We have noted a number of times, the ‘unusual’ uses found for Apple’s (AAPL) AirTags and the associated ‘Find My’ application used to locate lost Apple devices, particularly iPhones, iPads, Macs, and the Apple Watch, but it seems another ‘unusual’ use has been discovered during the Russian invasion of Ukraine.  It seems that since the Russian invasion is not considered a ‘war’ but a ‘special military operation’, it would not be a violation of the Geneva Convention that Russian soldiers have been looting Ukrainian cities and even sending such stolen items back to Russia, but by ‘collecting’ Apple products, the Russian soldiers have given the Ukrainian military a new tool to battle such aggression.
It turns out that by using the ‘Find My’ application, the Ukrainian military has been tracking looted Apple devices as the looters move with the stolen devices, including when they made a recent retreat into Belarus, according to the staff of the opposition leader in Belarus, providing the map below.  This is a step up from location data available from FitBit (GOOG) devices that had been used in earlier conflicts to locate hidden military bases.  As the ubiquity of Apple products and social media have made passing Apple’s ‘Find My’ information so precise and easily passed to the proper authorities, it seems that the Russian troops, in their excitement to ‘own’ an iPhone, have given the Ukrainian military the ability to use that naiveté to their advantage.  Perhaps Apple should offer to ship a few hundred thousand older iPhones to Mariupol in plainly marked crates that somehow fall into the hands of the Russian military…
 

​Back in 2019, at the height of the Trump administration’s anti-China hysteria, the US Congress passed Public Law 116-124, otherwise known as the Secure & Trusted Communications Network Act of 2019,that prohibited the use of federal funds toward the purchase of communications equipment or services from companies that pose a national security risk to US communication networks.  As part of the requirements, the FCC published a list of equipment and services that would be prohibited by this law and communication providers were required to justify any such purchases to the FCC, with equipment from Huawei (pvt) and ZTE (000063.CH) being the focus.  The bill also established a reimbursement program that would supply small providers (less than 2m customers), with funds to offset the cost of replacing such equipment.
The bill required that carriers that qualify make initial reimbursement cost estimates to the FCC and allocated $1b as a starting figure for the reimbursement fund, while giving carriers only 1 year from the date of funding to make the replacements, although the FCC was given the ability to grant 6 month extensions on an individual basis.  Based on the initial applications, the capital allocation was raised to 1.89b in 2020.  At the time of the initial applications there were 52 company submissions, however by January of this year that number increased to 181 as more companies found they could meet the necessary qualifications, but at the same time the number of applicants was increasing, so were the estimated costs for the removal and installation of qualified equipment.  Based on current FCC estimates after the recent review, the cost has now risen from 1.89b to $5.6b, which leaves a funding gap of ~$3.7b, with some of the blame resting on the ‘equipment replacement cost catalog’ that the FCC initially provided to help early applicants cost out the replacement.  It seems that the FCC did not do the complex cost analyses done by the carriers that includes modifications to cell towers or the replacement of downstream equipment to make it compatible with the replacements.
There are likely overestimations at the carrier side in order to protect them from potential problems during the transition, but few expect that the new $5.6b estimate will be reduced significantly, and with the continuation of silicon shortages and the rising cost of materials overall, some carriers are holding back the progress of the replacement cycle in order to see if the Congress will fund the higher amount, especially since major US carriers will be spending more this year and next for 5G mid and C-band rollouts.  If the money doesn’t get allocated by Congress, it could slow the replacement project to a crawl as we doubt smaller carriers would be able to foot the bill themselves and larger carriers will focus capital spending on revenue producing 5G capacity.

​Samsung Electronics (005930.KS) reported preliminary 1Q results of 77t Won in sales ($62.62b US) and 14.1t won in operating profit ($11.47b US), both exceeding consensus estimates of 75t won and 13t won respectively.  This represents an increase in sales of 0.6% q/q and 17.8% y/y and an operating profit increase of 1.7% q/q and 50.3% y/y.  The 1Q sales figure is the highest in the company’s history.  While Samsung does not give details when it states preliminary results it is expected that expectations for lower memory shipments were overly pessimistic and lost smartphone sales in Ukraine and Russia were offset by better results in other regions.  Full details will be released later this month.

