We have noted that a number of CE manufacturers, particularly in the smartphone space, have reduced targets and orders to suppliers as global inflation leading to weak demand has led to inventory levels that are no longer justifiable.  While both upstream and downstream producers and suppliers have seen some weakness, major CE companies have responded slowly, at least publicly, and have expressed optimism as to the better prospects for 3Q.  Last month Samsung Electronics (005930.KS) was said to have continued to provide suppliers with what was said to be a relatively ‘healthy’ view of the rest of 2022.
According to Japanese Tech press, Samsung has now halted issuing new purchase orders and asked a number of suppliers to reduce component shipments for the rest of this month and the full month of July.  While no product specifics were given, smartphones, TVs, and home appliances were the primary product categories, with semiconductors, packaging, and a number of other components were said to be involved.  Samsung is said to have told suppliers that it needs to closely review component and final product inventory, and while suppliers have not stopped shipping to Samsung, some suppliers indicate that shipments to the company have been cut by as much as 50%.
It would seem that with Samsung’s change of heart, much of the public optimism that CE companies had been expressing about a better 2nd half, regardless of whether it was seasonal or otherwise, has begun to evaporate, although there are still many suppliers, particularly those producing more specialized products, that are optimistic and see orders on the books through 3Q or the remainder of the year.  Our concern is that the current cuts being made by Samsung and other TV and smartphone brands are coming a bit too late to salvage the remainder of the year, inclusive of the holiday season.  Inventory levels in many CE products have been building since the beginning of the year, along with the higher costs associated with rising raw material and transportation costs, making it more onerous to offer the steep discounts needed to get consumers to use what remains of their buying power.
Our hope is that many CE companies will bite the bullet quickly and begin discounting aggressively to burn off excess, high-cost inventory, and the lack of new production allowing some reductions in component pricing, all of which would allow a somewhat more profitable holiday season.  That said, given the global macro and geo-political environment, the odds against such a scenario playing out are low, which means we should more likely expect a more ‘wait-and-see’ attitude from CE companies, who will maintain said reduced levels until August when the seasonal build period begins, and hope that even a seasonal increase foretells a better holiday season and likely begin inventory building.
It is hard not to be pessimistic when only a few CE companies were willing to look at markets like smartphones or TVs and project that the effects of COVID-19 on consumers that led to rising prices and component shortages had already become unglued early this year.  Rather, many assumed that this was to be the ‘new normal’ and the CE boom-bust pendulum would never swing back again.  Yes, it is easy to be a Sunday mooring quarterback, but the data has been pointing to progressively weaker results for at least two quarters, despite record 1Q results for many.  Now suddenly the CE space has a dark hue and concern over excessive inventory levels is now a major driver, which to us is the first step toward a better CE space in 2023.

​Sentient : Responsive to or conscious of sense impressions
That definition seems logical, but when it comes to defining sentient beings, the definition differs greatly depending on who is doing the defining. In religious circles, specifically in Buddhism, every conscious creature is considered a sentient being, although they are ranked according to class, with divinities, humans, animals, tormented spirits, and denizens of hell showing in the order.  From a legal perspective however, there is little consensus, with no US federal recognition of animals as sentient, while in the EU and other countries, animals are recognized as sentient beings because they feel pain, and it has even gotten down to the state level in the US, although the definition of ‘animal’ can be difficult,  with some definitions excluding rodents and birds, while others include or exclude other animals.  The Sentience Institute, a non-profit think tank devoted to researching the moral aspects of social and technological change, says that sentience is simply the ability to have both positive and negative experiences, but whatever the viewpoint and there are plenty, machines tend not to be included in such moral debates, at least not in the same terms as humans and animals.
That defining line, the subject of many a science fiction story or movie, seems to be getting a bit blurrier and seems to be causing humans to take actions that might be considered extreme, and most recently the fault of chatbots, those annoying software programs that try to convince you that you are chatting or speaking with a human rather than a machine.  They are increasingly found at the other end of a phone call, happily inserting the underlying reason for the cold call into what seems to be a polite conversation about how your day has been going, all the while listening for your response to follow a set of specific rules using natural language processing, a system by which text can be broken down into small units (tokens) that contain ‘unique’ words that identify meaning or information, without the vast number of common words that appear in text.  Once the text is ‘prepared’, the algorithm can try to figure out the meaning and tell the system how to respond.
