​In our 8/16/21 note we indicated that Samsung Display (pvt) had been developing an alternative method for the deposition of OLED materials for RGB displays.  The process involves both shifting from Gen 6 substrates (which are typically used for small panel and IT OLED production, to Gen 8.5 substrates, which are typically used for larger TV size panels.  The reason for the research is that as current deposition systems are horizontal, the masks are affected by gravity causing them to sag as they get larger which has limited their size to Gen 6 when producing RGB OLED displays.  SDC is working with tool vender Ulvac (6728.JP) to develop a deposition tool that is vertical rather than horizontal, eliminating the potential gravitational mask sag issue, allowing the tool to process larger Gen 8.5 substrates.  If successful, it will give SDC a cost advantage over other OLED producers when producing IT RGB OLED displays, such as those for laptops and monitors. 
We would expect SDC to convert existing Gen 8 LCD capacity to this new process, as the TFT portion of the display process would be quite similar to what had already been in the LCD fab, which would save considerable time and cost, but at the time of our note, much depended on whether the technology was viable and cost effective.  We expect that SDC has decided that the technology is viable but has yet to decide whether the process is cost effective, with a large portion of that cost being the Gen 8.5 vertical deposition tool designed by Ulvac.  Typical Gen 6 OLED deposition tools range from $350m to $400m with Ulvac asking for $540m to $617m for the new tool, which is far above SDC’s $309m offer.  SDC is saying that they are currently the only buyer of the tool and that Ulvac has yet to complete the final version, while we expect Ulvac is building in a premium to cover sunk development costs, the larger format, and the fact that no other manufacturer has made such a tool.
We expect SDC is not betting the ranch on the Ulvac tool and is likely looking to Canon-Tokki (CAJ), the company with the largest OLED deposition tool base, for an alternative, although we expect the tool development process is further along at Ulvac, but SDC is likely looking to get the new fab in place in time for Apple’s (AAPL) OLED iPads, which are expected in 2024.  SDC could produce such OLED displays on existing Gen 6 production lines, but would have little cost advantage over LG Display, who will be competing for the Apple business, which is why we expect a decision to be made within the next 30 to 60 days.

​On 6/21 we indicated that little data had been reported about the 6/18 shopping holiday in China, other than that sales at JD.com (JD), the originator of the holiday, saw sales increase by 10.3% y/y.  While this sounds like a successful holiday shopping period, typically sales are up between 25% and 35% y/y, which makes this a rather weak holiday, although the reasons for such weakness, COVID-19 lockdowns and inflation, are obvious.  We have gathered a bit more data to put the 2022 6/18 holiday in better perspective, albeit a product category that has been problematic for China over the last few quarters.
Data fro  Strategy Analytics indicates that smartphone sales during the holiday were 14m units, down 25% y/y, after a small gain in 2021 (~1%) and a large gain (~41%) in 2020.  The good news is that on-line sales were up 13% y/y based on value, as the relatively high priced iPhone sold well, but overall sales revenue fell 16% y/y to ~$9.5b US.  Roughly 49% of smartphones sold went through JD.com, with Tmall (BABA) and Taobao (BABA) representing another 30% (combined), although live streaming platforms, grew to 14%, up from 5% last year.  All in, while expectations for the holiday are always optimistic in the Chinese press, there has been little said this year, and we expect the weakness to continue until China’s COVID-19 policies become more amenable to the population and the economy, which we had expected (in a tacit way) by the end of Q3 or in early 4Q.  While we still believe that inventory levels remain high in China, we have seen some indications that the Chinese government is a bit more willing to relax its heavy-handed lockdown stance going forward.  It could just be a reaction to the weakening economic situation in China, or a better understanding of the county’s ability to control the virus through such lockdowns, but it’s a bit too early to tell if it is just for show or a real change in stance. 