Consumer Electronics is a broad category and from our perspective is no longer just focused on the hardware we use in our daily lives.  The category has become richer as the world of digital media has expanded, and as some might aver, we are on the threshold of another step function in the digital world with the popularization of the Metaverse.  Putting aside the ‘things to come’ refrain for a moment, we take a look at digital media as seen through the eyes of Deloitte, who summarizes digital media trends each year through a variety of consumer based surveys.  While we are always a bit wary of surveys, given that the survey format itself tends to color responses, they do give a bit of insight and interesting and surprising data relating to the long-term prospects for various forms of digital content.
Streaming video has become the standard-bearer for digital entertainment over the last 15 years, whether it is watched on a smart TV, monitor, laptop, tablet or phone, but at the same time has created an environment for consumers that has become complex and at times burdensome both from a source and a cost perspective.  The challenges of convincing the current generation of digital media users to abandon more traditional forms of entertainment have dwindled as the younger generation’s proclivity and appetite toward digital media is almost an inborn attribute, so SVOD suppliers are now trying to understand what they might face as that generation becomes their primary income source.
SWOD sources are in a competitive battle with social media where personalization is the mantra and algorithms are continually refined to include more specialized personal services than just entertainment.  This gives additional stickiness to those platforms with consumers and at little or no cost, while SVOD services push to monetize ‘new and exciting premium content’ that they know is just a short step away from what they have included in standard services in the past.  So while SVOD services capitalized on the ‘unbundling’ of cable services to gain viewership, social media is looking to capture eyeballs by essentially unbundling everything and providing content for free, albeit with a continual bombardment from advertisers.
While this competitive situation was already developing over the last few years, the COVID-19 pandemic accelerated that timeline as consumers were forced to shelter in place and became even more starved for the ‘companionship’ that the digital world can provide.  Concepts like the Metaverse, where consumers can wander through universes, real or unreal, through the anonymity of an avatar while sitting on their living room couch, now seem somehow plausible and an obsession with everyday folk dancing on TikTok has replaced watching cat videos to generate a bit of well-needed excitement.  But as the world begins to work through ways to control the COVID-19 virus and allows consumers the option to return to what was their previous ‘external’ life, will the momentum toward social media and a less social world remain, or will we revert back to  a less digital social life?
The Deloitte survey was conducted in December of 2021 and included 2,000 US consumers, along with comparative surveys in the UK, Germany, Brazil and Japan with the data being weighted nationally, with 5 generational categories as follows:

• Gen Z                    Born: 1997 – 2007            Age: 14 – 25
• Millennials           Born: 1983 – 1986            Age: 26 – 39
• Generation X      Born: 1966 – 1982            Age: 40 – 56
• Boomers              Born: 1947 – 1965            Age: 57 – 75
• Matures               Born: Prior to 1947          Age: 76+

 
Figure 1 shows the churn rate, meaning those US consumers that added and cancelled SVOD services during the past 12 months, broken down by age category.  With Gen Z and Millennials obviously the most prone to ‘gaming’ SVOD services, the churn challenges facing those providers will likely continue to increase as Gen X, Boomers, and Matures age out, but all is not lost for SVOD providers as those same younger generations are more likely to cancel services and then resubscribe, which is shown by country (and average) in Figure 2.  While Figure 2 is a bit of a positive for the SVOD community, churn reduces visibility and increases cost, so SVOD suppliers are looking for ways to keep subscribers from cancelling a subscription when the season for a particular show ends and resubscribing when the show begins its next season, a common practice.

One potential solution for SVOD providers would be to reduce streaming service costs by supplementing income from ads, similar to how social media supports itself.  The question is whether consumers who are paying for such services (as opposed to free social media) would be willing to agree to such plans and at what price point would it begin to alleviate ‘seasonal’ or other churn?  While Figure 3 gives some insight into the question, with the most ‘popular’ option being 12 minutes of ads per hour and no fee, we were surprised that the ‘no ads - $12 fee’ option scored almost as high on average.
Taking it a bit further the survey looked at some alternative options that might keep consumers from switching in and out of SVOD services.  These ranged from a typical ‘no ads or restrictions for an annual fee’ to ‘no option would keep the subscription’, with a few gradations between including ads, time restrictions for premium content, and delayed sports coverage.  Surprisingly the ‘no option would keep subscription’ scored the highest on average, with over 50% of consumers in Japan opting for that option and just over 40% on average.  Outside of the survey data shown in Figure 4, US consumers indicated that when thinking about cancelling an SVOD service, 37% would stay if they had access to 1st run movies and 34% would stay if there was a loyalty program, while more specifically, 51% of Gen Z and Millennials would stay if their SVOD subscription included a gaming or music service.
 