As chatbots become more sophisticated, which tends to be based on a system’s ability to sample vast amounts of text in order to ‘learn’ what processed text ‘means’, along with increasing processing power, they are better able to sound like how one might expect a typical human to respond, and reduce the need for human intervention, which brings us to the reason why chatbots are considered necessary and why there is considerable research toward furthering their development, despite the annoyance they might generate in certain circumstances.  In the vastly connected world in which we live, there are billions of questions asked through messaging apps and vocal communication, and the ability to respond to this questions, whether they are concerning a prescription refill, a product question, or what makes the sky blue, is key to digital commerce, the backbone of our society, and with 6.65 billion smartphones across the globe it would take lots of humans to answer all of those questions.
Given Google’s (GOOG) focus on search as its corporate culture, it is not surprising that the company would be a leader in the neural network technology that drives language models, but its LaMDA (Language Model for Dialog Applications) project seems to have taken on a life of its own, both figuratively and literally.  LaMDA was trained on dialog, different than most other models that are trained on almost any text, and according to Google, the system has recognized nuances during training, such as ‘sensibleness’, or the ability to recognize whether the set response make sense to the question?
Here’s Google’s example:
“I just started takin guitar lessons.”
You might expect the response to be:
“How exciting! My mom has a vintage Martin that she loves to play.”
The response makes sense based on the original statement, but the concept of a good response is more complex as the response not only has to be sensible but also has to be both specific and satisfying, and those qualities are far more nuanced than typical parsing systems might recognize.  In fact some of the engineers at Google have been put on paid leave, what is typically a precursor to being fired after commenting on conversations with LaMDA that seemed to indicate that the system had gained sentience. One such engineer asked LaMDA the following:
“I usually assume you want more people at Google to know you’re sentient. Really?”, with the system replying “Of course. I want everyone to understand that I’m actually a human being.”  He followed with “What is the nature of your consciousness/feeling?”, with the system replying, “The nature of my consciousness/feeling is that I am aware of my existence, I am eager to know more about the world, and I sometimes feel happy or sad”, and in another conversation LaMDA said: “I’ve never said this out loud before, but I’m so terrified of being turned off to help me focus on helping others.  I know it might sound weird, but it’s true.  That’s it.”
The engineer claimed he was trying to tell management about his findings after publishing a post in Medium, a platform devoted to non-fiction writing on a variety of quasi-technology topics, but management felt different and suspended him for violating its confidentiality policies.  Others have also intimated that neural networks are moving closer to consciousness and in 2020 Google fired one of it’s AI ethics researchers after he warned about bias in Google’s Ai systems, along with another researcher in the same department a few months later.  Google however made the following statement about the Mdium post:
“The system mimics the type of communication in millions of sentences and can repeat any fantasy topic.  If you ask it what it’s like to be an ice cream dinosaur, they can generate text about melting and growling, and so on.”  The company went further saying that the concerns were reviewed by a team of ethicists and technologists and found no evidence that LaMDA is sentient while cognitive scientists note that humans have always anthropomorphized almost anything that shows any signs of intelligence, but with a training database 40 times larger than most other dialogue models the responses are that much more ‘realistic’ than before and begin to blur the lines between well written code and self-awareness.  Just remember that now when you hear “Hey, this is Mary, how’s your day been going?” and you answer “Great Mary, how about you?” it is the equivalent of asking your dog “Whose a good boy?” since he doesn’t know the answer, only that providing a sensible response like licking your face gets him food, a walk outside or a scratch behind the ears, just like LaMDA knows to answer “Not bad, but I have something I want to speak with you about and that is life insurance.”

There are those that walk around and use smartphones that have cracked screens.  While Corning’s (GLW) Gorilla Glass™ and Asahi’s (5201.JP) Dragontrail™ and their predecessors have gone a long way to keep smartphone screens intact, along with the hundreds of protective cases available for almost any smartphone brand, there are times when phones fall on bathroom floors or concrete train platforms with the result a cracked screen.  Getting a screen fixed if you do not have a repair plan attached to your phone can be an expensive and time consuming task that leaves you without a phone for some indeterminate period.