​With many major CE companies no longer selling product in Russia, the Russian government is trying a scheme that it hopes will allow those Russian citizens who still want those CE products that are no longer sold in the country.  This week the Russian government published a detailed list of products from a variety of companies that the government now includes in its ‘parallel import’ plan that it instituted in March in response to US and other country sanctions.  The parallel import plan allows Russia to purchase the listed goods from any company outside of Russia regardless of where they were produced, but no longer needs the permission of the trademark or copyright holders to do so.
The Russian Trade Ministry stated that “Parallel import does not mean permission to import and circulate counterfeit goods in Russia - the products must be legally put into circulation from the country of import”, and added that customs services will be paid, although while the Russian government will consider such purchases to be legal, we expect the copyright and trademark holders will not see it the same way, and we expect that anyone selling such items into the Russian market will be tacking on some fairly hefty fees that will push prices up considerably. 
The bigger question would be how closely CE companies will monitor the shipments of goods that have already been shipped to other countries that remain on friendly terms with Russia, and that would depend on each company and how much control they have over their own foreign subsidiaries and how respectful those subs are to corporate mandates.  It is still going to be very difficult and likely expensive for Russian citizens to buy CE products from companies that have banned sales in Russia, but we expect a few iPhones and Samsung (005930.KS) TVs to make it across the Russian border for now.  There are only so many Russians who will settle for a 2017 Yota phone.
 

The consumer electronics industry is not known for long product cycles and as the number of brands offered on a global basis continues to grow, many CE products are released on yearly cycles in order to maintain product differentiation.  Brands are want to encourage consumers to upgrade each year by adding attractive product features that add élan to a particular brand or product, and with plans and incentives that make it easy and marginally less costly to do so.  The CE space has been trending toward increasingly shorter lifecycles over the years to meet those competitive challenges, but at the same time that push drives up development costs which include a wide variety of support services, many of which are particular to a specific model year or product type.  With the average smartphone lasting 2.75 years before replacement and the average laptop lasting only 3 years, brands expect consumers to play the replacement game and always have the objective of making sure marketing has something ‘improvement’ that they can hang a “…New & Improved” tag on.
As a subset of the CE space, the display industry is also fiercely competitive, and panel producers are like sharks, always on the move toward feeding orders into the massive capital investments that are necessary to maintain a position of strength in the industry.  While progressively shorter product cycles over the years seems to present more opportunities for display product wins, those wins are relatively short-term in nature and panel producers must feed the beast regularly.  As these product cycles shortened, display producers looked for customers that might have more sustainability in terms of product cycles and as far back as 1986 the automotive industry began including touch screens and infotainment systems which carried high margins, very long product cycles, and relatively light competition.

A number of display producers saw this as an opportunity to create a more sustainable customer base, and while the development and deployment cycle was years longer than typical CE products, product production cycles were also vastly extended, giving panel producers a long-term look  into their production window.  The development of OLED displays gave the automotive display industry a shot in the arm as LCD displays tend to be produced on rigid substrates, making they hard to configure in vehicles whose design lines ‘flow’, while OLED panels are typically made on flexible substrates that can conform to almost any interior shape, and the digitalization of a number of automotive components, such as mirrors, and the availability of displayable sensor information have increased the demand for automotive displays.
While widespread use of driver oriented informational automotive displays are just beginning to be part of the ‘automotive experience’, given the long product development lead times, more advanced automotive display products are already in development including some that use AR (Augmented Reality) to make it easier for the driver to see such information without having to take their eyes off the road.  By using AR HUD (Head’s Up Display) a wide variety of information can be displayed right in the driver’s field of view and with combined with an eye-tracking camera, the projected display can follow the driver’s focus wherever it may be.  We note that Huawei (pvt) claims to be the producer of the world’s first mass produced AR HUD system, used in the SAIC (600104.CH) Feifan R7, which is expected to be released in September.
Chinese panel producer BOE (200725.CH) has a subsidiary (BOE Varitronic (710.HK)) that has developed a similar product, or at least a road-tested prototype as part of OEM funded development project that is expected to move to mass production sometime in the near future.  The system projects a navigational picture ~60” wide at a virtual distance of ~25’ ahead of the vehicle, along with vehicle condition, ADAS information, warnings and other helpful information that is now available to the driver.  The projector is said to be 75% smaller than conventional HUD projectors and is based on Micro-LED that can generate peak brightness of 10,000 nits, allowing it to be used in bright sunlight, while other in-vehicle BOE displays are based on OLED and Mini-LED display technology depending on the application.
As panel prices decline to pre-pandemic levels, panel producers once again step up their efforts to find ways to generate more stable sales with automotive displays one of the most lucrative, but competition is increasing, with almost all LCD producers offering at least a few stock automotive panels, while Everdisplay (688538.Ch), JOLED (pvt), and Futaba (6986.JP) offer OLED automotive displays ranging in size from 3.5” to 14”, although we believe LG Display (LPL) is the share leader, with Mini-LED and Micro-LED displays and HUD projectors more of a custom market.  One point of synergy here is that HUD projectors function similarly to AR headset projectors, although headset projectors are orders of magnitude smaller, but both categories will benefit from technological developments, increased silicon production, and more advanced optical systems, where VR is impractical for automotive applications, other than as entertainment in autonomous vehicles (a scary prospect in itself).  As AR and VR are technologies looking for major applications, we expect automotive HUD to be one that can help to drive AR development over the next few years as more advanced displays and projectors help to make automotive HUD systems more commonplace while consumer AR gains recognition based on the benefits of those HUD displays.