That last statement from Gen Z and Millennials seems to lead back to the somewhat obvious focus of younger generations toward gaming and social media content.  In regard to social media, the survey questioned respondents as to what they do on social media, and while other surveys we have seen seem tend to disagree at times, the use of social media to watch or read news is the largest category at ~38% on average, as shown in Figure 5, followed by listening to music at 30%.  There are certainly variations between countries, such as the difference between the US, where listening to music took the top spot at 28% and news was 2nd at 27%, and Japan where news was 52% and music was 29%.  Most surprising in this category was the low averages for playing games (19%) and watching sports (12%) but we note that the data here is across all age groups, rather than just Gen Z and Millennials.
One area that is, or should be of concern to SVOD providers is the content itself, as 70% of Gen Z and 66% of Millennials say they spend more time watching user-generated content than they planned to and 59% and 63% of those groups say they spend more time watching user-generated content than 6 months ago, while 56% of Gen Xers indicated that they watch more user-generated content than they did 6 months ago..  Even more consequential is that 57% of Gen Z, 60% of Millennials, and 45% of Gen Xers indicated that they spend more time viewing user generated content than TV shows or movies, which would be an important metric for the SVOD community to gauge the value of branded streaming content.
If the value of SVOD content is lessened by user generated content, meaning that of influencers who promote lifestyles and products, and businesses find increasing value in ads and retail sales surrounding that content, consumer spending toward SVOD services would decline and SVOD content creation budgets would be affected.  While this might seem a bit far-fetched 70% of US survey respondents indicated that they followed an influencer and 33% of those indicated that said influencers made a difference to their buying decisions, with that share increasing to over 50% for US Gen Z and Millennials.  That trend is certainly a global one with 88% of Brazilian respondents indicating they follow an influencer and 79% in Japan, so while SVOD providers compete with each other to create more valuable content, they are really competing with social media where advertisers and influencer sponsors can capture revenue from product sales and social media firms can garner higher advertising rates, but underlying all of that is the social connection that social media provides that is absent from most SVOD services, and we see this as most concerning when it comes to the aging of the Gen X and Boomer age groups. 
As the younger generations, who seem to be more oriented toward social interaction through digital media than physical social interaction, the trend away from SVOD services will likely continue unless changes are made to pricing and/or service content.  The logical progression in our view would be for SVOD providers to become more social media conscious, such as providing Twitch-like services that would allow SVOD users to watch content with friends, something gamers have been doing for years, changing content scheduling so as to offer similar popular content for a more extended portion of the year, or the ever popular loyalty programs that give subscribers free content if they remain a full year subscriber.  It will be a difficult battle for SVOD providers as they come up against changes in attitudes toward the value of SVOD content, and a tie to gaming would certainly help to maintain younger subscribers, but the real question will be whether SVOD providers understand that while they were the successful radical alternative to cable’s service bundles, social media is heading toward being the radical alternative to SVOD and video content providers must change or accept a far more competitive and less profitable environment.

Estimating production goals is like herding cats; when you think you’ve got them rounded up, you notice that some of the ones you counted are now missing, so we give credit to those who make such attempts, especially knowing that they are moving targets that have the potential to change a number of times during the year.  OMDIA has made such predictions for the top three TV set brands, with the caveat that purchased panels and goals do not always translate into actual TV set sales, and in the hope that they remain unadulterated for at least a few months, we review them here.
Samsung Electronics (005930.KS) is the most aggressive in its panel purchase expectations for this year, up 16.1% over last year’s purchase estimate and up 31.6% over last year’s estimated TV shipments, while TCL’s panel purchase plans are up 12.7% over last year’s plan and up 48.6% over last year’s TV shipments.  LG Electronics is only expecting to increase TV panel purchases this year by 3.9%, which would be an increase of 25.5% over last year’s TV set shipments.

