Samsung Electronics (005930.KS) is expected to begin production of its next foldable smartphone iterations this month for an announcement and (hopefully) release in August.  What will likely be called the Galaxy Z Fold 4 5G and the Galaxy Z Flip 4 5G will mark Samsung’s 4th entry into the foldable smartphone market, with only Huawe (pvt) having three iterations of a foldable smartphone product.  While we expect Huawei will likely have a new offering this year, despite the stringent US trade sanctions that have limited the company’s access to silicon foundries outside of China, two new Chinese competitors have entered the market over the last few months, with Oppo’s (pvt) Find N and Honor’s (pvt) Magic V being released late last year and in mid-January of this year respectively.
The competitive nature of the foldable smartphone market however is a bit less so than in the generic smartphone world where there are hundreds of active brands and almost 140 models released YTD and expectations for unit shipments range from ~1.3b to ~1.4b, while foldable smartphone shipments are expected to be between 14.5m and 17.1m units thus far.  That said, Samsung’s foldable offerings represented ~84% to 88% of the total market last year, and while that share might be reduced a bit this year as the new entrants gain some momentum, we expect Samsung will remain the dominant player in the space for 2022 with a target of 13m foldable units in 2022.
While Samsung is expected to remain the dominant player in the smartphone foldables market, as new competitors emerge, it will become increasingly important for Samsung to maintain competitive pricing for its foldables which typically carry a significant premium over competitive brands.  Justification for such premiums comes from Samsung’s experience in both display production, a function of its affiliate Samsung Display (pvt), its ability to develop or co-develop a number of key components in such devices. And its massive advertising campaigns.  That said, tablets that are in the 8” size tier range in price from as little as $89 to $150, although without 4G/5G connectivity, there is also a bit of price pressure from tablets, so we expect Samsung will be working toward keeping the price of the next generation foldable smartphones at the previous level or lower.
As the cost of the display will likely still be the most costly piece of the foldable BOM, the hinges which allow the phone to fold without creasing the display are also a high cost item that does not appear in a normal smartphone BOM.  Samsung Display (pvt) should be able to reduce the cost of the display as long as the specs don’t change drastically from last year (7.6”), so there has been some speculation that Samsung will eliminate one of the two hinges on the Fold 4 to reduce the device cost.  While there will still be rollers on either side of the folding mechanism, the hinge itself is now expected to be in the middle, similar to Huawei’s most recent foldable release, the P50. 
Samsung has been developing its hinge technology with KH Vatec (060720.KS), a precision casting company that specializes in foldable hinges among other metal smartphone products, and is said to have not only reduced the number of hinges on the new devices but to also have reduced the size, allowing the phones to fold more tightly, making it thinner overall, something consumers have mentioned as a drawback to foldables.  Whether this new hinge arrangement and the higher expected volumes for Samsung’s foldables this year will give the company room to lower the price while maintaining margins remain to be seen, but we expect that Samsung will either have to offer a new ‘model’ type foldable device this year, such as a ‘slider’, or push down the price of both existing models to generate increased unit volume this year.  The good news is that consumers seem to be able to trust that they will not have a device that will last for a year or two and need to be replaced, but that puts more pressure on price in order to gin up consumer interest to the next level.

​It is tough to compete against companies like Samsung, LG, Apple (AAPL) and Xiaomi (1810.HK) in the smartphone market, it is even harder if you are a ‘unicorn’ that came out of the chute with a ‘first’ that seems to have put to shame those who had such huge developmental resources.  Such was the case with Royole (pvt), a company founded by Bill Liu and a group of Stanford engineering graduates in 2012.  The company has received financing from a number of VCs totaling over $1.1b and was the first company to make available a foldable display, albeit only to developers. 