​According to local Korean trade press, Samsung Electronics has initiated a program to develop a lower priced foldable smartphone for release in 2024.  With the concept of bringing the cost of a foldable down to 1m won (~$770 US) from the $960 to $1,550 (1.5m to 2m won) that such Samsung foldables cost last year by focusing on core functions, the company is hoping to widen its share of the foldable smartphone market and increase its own share of foldables across its smartphone lines.
As Samsung and other smartphone brands face competition from lower priced but fully featured Chinese smartphone brands, the impact on flagship models has been felt over the last two+ years, with Samsung’s best-selling phones being its Galaxy A series rather than the flagship Galaxy S series.  The Galaxy A series is priced between $180 and $450, while the Galaxy S Series is priced between $1,000 and $1,200 (Initial price).  While Samsung is expected to ship 15m foldables this year, up substantially from the 8m shipped last year, it is still under 6% of Samsung’s expected smartphone shipments this year. 
However with a share of just under 90% of the foldable market last year, Samsung needs to develop even larger volumes to maintain that very dominant share as other brands enter the market, and that would require a lower priced foldable to appeal to the more price conscious smartphone buyer as Samsung discovered when it lowered the price of the 2021 Galaxy Z Flip foldable to $999 last year.  That ~$200 price reduction over the previous year’s Galaxy Z Flip model made  last year’s Galaxy Z Flip the best-selling foldable model with a 52% share of the market. 
While we expect foldable display production costs to continue to decline, a less feature-rich foldable might be the key to bringing out a mid-priced foldable that will appeal to the top end Galaxy A Series customer without cannibalizing the more premium priced Galaxy Z Flip and Galaxy Z Fold.  As Apple is expected to enter the foldable market around the same time (2024), we expect Samsung’s ‘other’ motive for developing such a device would be to lessen the impact of Apple’s (AAPL) entry into the foldable market, which would likely have the most impact on the more expensive Samsung Galaxy foldables.  It will be tricky to create a less expensive device that still has enough features to warrant purchase without making it so attractive that it cuts into the Z Flip and Z Fold market, but we expect Samsung will do extensive customer testing before it makes such a step and will have a better understanding of the ‘foldable customer’ by then.
 

​If nothing else, the Metaverse is an advertising tool with unlimited potential.  Since there is no official definition of ‘the Metaverse’ it can mean anything from a 2D avatar to the potentially vast 3D experience that would allow users to wander (and spend) in worlds that do not exist in reality.  In the interim the mention of the Metaverse elicits excitement from a select group of technologists, many of whom are involved in the collection of consumer data, and hip retailers who see potential to sell both physical and non-physical products.
That said, we are not surprised to see a tech rag headline “HTC (2498.TT) Launches Metaverse Focused Phone” pop up in relation to HTC’s recently announced Desire 22 Pro smartphone (July release).  The phone has a 6.6” LCD display with moderate resolution, based on  a Qualcomm (QCOM) Snapdragon 695 (6nm) chipset and an 8 core4 Kryo CPU, along with 4 cameras and a decent size battery that will sell for ~$480.  HTC’s promos for the new phone tout it as “Swift, Versatile, Dynamic Desire 22 pro is the phone to carry you into the future.  Designed for immersive experiences in a world where the physical digital, and virtual interconnect – and with the capacity to run 2D and 3D content on extended reality (XR) devices.  Get ready to add a new dimension to the way you live, work, and play.”
As one reads further into the promo one gets a better understanding of the gist of the promotion as Viverse, HTC’s Metaverse ecosystem, is quickly referenced as where you can use the phone to “‘visit Metaverse communities (in Viverse) using your phones browser, or pair the phone to your HTC Vive Flow VR headset”.  While the ad goes further in describing the phone’s ability to provide “‘images, videos, and games in stunning clarity”, and allows the phone’s owner to “enjoy a rich view of the Metaverse even without a VR headset (using Viverse)”, when looking at the ability of the HTC Vive Flow headset to pair with smartphones, one finds that not only are a number of HTC’s smartphones able to pair with the Vive VR headset, but phones from Asus (2357.TT), Honor (pvt), and Huawei (pvt) will also do the trick, making the new phone just one more mid-priced 5G smartphone.
With Meta painting a picture of the Metaverse (their version) through its TV ads and flashy retailer campaigns that are sort of ‘Metaversy’, although mostly 2D, the advertising world is trying to help consumers understand what the Metaverse is, even if they themselves don’t know, as long as there is the potential for spending, either at the business or the consumer level, which makes it even more difficult for the average person to understand what relevance the Metaverse might have to them.  That said, it does make the concept, whatever that might be, more familiar to consumers generally, essentially seeding the idea of a new paradigm for consumers sometime in the future.  Until there actually is a Metaverse that is easily accessible to the general public and has some intrinsic value, advertisers will use the Metaverse as a way to indicate their products are what would previously have been called ‘futuristic’, ‘leading edge’, or ‘revolutionary’, sort of an advanced ‘lipstick on a pig’ concept.  Perhaps one day there will be a true Metaverse (our definition) but until then its just one step above ‘new and improved’ or ‘you can lose 10 lbs. overnight!’ advertising that tries to differentiate what are undifferentiated products.