As to the sources for these panels, most TV brands use multiple sources to secure TV panels, both for price and to ensure that disruptions at a particular supplier will not impact the entire TV set production process.  That said there are some changes this year, particularly Samsung Electronics’ TV panel purchases from Samsung Display, which are expected to decrease from 7.1m units last year to ~4m units this year as SDC winds down it final large panel production fab.  Much of that difference will be made up by LG Display who will see their large panel LCD shipments increase from .9m last year to ~4.2m this year, including ~2m OLED panels, over which the two companies have been in negotiations for some time.  Samsung will also procure 1m QD/OLED panels from SDC this year.
LG Electronics (066590.KS) seems to be taking a different tact toward TV set sales this year, which is reflected in its panel ordering plans.  LGE is concentrating more on profitability than volumes by focusing more on the premium TV set segment and less on generic TV models.  It is expected that they will be purchasing ~5m premium TV panels consisting of ~1m Mini-LED TV panels (up from .9m) and 4m quantum dot panels (up from 3m), increasing their focus on the premium LCD segment and also increasing their purchase of OLED TV panels that also contribute to the premium TV product tier.
The change in focus by LGE leaves room for China’s TCL (000100.CH) to push forward and potentially become the 2nd largest TV set brands globally.  While this would certainly be headline producing, especially in China, while units are commendable, sales leadership and profitability are more so and TCL’s emphasis on undercutting both competitors on price will be a challenge should LGE be successful in building its premium TV business further.  That said, TCL will also increase its LCD TV panel purchases from affiliate Chinastar (pvt) from 18.4m units last year to 22.5m units this year, a portion of which will come from the LCD fab it purchased from Samsung Display in 2020 for $1.08b (Samsung used some of the capital to buy a 12.3% stake in TCL at the time).  In theory this should help TCL to be competitive as it uses more of its own capacity to fill its panel needs.
While all three TV set brands roll the dice each year in reference to panel prices, Samsung has the most leverage, in both directions.  When Samsung Display was a major LCD TV panel supplier, positive panel price movements caused SDC to see higher utilization rates and become more profitable, while Samsung’s TV business struggled with weaker demand and an inability to completely pass on those higher prices.  When panel prices declined, SDC saw low profitability while Samsung’s TV business saw stronger demand.  While that balance was never perfect, it no longer exists for the LCD TV category at Samsung as SDC will be out of the LCD TV panel business entirely this year, meaning Samsung will be buying almost all of its TV panels from outside panel producers.  If TV panel prices rise, TV set sales will weaken but will have less impact on SDC, with small panel OLED displays being their primary product, while Samsung’s TV segment will see lower profitability, however if TV panel prices remain low or weaken, Samsung’s TV segment should see better shipments without the negative offset of weakness at SDC.
Again, no scenario is perfect but it seems that Samsung has made the bet that overall it can do better by purchasing LCD TV panels in the open market than it can by producing them itself, which would indicate that Samsung’s long-term picture for LCD TV panel prices is down, while TCL seems to be going in the opposite direction by increasing its own panel production capabilities.  There is validity in both theories, although we favor the Samsung scenario a bit more when looking at the 10 year price chart for 32” TV panels, which represent ‘generic’ TV sets, but the bigger question is whether the panel procurement goals set by these major TV set manufacturers are realistic or will be subject to change during the year. 
We are perhaps a bit less optimistic about how the TV set space will play out than the three brands, but we also have no vested interest in the actual results, other than from an intellectual standpoint, but lower large panel TV prices have been the reality since August of last year, giving some hope toward  those purchase goals, but we still see some cannibalization of demand last year eating into unit demand this year, which we expect will cause those procurement goals to be lowered at least once this year.  That said, the dollar value of TV set sales should increase a bit this year, at a rate greater than unit volume, as the premium segment grows, so while units might be a focus point for headlines in the trade press, again the winner will be the most profitable, which we expect will be one of the South Korean brands, depending on promotional spending and component availability.

