Corning (GLW) has been a glass supplier to almost all panel producers and has been a key supplier to Samsung’s smartphone business, with its Gorilla Glass® and Victus™ products and to affiliate Samsung Display, providing substrate product for LCD and rigid OLED displays.  Normally, parent and affiliate tend to be on the same page as to both short and long-term goals, but over the last year or so, that relationship seems to be less cordial and more disruptive.  There has been evidence that the decision made by Samsung Display to end its production of LCD displays and develop a quantum dot/OLED large panel product has not met with the kind of reception that SDC would have liked, and at times over the last year, rumors that Samsung would not be marketing a TV product using the new technology have surfaced and retreated a number of times, and since SDC and Samsung’s TV business are operated independently, both have had to make changes in the way in which they do business. 
Samsung’s TV business has been buying much of its LCD panel product from other suppliers and has been increasingly using ODMs to develop and produce some of its more generic LCD based product.  While this looked like a significant benefit early last year when LCD large panel prices were declining, it has become an increasingly more difficult market for large panel buyers as prices have been rising since the middle of last year.  While Samsung’s TV business has now endorsed Samsung Display’s QD/OLED product, the relationship between the two divisions still seems a bit strained.
At the same time, Samsung Display and Samsung’s Mobile division have also been at odds over the use of UTG (Ultra-thin glass) that is used as a cover glass for its foldable smartphones.  Samsung Mobile’s previous foldables, the Galaxy Z Fold 2 and the Galaxy Z Flip have both used UTG from Schott (AFX.GR) and processed by Dowooinsys (pvt), a company that Samsung Ventures has financed.  This relationship was developed by Samsung Display, and at least the Schott agreement, extends for three years from inception, however, Samsung Mobile considered the Schott/DowooInsys product too expensive but had no alternative, given that Corning’s UTG product was still under development last year. 
That seems to have changed with the new Galaxy Z Flip, where Samsung Mobile has agreed to split the cover glass for this next iteration between the Schott/Dowooinsus team and one comprised of Corning and eCONY (pvt), a Gumi based glass processor, which is in keeping with Corning’s stated timetable of UTG commercialization this year, and a nod to the Corning, eCONY process of laser cutting, rather than the wheel cutting used by the Schott/Insys team.  Rather than give Samsung Display the option to use whatever process they thought best, Samsung Mobile will handle the UTG relationship with Corning, which indicates a bit of continuing tension between the two divisions.
Whether this is business as usual for Samsung divisions, or a new, more competitive relationship among Samsung Electronics’ divisions remains to be seen, but it does have the earmarks of a mandate from senior management focusing on profitability, and if that means going to an outside source for an equivalent but less expensive product, so be it.  Competition from Chinese suppliers, a number of whom are subsidized by the Chinese government, has pressured a number of South Korean CE supply chain participants over the last few years, and pressure on LG (066570.KS) to divest its money-losing affiliate divisions has spurred a number of divestitures that we have noted.  While it is hard to tell whether the instances mentioned above are part of a ‘new’ Samsung or just a more public reveal of what has been going on behind closed doors, it seems that Samsung’s affiliates can no longer take for granted that they will be the preferred supplier to other Samsung affiliates, which in the long-run is a good thing for Samsung and for consumers, who will hopefully see better pricing as a result.