The company has been in the tech press many times as it released various odd-ball products  containing its flexible OLED displays but has been unable to gain real traction with smartphone brands, other than ZTE (000063.CH).  Royole submitted documentation to be admitted to the Shanghai STAR Exchange, but terminated the listing (Royole also failed to qualify for listing in the US in 2019) and rumors of missed payments to employees began to surface late last year as employees began to post on social media about the missing wages, with statements that September wages were only paid in part and no wages were paid in October.  At that time it was said that e-mails from the company’s founder stated that the company was working on financing and that wages would be paid in January of this year, with rumors of new financing raising the hopes of employees.  Some of the wage arrears were paid in January, with the promise the rest would be paid after the New Year festival, however that has yet to happen and what little information that is available about the company, seems to indicate that production and yields at the company’s OLED fab are so low that it would be difficult to attract additional financing.  While the company has partnered with a number of prominent luxury brands for one-off products, it seems that Royole is beginning to slip into the limbo where small display manufacturers who are unable to compete often go to slowly pass into display history.
  

​For those too young to know, this is a roof antenna, similar to those that were used to receive television signals before cable and satellite TV were possible.  TV broadcast stations had transmitting antennas on towers, usually at the highest point they could find near the broadcast facility, and signals were transmitted to rooftop antennae like the above so we could watch out favorite programs, as long as the weather was good and the station was broadcasting (many stations ended broadcasting in the evening).    When satellite dish service became available and then cable, US households began to transition away from OTA (over-the-air) service.
Estimates for antenna households can be a bit shaky considering that some have both an antenna and other TV viewing sources, but a study done in 2020 indicated that 40% of TV content viewers over the age of 18 reported owning an antenna, which was up from 29% in 2019.  This translates to ~48m households based on Neilsen’s (NLSN) 121m TV household estimate for 2021.  That same survey indicated that 5% of TV content viewers also indicated that they were planning to get an antenna in the next year and 9% said they were ‘very likely’ to get one after being presented with details of what is called NextGen TV, and another study, connected with a promotional campaign to let potential viewers know about NextGen TV indicated that 40% of consumers were aware of the technology, up from 25% the year earlier.  Even more amazing was that the same survey indicated that 74% of those who viewed ads for NetxGen TV were likely to purchase a TV set from the manufacturers mentioned in the ads, up from 60% the year before, although ~30% actually made such a purchase.
Surveys and promotions aside, what makes NextGen TV so attractive (at least to survey participants)?  ATSC 3.0, which is the technical name for NextGen TV can deliver 4K HDR video, enhanced dialog, on-demand viewing options and better overall reception, all for free (if you have an antenna) and is now available in 46 US markets, which is said to cover roughly half of the US.  That said, there is a catch.  You need to have a TV that can receive ATSC 3.0 signals, otherwise you remain with the old standards that have been around for years.  A number of TV brands introduced ATSC 3.0 compatible TVs at CES 2022, with China’s Hisense (600060.CH) being the first Chinese brand to join Samsung and LG (066570.KS) in providing ATSC 3.0 tuners in their TVs.
That said, when we said TVs, those with NextGen tuners tend to be high end TVs, with Sony (SNE) the only company offering ATSC 3.0 tuners in all of its TV products.  Mediatek (2454.TT) has made an agreement with a broadcast industry trade group that will help to bring down the cost of ATSC 3.0 component development but that will not happen until 2023, with much of the momentum in 2024 and 2025, but there are alternatives, such as an external tuner that can accept those signals, even if your TV cannot, although they start at ~$200 and can  be a bit difficult to set up, or you can try an ‘OTA DVR’ (~$300) but that has to be hard wired to the TV and would not make the OTA 3.0 signal available to others in the household.
All in, while NextGen TV is eventually going to give a select group of potential users a step up I their TV quality, it is certainly not going to happen overnight and will take a few years before it will become inexpensive and commonplace and while the surveys and data from industry groups promoting the technology will continue to espouse the enthusiasm that participants say they have toward the technology, coverage, cost, and content (there is little 4K OTA content available currently) will make the reality of NextGen TV a bit less than the surveys might indicate.  We are all for it, but as always, we are a bit careful about the path toward consumer acceptance.  It will eventually help those that cannot afford the myriad of streaming or fiber-based services, but its going to take time before it has real traction.