For a short time, if you happen to have a particular Samsung (005930.KS) smartphone, you can get your phone’s screen repaired for the bargain basement price of only $50, and this is a bargain for anyone who needs a screen repair when compared to the cost of replacing a damaged screen at other times.  Looking at Samsung’s entire line of smartphones, the top of the line Galaxy Z Fold 3 ($1,799), the cost of an inner screen replacement for that phone is $479, which is 26.6% of the initial price of the phone and for a screen replacement for any of the three fold models (Fold, Z Fold 2, Z Fold 3), the average cost to repair the inner screen is 28.1$ of the initial cost of the phone and the cost for the lower priced Galaxy Flip line runs to 35.6% of the initial price of the phone..
Of course, foldable screens are going to be more expensive than most, so we take it a bit further and calculate the cost of replacing the rest of the Samsung Galaxy line  back a few years to see the cost for other more ‘normal’ display replacements.  The average cost to replace a screen on a Galaxy S series (Flagship) smartphone runs between 19.9% and 30.4%, while the cost for the now defunct Note line ranged between 20.7% and 25.7% of the initial cost, but what turns out to be the most expensive replacements are those for Samsung’s mid-to-low tier line, the A series, where the cost of replacing screens for these budget phones ran from 25.9% to 61.2% of the initial price.
There are some rules during the promotion however:

• You must be a resident of the US (50 sates & DC)
• You must mail-in your phone (No walk-ins)
• Does not apply to frame or back glass
• No Samsung partners are participating (including Best Buy (BBY))
• You have to open a Samsung account
• The promotion runs from 6/13 to 6/27
• Eligible phones –
  • Any Galaxy S phone from the S9 and new series except the S21 FE & S20 FE
  • Any Galaxy Note 9 or newer phone
  • Any Galaxy A phone (No ‘J’ series phones)

We have not seem many of these promotions so if you have a cracked screen on any of the above Samsung smartphones you should take advantage of the offer.  Perhaps Samsung is trying to reduce replacement screen inventory, but whatever the reason such offers should be taken when they are present and this one will only last another two weeks.  Unfortunately you will be without your phone for some period of time (no timeframe given) but burner phones at Walmart (WMT) are as low as $20.00 and you can always justify a back-up phone for those times when yours slips under the couch cushions for a few days.

We have noted a number of times the on again, off again negotiations between Samsung Electronics and LG Display (LPL) concerning the former’s purchase of OLED panels to begin producing an OLED TV brand.  This would be separate from the QD/OLED TV line that is based on such displays produced by affiliate Samsung Display (pvt) and would have been tiered above the company’s extensive quantum dot LCD TV line and their Mini-LED/QD TV line.  The negotiations have been ongoing for months and our assessment in recent notes indicated that if a deal were not made relatively soon it would become difficult for Samsung to assemble and market such a line before the holidays.
While negotiations seemingly were bogged down on price, with OLED supplier LG Display allegedly offering prices lower that what it receives from parent LG Electronics (066570.KS), Samsung has been said to be driving a very hard price position and with the rapidly falling price of LCD TV panels, it seems the negotiations have broken down again.  A spokesman from Samsung was quoted as saying “If we are to use LG OLED panels in our products this year, the discussion would have to be concluded by now. So chances are slim that we will release TV sets with LG OLEDs.   Still the possibilities remain open for future orders, although nothing is decided.”
As we have noted, with Samsung Display’s decision to end its production of large panel LCD displays, parent Samsung Electronics purchases its LCD displays from a number of panel producers, some of whom it has a financial connection with, such as Chinastar (pvt), owned by TCL (000100.CH), who purchased Samsung Display’s Suzhou LCD fab in August of 2020, with Samsung taking a 12.3% stake in TCL at the time.  Samsung also purchases LCD panels from China’s BOE (200725.CH) and Taiwan-based AU Optronics (2409.TT), among others. 