The stack of materials that creates an OLED display seems simple, essentially a light emitting layer between an anode and a cathode, but it is certainly not.  There are a number of ‘other’ material layers that support the emitting layer (EML), including Hole Injection Layers (HIL), Hole Transport Layers (HTL), Electron Blocking Layers (EBL), Hole Blocking Layers (HBL), Electron Transport Layers (ETL), and Electron Injection Layers (EIL), a number of which are supplied by different manufacturers.  In some stack designs there are multiple layers of these materials, adding to the complexity, and with a number of companies vying for each stack slot, despite the fact that there are relatively few OLED stack material suppliers, the competition is fierce.
Solus Advanced Materials (336370.KS) is one of those competitors, and after committing $25m to build a new OLED material production facility that will be available in the 2nd half of 2022, seems to have edged its way into the OLED material stack at LG Display (LPL), or at least at one LG Display OLED fab.  According to Korean sources, Solus is to replace two of the four Hole Transport layers at LGD’s E3 OLED fab in Paju, South Korea, and while the amount of material involved for Solus is relatively small when looked at across the entire stack, it is important in that chemical giant Merck (MRK) has been the sole supplier of all four HTL layers to LG Display until now. 
Again Solus is supplying only two of the four HTL layers at one of LG Display’s three OLED fabs, but it does mark a significant change for LG Display, who has been looking to add an additional HTL supplier, considering Merck to be both expensive and unreliable according to local sources.  Using a South Korean based supplier is also a benefit, as South Korean OLED producers, Samsung Display (pvt) and LG Display are still quite dependent on materials supplied by other countries, particularly Japan, where political issues have caused some of those materials to be limited by the Japanese government.  As Solus expands production next year in China, it will try to replace Merck at LG Display’s Guangzhou fab, LG Display’s largest OLED fab.
Solus is also a supplier of what is known as advanced ETL to Samsung Display, which SDC has been using in its production of small and mid-sized OLED panels for almost eight years, and is said to be developing a similar material for Samsung Display’s QD/OLED project. Solus also supplies capping material, a non-emitting material used to cover the cathode in the OLED stack.  Since this material is not emissive, the development of new capping materials is much slower than other materials in the OLED stack, where new emissive and helper materials are being developed almost monthly.  This gives Solus a more stable product, while developing newer and more competitive materials for Samsung and others.
As is well-known, the emissive materials market is dominated by Universal Display (OLED) who owns the IP relating to the use of metal-organic phosphorescent materials.  In RGB displays, such as those produced by Samsung Display, two of the three emissive materials are phosphorescent based, while the third, blue, is fluorescent, and primarily supplied by Idemitsu Kosan (5019.JP), however LG Display’s large panel OLED displays are produced using a single phosphorescent emitter, UDC’s yellow/green and a blue fluorescent material.  This leaves open competition for all of the other materials in the OLED stack and companies like DS Neolux (213420.KS), Hodogaya (4112.JP), Sumitomo (4005.JP), and JSR (4185.JP) are constantly supplying new stack materials to both South Korean and Chinese OLED producers to replace or add to existing OLED production material stacks and all OLED producers are working toward improving their displays by upgrading their stack materials.  This leads to a very ‘fluid’ market that changes with every new stack implementation, and while the number of high-grade OLED material suppliers stays about the same, the chessboard of who supplies what is constantly changing.

Samsung Electronics’ (005930.KS) mobile marketing team was excited back in August of 2016 when the company released the Galaxy Note 7, the successor to the Galaxy Note 5, and features such as a dual sided curved display and support for HDR (High Dynamic Range).  In South Korea, where the phone was released first, demand was high, beating previous model pre-order records and Samsung found itself a bit short of units when it began international release, but for a good reason.  In days that ensued, Samsung received positive reviews and the Note 7 was on its way to becoming a star in the Samsung Galaxy lineup.
Unfortunately that did not last, with reports of the Note 7 bursting into flames as the battery overheated, forcing Samsung to issue a ‘soft’ recall of the device only four weeks after its release, followed by a more formal recall about two weeks later, a marketing nightmare for the company.  But it did not end there, and the replacement phones that were issued to those consumers returning their Note 7’s under the recall, also began to catch fire, prompting the company to issue a global recall and end production for the Note 7.
Samsung’s marketing department is aggressive, and could not just walk away from such a public relations disaster, and nine months after the disastrous end to the Note 7, the company issued the first ‘fan edition’, under the marketing story that the phone was so popular, despite the ‘issues’, that fans were clamoring for the phone, and this, a refurbished version of the Note 7 (with a new battery supplier) was the answer to that demand at least in South Korea where it was originally released.  The company sold out all of its Korean inventory (~400,000 units), which were built from parts left over from the Note 7, and while it said it had no plans to produce any additional units there was talk that it was so popular that it should be released internationally.  This was never done, although a limited number of Note FE’s showed up in Malaysia and a few other locations.
That said, the success for the FE was now ingrained in Samsung marketing’s zeitgeist, and while it took some time before the next Fan Edition hit the shelves (Galaxy S20 FE – 10/2020), Samsung used it to create  a $700 version of the Galaxy S21 ($1,000) that retained most of the important features.  The FE did have a plastic back while the original had a glass back, and it had a larger but lower resolution screen, and an MP second camera, where the S20 had a 64MP second camera, but it allowed Samsung to essentially lower the price of the S20, without actually lowering it.
With the release of an ‘Fan Edition’ tablet in May, and the potential release of a Galaxy S21 FE later this year, it seems Samsung has adopted the Fan Edition as a way to offer a bit of diversification without diluting the original product price, but it seems that plans this year are not going to be as easy to implement, with claims that Samsung has halted production of the Galaxy S21 FE recently due to a shortage of semiconductor components, and has or is considering reallocating Qualcomm (QCOM) processors from the FE to its foldable line. 
Samsung sys it has not made a decision as to whether to suspend production of the S21 FE, which has not been formerly announced, but the company has said in the past that it will produce FE versions of its flagship phones.  With last year’s S20 FE not being announced until September last year, Samsung still has time to make an official decision, but without a change in the prospects for semiconductor supply, it seems Samsung will likely be rationing components as the year progresses.  While the Fan Editions seem to generate incremental sales of the company’s flagship lines, components will go to wherever the margin is the highest, and we suspect that is with foldables, which might put an end to both the Galaxy Note and the Galaxy FE models, at least until the component shortages are alleviated.