BOE (200725.CH) is China’s largest panel producer and the largest single display panel revenue generator in the display space, so we took some time to read through the company’s recently released 10K to clarify some points that have been in the trade press over the last few months, and a few that we felt important to clarify.  While most US investors are not familiar with Chinese display companies, during a portion of 2021 and in January of this year Chinese panel producers represented over 50% of the industry’s large panel LCD revenue and will likely continue to see that share expand over the next few years.  We do note that the above data only represents the large panel LCD business in China, and as we have noted, Samsung Display (pvt) and LG Display (LPL) have been reducing their capacity exposure to that segment since late 2020 so there is some give and take as to share, but the bottom line is that China is the dominant player in the large panel LCD display space currently.
BOE has been diversifying in order to maintain profitability through the cycles that are part of the display space, and we have broken out the company’s revenue segments below (Sales are in billions).  While product diversity is certainly a goal for BOE, with a 92.2% share of revenue, the display business was certainly the key to the company’s sales and the panel price increases seen in 2020 and 1H 2021 were instrumental in generating the 64.3% display segment growth and substantial increase in gross margins.  That said, we were a bit surprised at the size of BOE’s Mini-LED business, which generated $71m last year, which was a bit larger than we had expected.  BOE’s top 5 major customers represented 37.8% of sales last year, with the largest of the top 5 representing 9.05% of total sales, with 42.8% of total sales being made in China and 43.8% in other Asian regions, while the company’s top 5 suppliers represented only 17.9% of purchases in 2021.

While much of the 10K equivalent was typical boilerplate, there was mention of a number of capacity development projects particular to the display segment, which were and are at various stages of construction and development, however the most significant project that we see BOE embarking on this year is one that was not mentioned in the 10K.  BOE is expected to begin construction of a new Gen 8.5 OLED fab it will use to produce OLED IT products with the goal of mass production late in 2024.  This would put BOE in direct competition with Samsung Display and LG Display who are both working toward building Gen 8.5 OLED capacity in order to supply Apple (AAPL) with tablet and laptop OLED displays.  While the substrate efficiency of such Gen 8.5 OLED lines is similar to that of a Gen 6 line for tablets and laptops, the size of the substrate increases by 2x which means 2x more units per run, making a Gen 8.5 able to produce more units/operating time than a typical Gen 6 line.
The problem with running Gen 8.5 lines for RGB OLED displays has been the fine metal masks used to pattern OLED materials on the substrate, and while these masks are made of a strong alloy that is resistant to heat, even the smallest sag in what looks like a thin screen will create a defective display.  As the masks must be larger for Gen 8.5 lines, they run the risk of sagging and OLED panel producers have been wary of making the move from Gen 6 to Gen 8.5 fabs for RGB OLED displays.  In the case of the three producers mentioned, SDC has taken a new approach, devising a vertical OLED deposition unit, taking out the potential for much of the sagging, while LGD and BOE are working with conventional horizontal deposition tools to try to conquer the problem.

​All three OLED producers are working toward this new IT OLED capacity in 2024 and will likely be supplying test and qualification panels to potential customers as soon as the fabs are able to produce even limited quantities, but we would not expect to see any real product next year.  2024 is more of a realistic timeframe for these new fabs and while they face some difficult challenges, would represent the next step in OLED display production.  As we have mentioned in the past, one of the challenges facing OLED producers is improving brightness, which can be done in a number of ways, by creating new more efficient OLED materials, by stacking OLED emitting layers, and by improving light extraction, so the technology can play a role in who wins this rivalry.  What makes the game a bit more interesting now is that SDC and LGD now have some new competition to deal with and while BOE does not have the OLED expertise that South Korean producers have, they are quite aggressive and already have an established relationship with Apple for OLED smartphone displays, making the field a bit more crowded this time around.

Mini-LED backlights are a step up from typical edge-lit, un-zoned Direct, or even FALD (Full Array Local Dimming) LED backlight, and their use in what are mostly high-end display devices allows existing LCD infrastructure to compete more effectively with self-emitting technologies such as OLED and Micro-LED.  Many LCD displays, particularly lower tier models utilize edge-lit backlighting, which places LEDs at intervals across the top and bottom of the display. As the incoming image is scanned, the brightness of these LEDs can be adjusted to match light and dark areas on the image, adding to the display’s contrast, but it should be noted that given the spacing between the LEDs, the light and dark areas of the image do not always match the location of the LEDs, which can cause light from a nearby LED to ‘bleed’ into a dark areas of the image causing halos or similar artifacts.  

By placing smaller LEDs in an array consisting of strings of LEDs, the ability of the backlight to match light and dark image areas is increased however since the strings operate as one, there is still considerable bleed when the image has light and dark areas close together.   LCD designers took this one step further with FALD, which added more LEDs and broke them down into smaller strings called zones.  As these zones were smaller the granularity of the backlight increased, but when compared to self-emitting displays, such as OLED, where there are almost 8.3m pixels, even FALD backlight systems were unable to generate a comparable contrast.

Mini-LED backlight systems take the process to the next level, shrinking the LEDs once again and mounting them on a PCB or glass substrate, and with LEDs this small they can be grouped into smaller strings (or cubes) and the number of zones can be increased to the thousands.  While this is still not a match for self-emitting displays, it does sustain LCD technology infrastructure for a longer period, which aside from improving quality, is the goal of LCD panel producers, especially when that LCD capacity is fully depreciated.
So logic holds that both LCD display manufacturers and LED producers would be interested in developing the necessary infrastructure to produce Mini-LED backlight solutions, and to make Mini-LED technology even more attractive, it does not require new process manufacturing, but there are some issues that have to be solved and the most important is cost.  Given that there are more LEDs in Mini-LED backlights than in existing display backlight types, and that handling progressively smaller LEDs is more challenging, we find that currently Mini-LED backlights are typically used for high-end TVs or smaller displays that are oriented toward video production or graphics where color and contrast are influential factors. 
It takes a bit more expertise and more specialized equipment to produce Mini-LED backlight arrays and given the early stage of adoption, it becomes a typical consumer electronics chicken & egg scenario where the high cost limits adoption and the limited adoption holds back new capacity, but in this case that does not seem to be the way things are progressing.  While adoption is still relatively low for Mini-LED backlights, there have been a number of LED manufacturers that have begun Mini-LED production and even more that have announced plans or are building dedicated Mini-LED capacity, particularly in China.
Announcements from Sanan (600703.CH), Qianzho Optoelectronics (300102.CH), HC Semitek (300323.CH), Jucan Optoelectronics (300708.CH), Shenzhen Ruifeng Optoelectronics (300241.CH), Nationstar Optoelectronics (002449.CH) and Jufei Optoelectronics (300303.CH), just to name a few, concerning projects to expand or initiate Mini-LED capacity have been made over that last few months and while much of this new capacity will not be viable until 2023, there are already concerns that the Mini-LED industry will be facing over-capacity relatively quickly, despite the fact that Mini-LED backlights are currently in short supply.
Questions remain as to whether Mini-LED production will repeat the last LED cycle where excess capacity drove intense price competition that spurred the elimination of a number of smaller LED manufacturers and the need for government subsidies to keep a number of larger Chinese LED manufacturer afloat.  The good news is that while Mini-LED based displays are expensive currently, we expect that to change relatively quickly, which will increase adoption by CE brands and improve the overall quality of displays, while preserving the trillions of dollars’ worth of LCD infrastructure that has been made over the last 18 to 20 years.  While price wars and over-capacity are not good for producers, consumers are the beneficiaries. 

​The on-again/off-again negotiations between Samsung Electronics and LG Electronics’ (066570.KS) subsidiary LG Display (LPL) have been reignited according to industry sources (unconfirmed) in China.  As we have noted in the past, Samsung’s desire to offer a complete line of display options to its customers and the relatively low production capacity of its own QD/OLED display production, have been pushing the company to procure OLED TV panels from rival LG Display.  Rumors that prices for a high volume contract that would likely span at least two to three years has been a sticking point that has kept the two companies from such an agreement.
The most recent rumor-mill states that progress in the negotiations has been made and an agreement is getting close to being signed, but in the case of a commitment from both parties, which would likely entail additional capital spending on LGD’s part and a guaranteed financial commitment from Samsung, there will be lots of details to be worked out.  In such a case we doubt the more typical ‘cooperation agreement’ typically used in China, would suffice, so we expect if Samsung is to release its own ‘OLED’ TV this year (other than the QD/OLED), it would have to forge such an agreement by June or July, which gives LGD a bit more negotiating power if Samsung stays on its September rumored release date.  That said, Samsung can still walk away at any time and get its marketing gurus to come up with a reason it has decided to postpone such a release.  Since LGD is the only producer of volume large panel OLED displays, its going to be a question of whether an agreement can be reached within the next 90 to 120 days and whether Samsung is able to gather the necessary components (drivers, etc.) to make this all happen for the holiday selling period.
Some say it is a win-win situation for both parties, but that seems rather naïve as there is considerable ‘face’ involved in such a deal.  Samsung has pointedly stated that OLED is not well suited for large panel displays and discontinued its own large panel OLED development program years ago, particularly due to the use of a color filter in OLED TVs, which reduces brightness but creates the colors necessary for typical displays.  LGD will gain a potentially big customer but parent LG Electronics will now face another fierce competitor in Samsung, which will likely put some pressure on OLED TV margins, so it is not as cut and dried as one might think.  There is also the financial commitment and the capacity necessary to meet that commitment, which could entail further capacity expansion on the part of LG Display, and once that commitment is implemented, should Samsung back away for any reason, LGD will be stick with potentially excess OLED TV panel capacity, something LGD has faced years ago in its dealings with Apple (AAPL).  At the same time, should LGD be ‘unable’ to meet the supply requested by Samsung, there could be considerable friction between the two as Samsung would be unable to meet its own TV production commitments.  Its like two tightrope walkers trying to pass each other while over the Grand Canyon...