Notebook brands have been a mostly happy lot for the last two years as the COVID-19 pandemic has kept many potential customers at home and desperate for ways to communicate with workmates, friends, and the outside world.  This has stimulated laptop sales as isolated workers need a way to communicate that does not lock them down to a particular location in their houses or apartments and has the potential to be taken to work when they might return.  Also a contributor to such demand are students, who through government mandates, were given tablets and laptops to continue their education from home.  This occurred in some countries on a mass scale, pushing demand far beyond norms as seen in Figure 1.
The result of this demand was notebook panel price increases as seen in Figure 2, which typically would slow demand at least to some degree.  However as prices for notebook panels began to increase in late 2020 buyers, fearful that they would not be able to meet customer demand, continued on their buying spree and pushed notebook panel prices higher.  Adding to this scenario were component shortages caused by similar factors, and notebook panel buyers began trying to build inventory by double ordering, although that did little since silicon capacity was essentially fixed.  Notebook panel pricing peaked out at the beginning of 3Q ’22, while notebook panel shipments continued to rise through November, as brands continued to buy to fulfill expected holiday purchases.
Distributors were inventory constrained throughout 2H ‘;20 and much of 2021, facing the same challenges as component buyers, and most were able to maintain only a few days or a week of inventory and contributed to the demand cycle by increasing orders, which made the situation worse by giving assemblers incentive to order more components and push prices higher, all part of an incestuous cycle that began to end at the beginning of this year, as the COVID-19 pandemic began to become so ingrained in global culture and the ennui of being in isolation pushed folks back to some sort of more normal existence.  As can be seen in Figure 3, the timing of those cultural changes might not have been well planned as seen by the case spike in late January, but many of the educational notebook mandates ended along with 2021 and we believe that the increased shipments seen throughout 2021, especially in 2H, got close to satisfying actual demand.
Notebook brands however remained optimistic about expected shipments for 2022, likely making the assumption that 2021 was the ‘new normal’ and demand would continue at those levels, however notebook panel prices have been on the decline since late last summer and notebook panel shipments have been declining since the November 2021 peak.  While these are both signs of a path to a more ‘normal’ notebook demand cycle, more telling metrics are that distributors are now stocking between 10 and 12 weeks of notebook inventory and brands are beginning to pull back assembly orders to more realistic targets.
Some of this has been reflected in our previous notes discussing IT panel prices, which are composed of notebooks, monitors and tablets, but target changes by brands are usually the last to go as the cycle returns to some semblance of normalcy.  We do not expect demand to diminish entirely but we would expect at least a move toward the averages seen before COVID-19, which, between 2013 and 2019 were 15.38m units/month, as opposed to the average of 21.5m seen between 2020 and 2021 (40% higher).  Component shortages will ease a bit but some will remain, while notebook prices themselves are slowly declining as inventory grows and notebook panel prices decline, but the specter of overall inflation will likely keep notebook prices from falling to previous levels which will slow any return to pre-COVID-19 levels, but the direction seems to be becoming more clear and slowly being acknowledged by the industry.

Jay Chou is a 43 year old singer, songwriter, rapper, director, producer, actor, television personality, and strangely magician who has been releasing album since 2000, has performed for more than 10m during tours, and starred in the Green Hornet in 2011.  As many Taiwanese recording and film stars seem to do, Chou collects artwork which he purchases using NFT’s (Non-fungible tokens), which protect the one of a kind artwork from being copied and sold as original.
Unfortunately it doesn’t protect art collectors from being ‘phished’ by sophisticated hackers who offer giveaway promotions on Instagram or other social media sites.  Mr.Chou made the mistake of clicking on one such offer only to find that his personal NFT worth $550,000 and three other valuable NFT artworks had been removed from his account, with the likely culprit being software loaded into his system by clicking on the free offer.  Mr. Chou first thought that the missing art was an April Fool’s joke but when the source of one piece of his art posted that they also had been hacked he realized it was no joke and the tokens were truly gone.
There are two questions here, first, why would one expect a free offer of anything? And second why would one collect what was stolen? (see below), but our is not to reason why, just to note how many hacks, scams, swindles, and flimflams (Thank you President Biden) take place every day relating to cryptocurrencies and NFTs, and the ones that make it into the press or even the technical press are likely just a subset of what actually occurs, as many would rather not see their names associated with such issues.  For what has been touted as a secure way to buy and sell ‘things’, the definition of secure seems a bit flimsy.