What does your smartphone camera actually do when you take a picture?  It collects information about the intensity of the light as it enters the imaging sensor and from that data constructs a two dimensional image of the three dimensional image you were viewing.  While this sounds like a massive reduction in the information that exists in the real world, much of which is processed by your visual cortex, we have become quite used to such 2 dimensional images, since 1839 when Alphonse Giroux signed an agreement to commercialize his camera with Mande Daguerre, who had developed a process for single shot photographic printing.  Since then 2 dimensional photographs have become the standard for almost every application where an image is recorded on a directly viewable substance.
3D, in various forms, has been around for many years, entering and exiting the consumer electronics space at various times as the technology develops, and AR/VR, a more common form of 3D imagery, is becoming a commercial product, but is there any way to use the information available in a say, smartphone camera, to do more than produce a 2 dimensional image?  Enter the light-field camera, a sort of 3D camera, but not one where you need special glasses of a helmet to see a 3D image. In full disclosure, the three dimensional images we are speaking about here are not the roller coaster or animation type of images usually associated with 3D, but are more normal images that you can take with your smartphone camera, or will in the near future.
The system uses what is called a plenoptic camera, which is a fancy name for a camera that has a set of micro-lenses in front of the imaging sensor.  Not only would the camera pick up the light intensity, as any camera would, but also gathers information about the direction that the light rays are moving, which allows the software to modify the image in ways a typical 2D camera cannot.  There are a number of characteristics that can be derived from the information collected by a light-field camera, that allow the user to not have to choose the point of focus in an image, in other words the software can use all of the image data to keep every part of the picture in focus, not just a face or central image.  In the same way it can refocus any plane in the image, allowing any part of the image to be in focus while others are not, and in almost true 3D fashion, the image viewpoint can also be changed, meaning that the image of a person can be rotated along with the background.
It doesn’t end there as a light-field camera can also create a depth image, remove the background from an image, and measure distance, all similar to what would now entail using a regular camera and a depth sensor, but understanding what a light-field camera can do needs some imagery.  The image below (Fig. 1) was taken with a light-field camera, and each of the individual images below (Fig . 2 – Fig 4.) are blowups of a particular portion of the 1st image.  Note that every pixel in all three images are in focus, something a normal camera would not be able to do, and after the image has been taken, the user can refocus any part of the image while blurring any other part. (Fig. 5), and while we cannot adequately show the camera’s ability to change perspective, we include a video below.  Background removal and/or substitution is also easy as the camera has captured far more data than normal, and can understand each depth ‘plane’ to remove the background, rather than use color or specific image shapes of guidelines to gauge where the background actually is (Fig. 6 & Fig. 7).
Such cameras are just beginning to reach commercial potential and we expect will make their way into high-end smartphones over the next few years as smartphone brands look for more ways to differentiate themselves from others and app developers better understand the capabilities of using this kind of information to enhance or modify images.  There are obvious uses in surveillance and law enforcement and certainly for professional photography, but while all of those applications allow costs to remain high, applications on consumer devices will bring the cost down far more quickly, but as the key to consumer demand will be applications, the need for developers to focus on more than filters and face changers is key to the technology’s development.  It’s a technology waiting for an application….
https://youtu.be/zHrd3ztHLpk