Over the last few years we have mentioned the development of TADFs (Thermally Activated Delayed Fluorescents) as complementary to or as an alternative to fluorescent and phosphorescent OLED emitter materials.  Given that TADFs are based on fluorescent materials, which are relatively inexpensive but exhibit a number of the more desirable properties of more costly phosphorescent OLED materials, they have been the subject of considerable research in the OLED material space since the early 2000’s, particularly at the university level, with the objective of designing less expensive alternatives to the red and green phosphorescent OLED emitter materials that are used in OLED displays currently.
In order to produce the light necessary for an OLED display, electrons in the emitter material absorb electrical energy which pushes them from what is called a ground state (it is easiest to think of it as an orbit around a planet) to an excited state (a higher orbit).  These excited electrons quickly fall back to their ground state but give off the electrical energy they absorbed in the form of light, essentially converting the electrical energy that you supply when you turn the display on, into the light you see on the screen, with the composition of the emitter material determining the color of the light.

​Here’s where it gets a bit more complex…  When the electrical energy is applied to that electron and it moves to an excited state that change can happen two ways, as a singlet or a triplet, with the technical difference between the two not germane here, but phosphorescent OLED materials produce triplets which have considerable higher efficiency when converting electrical energy to visible energy (light).  This makes phosphorescent OLED materials the preferred choice for display manufacturers.  However there are some drawbacks, the first of which is such phosphorescent emitters are only available in certain colors, with blue the exception, so in order to create an RGB (Red, green, blue) display, a less efficient fluorescent blue emitter must be included, which means a less efficient combination of materials and the potential for the materials to age at different rates.
Without going into the details of why creating a phosphorescent blue emitter has proven difficult, we leave it to say that material scientists have been working toward improving the efficiency of blue fluorescent materials for many years, which is where TADFs and Cynora (pvt) come in.  One technical detail of the difference between fluorescent and phosphorescent emitters is that the jump up to an excited state and the subsequent return to ground state in fluorescent emitters is rapid, while in phosphorescent emitters (triplets) it is relatively slow, which makes phosphorescents more efficient in converting electrical energy into light energy.  TADFs take the rapid fluorescent singlet reaction and slow it down (hence the ‘delayed’ in the name) to make them more efficient, giving the potential for TADFs to be used as a more efficient blue emitter when paired with phosphorescent red and green emitters.
This has been the objective of Cynora and a Japanese company Kyulux (pvt), who have been working toward the development of a blue TADF for a number of years, along with a vast group of universities and R&D arms of companies in the display materials business.  Unfortunately such development has proven more difficult than might have been originally thought and while there have been blue TADF materials released commercially, they have not been able to meet all of the characteristics needed by OLED display manufacturers.
Heretofore we have only mentioned OLED material efficiency, but commercial OLED emitter materials must meet a number of other characteristics, all of which are a sort of balancing act between efficiency, material lifetime, and color point, as each fluorescent, phosphorescent, or TADF material is trade-off of the three.  We have seen highly efficient blue phosphorescent OLED emitters that would certainly meet commercial requirements in that category, but had lifetimes that were not commercially viable, and we have seen efficient blue phosphorescent emitters that had longer lifetimes, but were not the deep blue necessary for commercial displays, so Cynora and other TADF developers have been competing with phosphorescent blue developers to hit that magic combination of all three characteristics that would push a new material into true commercial production.
If Cynora has not been able to produce the perfect blue TADF iteration, why would Samsung Display (pvt) , an affiliate of Samsung Electronics (005930.KS), and investor in Cynora, want to pay an estimated $300m (no confirmation on price has been noted) for the company, especially as it seems the company had been reducing its staff over the last few months?    We believe there are a number of reasons, the first of which is IP.  Cynora has filed or been granted over 600 patents, much of which relates to the development and application of TADFs, with an emphasis on blue.  Even if Cynora was unable to meet its goal of developing a commercial blue TADF OLED emitter material that offered better characteristics than existing fluorescent emitters, they have done very extensive work toward that end, which makes that IP valuable, particularly to Samsung Display, the leader in the RGB OLED space.  LG Display (LPL) was also an investor in Cynora, which means that SDC’s purchase would also force other OLED producers, including LG Display, to license any TADF IP that was developed by Cynora if it predates new material TADF discoveries and would give SDC a cost advantage if such materials became commercially viable.
We expect that while Cynora has sold relatively small amounts of various materials, their last funding round was in May of 2019 and were likely facing the prospects of a need for further financing, given a staff of ~120.  At the time of the 2019 financing the company’s CEO was replaced, likely to refocus the company toward a more financially viable commercial timeline.  Our history with the company has consisted of a number of meetings over the last seven or eight years where timeline estimates tended to be pushed forward, so we would expect that initial and early investors (2010 and earlier), might be looking for a way out of what has become a longer-term investment than originally thought.  While we have looked at a number of Cynora’s patents, we expect SDC has done a deep dive into the value behind the company’s IP in order to value the only part of Cynora that SDC seems to want.  If SDC is able to monetize that IP then the transaction will make sense, otherwise it seems to be a protective move to keep any hidden potential out of the hands of competitors and to bail out the company’s venture investment.

​Back in January of this year, a time when most CE companies had an optimistic view of the prospects for the 2022 year, Taiwan based Foxconn (2354.TT), the largest assembler of the Apple (AAPL) iPhone, began offering large sign-on bonuses to entice workers to its assembly plant in Zhengzhou, China.  The bonuses, then worth ~$1,470, were 36% above the standard average monthly salary being earned by workers at the time, and were necessary to attract workers back to the factory during increased COVID-19 outbreaks, despite the fact that Foxconn’s plants in Zhengzhou were in what were considered extremely ‘safe’ zones in relation to COVID-19 risk. 
This was the 2nd time Foxconn had offered such incentives, as it had faced the same issue back in June of last year in order to keep up with iPhone 13 production, then offering a $1,235 sign-on bonus to former employees, also far above the then typical sign-on bonus of $773 offered to new workers, who are only paid the bonus if they work at least 4 months and remain working through the peak season, earning between $772 and $926 for a new hire.  It seems that Foxconn is playing the bonus card again, as production for the iPhone14 to be released by Apple later this year begins.  This follows a suspension of recruitment in May when the government of Zhengzhou locked down the city for seven days, right after Foxconn went on another hiring spree.  As the Zhengzhou complex assembles between 75% and 80% of iPhone units, it is essential that Foxconn brings staff up to needed levels in or to keep release and delivery dates on schedule.

Announced products and released products can be very different animals in the CE space and more so with AR/VR headsets, which have a tendency to be announced with considerable fanfare and drift off into the nether world of ‘things to come’.  Some of this is due to the fact that many AR/VR headsets are developed by small companies, whose resources are stretched and whose financials are based on weak funding sources.  That said, this year to date there have been 4 new AR headsets officially announced and 7 AR headsets released, with all coming from 2021 announcements, with the average time between announcement date and release date for those released this year being 126 days, with a low of zero and a high of 237 days.  Last year there were 21 announcements but only 12 releases, with an average time between announcement and release being 139 days, with a low of zero and a high of 820 days.  In 2020 there were 8 announcements and 10 releases, with an average time between announcement and release of 227.4 days, with a low of zero and a high of 620 days.
If nothing else, the time between announced AR headsets and their actual release is declining, and that is a good thing for keeping the public interested in the AR/VR space.  That said, there is also the issue of price, and our data suggests that the average price of released AR headsets has been declining each year since 2018, including 2022 to date, which we see as a key factor toward the commercialization potential for AR, and while we expect the rate of change will slow, as the AR space finds more ways to accomplish such mixed reality without the need for bulky or odd looking headsets, the public will have an easier time accepting their use, especially when compared to VR, which requires that the user be stationary, or at least limited to a small space.
We believe we are still a distance away from the concept of everyday folks walking the streets with AR glasses, and the need for world class applications will really be the driver for AR (see our note of 5/12/22 for details) but at the least, AR headsets are getting less expensive and closer to the necessities that are demanded of popular CE products, like actually releasing a product some time close to when it is announced, and not causing its users to become motion sick or quickly fatigued.  AR is really a tool that does not require major content creation or a Metaverse for support, just high quality, unobtrusive hardware and consequential applications, all of which seem to be getting closer to creating a syzygy (today’s word of the day[1].  Everyone is waiting for Apple…we are waiting for applications….
 