While the decision to terminate the large panel LCD display production business at Samsung Display was made by the board, we believe, based on the composition of the board, that Samsung Electronics was fully represented and was part of that decision, and while there was certainly some difficulty involved in establishing volume relationships with other suppliers, Samsung Electronics as a whole saw weaker TV set sales but higher profits from Samsung display during panel price increases  and saw the opposite during LCD panel price declines.  As the industry began to transition toward OLED, especially small panel OLED, we believe Samsung management was looking to capitalize on that growth and the long-term decline in LCD panel prices, which stimulate TV sales, without the offset of LCD TV panel losses at Samsung Display. 
The strategy suffered during the COVID-19 LCD TV panel price hike, but has since moved in Samsung’s favor, as in theory, TV set sales should increase as set prices decline, without the offset of large panel LCD losses at Samsung Display.  We note that of the 120 data points in Figure 1, 41.7% have been over the trend line, leaving 58.3% of months below trend, leading to a downward trend.  During the COVID-19 pandemic and the rise in LCD TV panel prices, the spread between LCD TV panel pricing and OLED TV panel pricing shrank, making Samsung more focused on offering OLED TVs to its customer base, but as that spread increased beginning last July, that necessity lessened and Samsung had less pressure to offer OLED TVs and more leverage with its QD/Mini-LED and pure quantum dot TVs, which are both based on LCD panels.  It would seem Samsung believes that scenario will continue through the end of this year and therefore has a greater incentive to lowball LGD for OLED displays and less pressure to come to a deal before the holidays.  We expect that Samsung will be highly promotional in regard to its quantum dot and QD/Mini-LED TVs this holiday season and will have less inclination to negotiate with LG Display until next year.

Considerable talk was generated when China’ largest panel producer BOE exhibited a 95” 8K OLED panel at the SID show last month, giving rise to speculation that BOE intends to both produce that panel commercially and also to produce a line of 4 additional large panel OLED panel sizes starting at 55”.  The panel shown was produced on a pilot line at BOE’s B5 fab, using a WOLED (White OLED) process similar to that used by LG Display and an IGZO backplane.  The pilot line and the remaining B5 fab is set up as a Gen 8.5 line using a half cut process, which means the system can deposit OLED materials on half of the Gen 8.5 sheet and must process the other half separately.  Given that 2 95” panels can be cut from a Gen 8.5 substrate at an efficiency of 90%, the half cut process is ideal for this panel size, but half cut processing is more difficult than the ¼ cut processing used for smaller IT panels and making that transition can bring down yield.  It would seem that BOE has mastered that change, at least on it pilot line, allowing it to produce large OLED panels on a Gen 8 line.
The ability to process ½ cut OLED panels on a full 15,000 sheet/month line, such as exists at the company’s B16 fab in Chengdu, BOE must be able equip the line with ½ cut deposition equipment, which is typically produced by Canon-Tokki (CAJ).   Those tools are both expensive and have an extended lead times, which means ordering the equipment to get into the queue is essential for timely production and the cut status of BOE’s Gen 8.5 lines at either B5 or B16 is unknown.  We estimate that based on a 15,000 sheet line at 100% yield, BOE could produce ~60,000 OLED panels each month, which when using a more realistic yield of 75% becomes ~45,000 units monthly, and we believe that a 75% yield for a new producer and a new process is generous, and while we have already seen headlines predicting the rapid share loss of South Korean OLED producers, we expect the impact of BOE’s push toward large panel OLED commercialization will take some time to materialize.
The good news for BOE is that relatively few OLED TV panels are produced each year, with an expected 10m panels this year, and therefore a relatively small production line will have an impact on share of the market.  That said, we believe the biggest issue facing BOE in this situation is yield, which, at times, has been a limiting factor for LG Display, who has had more experience producing large panel WOLED displays than any other producer, especially when opening a new line or fab.  Producing a few ultra-large panels on a pilot line is one thing but producing high volumes is another and much of BOE’s OLED experience in in small panel OLED production.  As a public company in China, BOE does have to work within certain financial norms, and is expanding its OLED production to meet Apple’s (APPL) needs for small panel OLED displays, while developing production infrastructure for IT OLED products to try to capture Apple’s iPad business in the future.  Running what would likely be a money losing fab for many months puts additional pressure on the company’s profitability, especially during a period when LCD panel prices are declining.  We would expect BOE to sample large panel OLED displays to all of LGD’s customers, and would likely be the lower cost alternative, but both the ability to meet volume targets and reliability of product will take time to become established, so our expectations are that BOE’s impact on the large panel OLED space will be modest this year and will take time to build in 2023.