In 2004 Huawei’s chip design department became HiSilicon (pvt), an affiliate of its parent, and one of the top fabless design shops globally.  In fact, in 1Q 2019 HiSilicon moved from #25 to #14 in ranking among all semiconductor companies, based on sales, including foundries, and by 1Q of last year it made it into the top ten in both 1Q and 2Q.  That said, by the end of 2020, it had fallen out of the top 15 and in the first quarter of this year, reported only $385m in sales, down 87% y/y.
US trade sanctions against parent Huawei that have restricted foundries from producing semiconductors for HiSilicon have left the company with a very large operation and little revenue to offset such an operation, and the burden of a staff of over 7,000 does not make things any easier, however, despite the fact that HiSilicon’s major customer is struggling to find semiconductor production capacity for many of its CE products, Huawei has indicated that they are a private company and therefore ‘will not be affected by external forces’ and will not give up HiSilicon.  HiSilicon continues to develop 3nm application processor chips (Kirin 9010), despite the fact that they cannot be produced, along with developing new 5G silicon, even though its share in 5G is expected to decline from 23% (2020) to 5% this year, and is forced to use Mainland foundries such as SMIC (688981.CH) and HuaHong (1347.HK) that do not have capacity at nodes below 28nm. 
While this allows the production of a number of needed semiconductor products, application processors, a necessary item for smartphones and other CE devices, are competing at the 5nm node, which is unavailable to HiSilicon.  While Huawei can continue to fund HiSilicon for what we expect would be another year without outside help, unless the US lowers the barriers it has placed in front of China’s semiconductor development plans, HiSilicon will have to change, and that will not be easy for Huawei or the Chinese government to accept.  With that in mind, we struggle to find a way that a fiercely private company like Huawei will accept what would likely have to be subsidies and partial ownership by the Chinese central or local government, but the key word is survival and the US does not seem to be easing any restrictions thus far.

www.auo.com/en-globalJapan’s Panasonic (6752.JP) has announced that it will be withdrawing from the LCD panel production business and would be taking bids on a wide variety of equipment and instruments that are part of its remaining Gen 8.5 production line, color filter line, and assembly lines.  The Gen 8.5 fab in Himeji, Japan has been focused on producing medical displays for the last few years, with a stated capacity of 50,000 sheets/month, but we expect the lines have been producing at much lower rates.  Panasonic has indicated it was to be exiting the LCD production business previously, although we believe there is little chance they can survive in the current highly competitive environment, particularly against Chinese producers.
Last year Panasonic’s LCD panel business generated between 17m and 20m per month, a pittance compared to Taiwan’s AU Optronics (AUOTY) $600 to $800m monthly rate or BOE’s (200725.CH) 1b to 1.7b, so it will have little or no impact on global LCD production capacity, with Panasonic having been a purchaser of LCD TV panels from China’s TCL (000100.CH) and others for its TV set business, and with the ‘based on fierce competition and changes in the environment’, Panasonic’s stated reasoning for the closure, they are also expected to close assembly plants in India and Vietnam later this year.  Given the availability of OEM services associated with or attached to other panel producers, it seems they have no reason to assemble product themselves.
While Japan has moved far from the leading position in LCD panel production that it had years ago, with only Sharp (6753.JP), which is owned by Taiwan’s Foxconn (2354.TT), and Japan Display (6740.JP) that is owned by private equity, the LCD panel production business has left Japan.  That said, as we have noted in the past, Japan is still a dominant player in the upstream display business, owning 90% of polyimide production (flexible substrates and plastic cover films), photoresist, and Hydrogen Fluoride etchant, all key materials used in display and semiconductor production, and a recent study of components in the popular Huawei (pvt) P30 Pro smartphone, indicated that 869 (53%) of the 1,631 parts in the phone were produced in Japan.  As we noted last year, Japan’s revisions to its trade policies with South Korea over a WWII dispute almost caused semiconductor production to grind to a halt when they limited some of those materials and while both South Korea and China have set themselves on a path to reduce their dependence on Japan for such strategic materials, that path is one that will take many years to develop.  Panasonic might be out, but Japan still has a bit of a hold on the global panel business despite its more reserved image.

​Today is the last day of the 3 day legal holiday known as the Dragon Boat Festival in Chinese culture.  The holiday is also called the Double Fifth Festival, as on the Chinese calendar, it occurs on the 5th day of the 5th month, which means it varies each year when using a standard Gregorian calendar.  The 5th month is considered unlucky, a time of illness, a proliferation of poisonous insects, and natural disasters, so garlic and aromatic flowers were placed over doorways to remove evil spirits.  Eating Zongzi, a rice dumpling, and racing dragon boats are traditions that go back thousands of years, and have now spread across the globe, with the US Dragon Boat Federation and others sponsoring such festivals in states across the US and global Dragon Boat organizations sponsoring championships in Hungary, Italy, Australia, France, and Canada.