​Semiconductor manufacturing is complex to say the least and the number of materials used in those processes numbers in the hundreds, with some very toxic or expensive.  As we have noted previously there have been some recent supply interruptions that have the potential to leave their mark on an already beleaguered semiconductor sector, such as the neon shortage created when the Russian invasion of Ukraine took place.  Unfortunately another shortage is likely to occur, but this time not caused by war but by the government of Belgium.
On March 18 3M (MMM) sent a letter to its customers concerning the indefinite closing of its coolant (Omega 906X) plant in Zwijndrecht, Belgium as new regulations concerning the manufacturing and use of perfluoroalkyl and polyfluoroalkyl substances (aka PFAS) are being tightened across Europe and the US.   The 3M plant in Belgium is one of 5 that the company has globally but is said to be responsible for ~80% of the production of the material specifically used in semiconductor processing 
PFAS are used to pull heat away from certain steps during wafer etching and are quite effective at doing so however the molecules of such substances are so tightly bound that they do not break down in the environment and leach into the soil, air, and water, with a Center for Disease Control study finding such chemicals present in the blood of 97% of Americans.  Research on the effects of same are continuing across the globe, as the materials are used in many other industries, and 3M has filed an appeal with local regulators and a $145m discharge and remediation plan (3 years), but as of now, the plant is closed indefinitely, as concern over the material’s effect on body hormones has become a significant focus.. 
3M’s major semiconductor customers for the coolant are Samsung Electronics (005930.KS), SK Hynix (000660.CH), Taiwan Semi (TSM) and Intel (INTC) who are said to have inventory ranging from 1 to 3 months, so unless the situation can be resolved in that timeframe, the semiconductor industry could be facing another catastrophe that could tighten an already tight silicon market.

​While Huawei (pvt) and ZTE (000063.CH) have already been sanctioned by the US government over alleged collusion with the Chinese government, there are a number of Chinese smartphone and telecom companies that have not, some of whom sell products in the US and Europe, but there is the possibility that new sanctions might be imposed on some Chinese brands as they sell products into Russia during the Ukraine invasion.  The Chinese government has taken the stance that it does not believe that sanctions against Russia have any basis in international law and will create more problems than they solve, leaving Chinese smartphone producers to continue to sll product in Russia.
Russia’s largest mobile operator MTS () has indicated that sales of Huawei smartphones jumped 300% during the first two weeks of March, along with triple digit growth from Chinese brands Oppo (pvt) and Vivo (pvt).  While these brands are hard to find in the US, Oppo and Vivo are both typically found among the top 5 brands globally, so the possibility of US sanctions, which would preclude any company (globally) from producing or selling same if they are produced with any US equipment or software (hard to imagine that is not the case).  If the US were to sanction these companies for selling in Russia, it could create a very difficult business situation among US supporters in Europe and Asia.  That said we have seen a number of companies in the US that have indirect ties to Russia be criticized and social media will continue to press those connections.  While sanctions against Russia make us feel that we are doing something for the people of Ukraine, they have implications that wind even more deeply through the US economy and the US political system.  It’s complicated…