[1] Syzygy - a conjunction or opposition, especially of the moon with the sun.
"the planets were aligned in syzygy"
 

​months is dependent on reducing panel inventory across the industry.  This is accomplished through utilization reductions at panel producers, who must take a hit to margins from the lower utilization rate or continue to over-produce and worsen the panel inventory overload, pushing panel prices lower.  This has always been a difficult choice for panel producers, especially after such a strong boom cycle last year, and resistance to such cuts is always high, but there are few alternatives, especially when many raw material and component prices are rising.
While each panel producer must make utilization cuts based on orders, estimates, and targets from customers, the temptation is to err on the low side and maintain production at the highest levels possible, and that has a tendency to extend the period during which utilization cuts are necessary, so we try to gain insight into how deep panel producers are making the cuts as an indication of how long it will take to work down inventory, and how much panel producer performance will be affected by the cuts themselves.
There is a certain amount of granularity here also, with vastly different utilization rates at LCD fabs vs. OLED fabs, and even more granularity across fab substrate generations, as fabs Gen 6 and below tend to be used for IT and mobile device displays, and fabs above Gen 6 being used for TV displays, although with gaming monitor sizes reaching TV size, those lines are blurring somewhat, and utilization rates ay ultra-large (Gen 10/11) LCD fabs, which are for TV displays 65” and larger, provides even more granularity.
Panel producers tend to keep this data to themselves given the competitive nature of the business, but occasionally enough data becomes available to make such calculations with some sort of accuracy, although there are many assumptions that have to be made and doddering opinions on those assumptions, but to us the important point is how much utilization rates change during periods of panel price declines and periods of excess inventory vs. orders and shipments.  As Chinese LCD producers now represent ~66.1% of Gen 7+ capacity, they hold sway over how their production rates will affect large panel prices, and consequently we pay close attention to whatever data we can derive concerning changes to their utilization rates.
According to our most recent data, we estimate that the utilization rate across all Chinese LCD fabs was ~84.9% in May, down ~3.5% from April and down 8.1% relative to January.  A relatively small m/m drop in May. With small panel LCD fabs seeing a 3.2% decline in May (m/m) and ultra-large format LCD fabs seeing only a 2% drop m/m.  With the largest producers such as BOE (200725.CH), Chinastar (pvt), and HKC (248.HK) seeing m/m declines between 3.1% and 6.1%, it would seem smaller producers have made only small adjustments to utilization rates on the Mainland.  We calculate that the cuts in May would reduce inventory production by ~600,000 m2 of capacity, or the equivalent of ~515,000 65” TVs out of ~15m that could be produced monthly.
It the industry, particularly Chinese LCD producers, expect to work down inventories the reductions seen in May would likely not be enough to stem the tide of panel price declines and inventory glut, but there is a reason why the cuts tended not to be deep in May, and that is that panel fabs tend to operate a breakeven at a utilization rate of ~85%, and while this is a generalization across a wide variety of producers and fab operations, cutting utilization below this point across the industry tends to lead to a general lack of profitability for producers.  The problem is that with inventory levels still high and demand low, along with raw material and component costs that are not absorbed by customers, further utilization cuts are necessary to shorten the time it takes to reduce inventory levels before the holidays.
We expect that further utilization cuts were made at Chinese LCD fabs this month, likely bringing the average LCD utilization rate to between 78.5% and 79.0%, which will hopefully be sustained in July, which we believe would be enough to al least bring down inventory levels to more reasonable levels based on current demand.  Whether that happens will depend on how much of the ‘bullet’ Chinese panel producers are willing to bite