​On March 30, we noted that OLED driver chip manufacturer Magnachip (MX) had received an offer from Wise Road Capital (pvt), whose entities were to buy the company for $29 per share, a 75% premium to the company’s then 90 day average price, with a total deal price of $1.4b.  The buyer was a Beijing-based Private Equity firm that has a number of smaller investments in technology companies mostly in the semiconductor space, including Huaqin Communication (pvt) one of the largest global OEM for a variety of CE devices.  As the 2nd largest OLED driver manufacturer, behind Samsung Electronics (005930.KS), Magnachip is a very important part of the OLED display supply chain and would give the Chinese OLED industry a significant boost.
As the process node for producing OLED drivers is 28nm, the technology is not considered of major importance to national security in South Korea where it has much of its manufacturing, and last month the South Korean Ministry of Trade, Industry, and Energy gave it tacit approval to the transaction, knowing that Huawei (pvt) and others were already developing OLED driver technology on the Mainland.  While we had suggested that getting such a deal through regulatory authorities in both the US (MX is a Delaware corporation) and Korea, the path toward a conclusion seemed to be opening.
As always in the CE space, thing are not always what they seem and yesterday the South Korean press indicated that the Korean government had changed it view on Magnachip’s technology, and that it had been designated as ‘core technology of South Korea’, which would seem to have ended the deal.  It seems that the reason for the change in attitude toward the transaction in Korea was the result of an investigation by the Committee on Foreign Investment in the US (CFIUS), which likely resulted in a negative view from the US Treasury Department, then relayed to Korea.  As the US is particularly sensitive toward doing anything that might help China in their bid to develop their own semiconductor infrastructure, the outcome of such a CFIUS investigation was almost a given.  Whether CFIUS could have blocked the transaction itself is no longer an important point as it looks like both countries are now uniting against the deal, but it doesn’t end there.
Last night, Magnachip received a new offer, roughly 20% higher than the initial offer, from another group of Chinese and Hong Kong investors, despite the potential problems with the authorities, which was both a surprise to us, and a surprise to investors, given the 12%+ move the stock made this AM.  How this offer is any different from the previous one from the standpoint of the government’s involvment, we don’t know, but that doesn’t seem to have made much of a difference to Cornucopia Partners (pvt), the entity that has made the most recent bid.  There is a $105m termination fee to MX if the original deal is not completed, with certain reductions depending on the circumstances.

Mini-LED TVs are a relatively new item for most TV brands and Samsung is no exception.  When they released their first true consumer mini-LED series earlier this year, we noted that prices seemed excessively high, given that Chinese brand TCL (000100.CH) had been offering a lower priced mini-LED line for over a year.  We have updated Samsung’s mini-LED pricing twice since then, with price reductions of as much as 11.1% on some models.  We now post another update with Samsung taking prices on its mini-LED/QD line down further, which points to our original conclusion that the initial prices were way too high to be competitive. 
In this round Samsung now sets prices on some models in the mini-LED line down 20% from initial pricing, and while we expect much of that initial pricing was ‘trial balloon’ pricing, these are certainly noticeable reductions.  Here are the models that have been reduced and by how much.  Those in yellow have been reduced three times.

As has been the case since March, all three of the primary 5G Ecosystem metrics we track have been on the rise, with the total number of 5G devices remaining substantially above the trend line.  Available 5G smartphones increased by 7.5% m/m and 240.6% y/y while the number of available CPE devices, an indicator of potential demand for 5G in-home or business usage, grew 6.7% m/m and is up 71.4% y/y, and the number of combined 5G devices reached over 800 for the first time.  The m/m growth of available 5G devices is settling down to a range between 4% and 14%, a less volatile range than last year’s -1% to +40% range.  We expect this stability to remain and potentially narrow, although we expect new smartphone releases toward the holidays might skew the averages a bit, including the release of the next iPhone series.
All in 5G continues to grow at an increasing rate, we see more mid to low price tier phones equipped with 5G.  A look at phones currently available (2021 releases), 5G availability breaks down as follows, with over 50% of smartphones released this year in the $200 - $300 range equipped with 5G modems and 46.9% of all smartphones released this year inclusive of 5G.  We expect that share to rise further this year as the bulk of the smartphones to be released in 2H will be in the higher price tiers: