of total shipments, leaving the product in limbo as to its place in the Samsung 2023 TV lineup.  That said, there was considerably more Samsung traction for QD/OLED at CES this year and the company indicated that it would be adding 77” and 49” models to the line this year.  In order to make the QD/OLED product significant enough to take a real place in the TV line, we expect Samsung must be able to bring shipments to between 4% and 5% of total TV units, or between 1.8m and 2.3m units this year.
We believe SDC was able to produce ~1m units last year, although they produced less, and while they have brought yields to over 90%, they would be limited to under 2.2m units at full capacity for the 2023 year, leaving little room for Sony, Dell, and other potential customers, along with safety stock.  That has led us to expect SDC to announce that it will expand production , building out additional capacity, although no such announcement has been made.  However a number of rumors have been circulating in South Korea indicating that Samsung Display will be increasing capacity at the QD/OLED Asan plant from the current 30,000 sheets/month to 45,000 sheets/month during the year, which we assume would be co-located with the existing lines.  Based on our timing and capacity estimates, we believe this will enable SDC to produce ~2.5m units, enough to justify parent Samsung’s increasing product support with a path to a more significant place in the 2024 TV product line
As SDC is currently the only producer of QD/OLED technology, it is up to them to produce quantities that make it worthwhile for customers to support the technology, so SDC must balance the need for capacity against the cost of that capacity and the risk that a weak macro environment will weigh on overall TV shipments this year.  A line-by-line expansion makes considerable sense given that the QD/OLED process is a bit less complex than typical RGB OLED and we assume that there is already sufficient TFT backplane capacity at the existing fab, keeping the cost of the expansion relatively low.  This would imply the installation of a new 15k line, with the major tools being an open-mask deposition tool and QD ink-jet printing capacity that could be fit into the existing fab structure.  While there is considerable conjecture here, the risk of such an incremental expansion is far less than a greenfield project, even if it were done in an idle fab shell.  We expect SDC to say little until such a capacity increase is up and running smoothly, but both the timing and the level of risk fit the parameters necessary to keep the QD/OLED display product line active and growing for SDC.