​The US Department of the Treasury has designated 21 entities and 13 individuals to Executive Order 14024, which allows the treasury to impose sanctions on any entities or individuals that are deemed to be attempting to evade sanctions placed on the Russian Federation, which in this case would would be supplying or financing Russia’s invasion of Ukraine.
In the technology space a St. Petersburg software and communications company that supports the Russian Liana satellite network that has been used to track ships, aircraft and ground vehicles during the invasion has been sanctioned, while T-Platforms (pvt) a supercomputer developer that was originally on a similar list but was dropped at the company’s request, was put back on as they are suspected of having developed a supercomputer center for the Russian military.
Likely most significant is Mikron (pvt) a subsidiary of RTI Systems (pvt) one of Russia’s largest defense contractors.  The company produces Power Management ICs, a number of discretes, and IoT sensors and systems.  According to the DOT Mikron is responsible for exporting more than 50% of Russian microelectronics and is the largest chip producer in the country and the only Russian producer at 65nm.  The focus of the sanction is the company’s development of a domestically produced chip for the Mir payment card system.  The State Research Center of the Russian Federation Central Scientific Research Institute of Chemistry & Mechanics was also added to the list for their part in developing a tool that was responsible for the August 2017 cyber-attack on a Middle East petrochemical facility, known as Triton (aka Hatman), and while the center has already been sanctioned back in 2020, the DOT is adding a number of employees who were present during the 2017 attack, as they have continued to  support and conduct further attacks at energy facilities in the US and other countries
The new sanctions expand coverage by the DOT to the aerospace, marine, and electronics sectors with the intent of imposing economic cost on the country for its entry into Ukraine and is added to other designated sectors such as financial services, technology, and defense.  The sanctions imposed are to block all property and interests of same in the US and to prohibit all transactions with US persons or in the US by any of the companies or individuals.  Here’s the link to the full list.

​Samsung Electronics (005930.KS) is said to have delayed the production of its 89” Micro-LED TV, with production pushed back from May to sometime in 3Q this year.  The 101” model which the company also announced would be in production this year does not seem to have a production date as of yet.  Samsung is expected to begin production of the 99” Micro-LED it announced last year during the 2nd quarter, according to South Korean tech press and has already been producing the 110” version since last year.
Both the 99” and 110” models use PCB for control circuitry, based on LEDs that are 75um across and 125um high, however the newer models will be based on smaller Micro-LEDs that are 1/7 the volume, based on cylindrical measurements and are said to be deposited directly on a glass substrate containing the TFT backplane, rather than PCB boards, a process similar to that used by China’s BOE (200725.CH) for Mini-LEDs, which should ultimately reduce the cost.  That said, such smaller Micro-LEDs, while they allow for higher resolution displays, they are packed more closely together (.44mm for the 89” set), decreasing placement error tolerances and changing some of the characteristics of the Micro-LEDs themselves, particularly red Micro-LEDs. 
While we don’t know if the delay is related to the production of the smaller Micro-LEDs, the characteristics of those LEDs themselves, or the potential changes to the substrate of TFT configuration, we expect it will make little difference to Samsung’s TV sales and these sets are quite expensive and relatively few units are sold to consumers, but while Mini-LEDs are an extension of existing LCD technology, Micro-LEDs are not and will require far more R&D and interim modifications that existing LED based products.  That said, if the challenges of developing cost effective Micro-LED displays are eventually met, they have the potential to change the display industry over time.  Of course, many will (and have) predict the demise of existing display technologies, as they did when OLED displays began to appear on smartphones as far back as 2003, and again in 2005 when Samsung released its 21” OLED TV, and again when both Samsung and LG (066570.KS) showed 55” OLED TVs at CES in 2012, and while OLED has certainly become an integral part of the display industry, it takes time to move an industry with such high capital investments built into each company.   “I was taught that the way to progress was neither swift nor easy.”  Marie Curie