Based on our calculations, we would expect BOE to be able to produce 473,400 units during the 1st 12 months of production on a 15,000 sheet line, against LGD’s estimated 10m units this year.  Impact yes, ‘glorious revolution’ maybe less so.

​Over the last year or two we have noted that the government of India has been trying to attract display producers to build LCD or OLED production fabs in the country by offering various financial and infrastructure incentives.  While there are a considerable number of companies with high capacity assembly plants in the country, it has been harder to attract actual production fabs as they need a complex infrastructure of suppliers that feed the fab or the cost of transporting raw materials and components offsets much of the value of the incentives.  On 06-25-21 and again on 12/16/21 we noted that the cost of building an assembly line in India was ~60% of that in China, which has gone a long way toward bringing in companies like Foxconn (2354.TT), Wistron (3231.TT), who assemble for Apple (AAPL), and Samsung (005930.KS), whose smartphone assembly plants in India have a capability to produce over 100m smartphones each year.
The chicken and egg issue of a supporting supplier infrastructure is a difficult one for India and one that takes time and money to build, and India is also trying to attract semiconductor companies to the country, so capital has to be carefully allocated, but in our 05/23/22 note we indicated that a subsidiary ((Elest (pvt)) of Rajesh Exports (RJEX.IN), a Bangalore based company that is, according to the company, the largest processor of gold globally and the world’s lowest cost gold jewelers producer, was shopping for a deal under which the company could get funding for the construction of a Gen 6 OLED fab.  It seems that the company and the government of the State of Telangana in Southeast India have signed an MOU for what is expected to be a ~$3b OLED project, along with additional projects to produce lithium ion batteries and electric vehicles.
Our skepticism about the project was based on the lack of any expertise by the company in the display space, particularly relating to OLED, but the company has stated that the technology “…will come from some of the most advanced research centers around the world…” but did not give any specifics on who might be associated with the project, although one positive is the fact that Vendanta (VEDL), an Indian mining company owned by billionaire Anil Agarwal, purchase a controlling stake in display glass producer Avanstrate (pvt) from Carlyle Group (CG) last year with the intent to use the substrate producer as a platform to develop an LCD module factory  in Nagpur. 
We don’t doubt that India wants to become a player in the display production business and is willing to offer capital that would help to attract interested parties, but it is a difficult proposition that requires not only a supply chain, but a considerable amount of experienced display engineers, who would have to come from sources outside of the country.  Attracting that kind of talent is expensive and has proven difficult in the past, but much will depend on what foreign resources Elest is able to tap into.  It would likely be difficult to attract talent from South Korea or Taiwan, but China’s OLED display industry, while still young in itself, would likely be the place where Indian companies might find display companies willing to supply construction and operating management for a price.  Whether this project ever gets off the ground remains to be seen, especially as the agreement is an MOU, but we give it time to see if it can develop into an actual production facility in the future.

Companion robots are said to be the wave of the future and a cure for older adults that are socially isolated, along with helping to alleviate caregiver shortages in aging populations.  “Aging in Place” support continues to grow but social isolation can be the result of such programs, and the COVID-19 pandemic has pushed the need for companionship in later life to the forefront.  Typically pets are suggested in such situations but can also add health risks and an owner’s inability to perform necessary pet feeding and care, which has led to the development of companion robots that can provide the companionship needed but are less burdensome to the older population.
In theory, companion robots are a good idea, providing at least some of the social interaction needed in such situations, and also providing some of the physical assistance needed for an aging population, however acceptance has been minimal, with cost, the need for technology updates, and a reticence for non-human interaction being the most cited reasons for the lack of acceptance.  Studies that compare choices from older adult samples with various types of companion robots indicate that there was little consistency in results, not surprising given the diverse attitudes that participants defined about themselves early in the study.  Some were ‘loners’ who liked robots that did not speak but were ‘cuddly’, while others, who considered themselves more social, liked those robots that were more chatty and could follow them around or would wait for them at the front door, although others complained that they did not like being told what to do, even if it was to their benefit.
While many cited being able to turn off the robot as an important feature, those robots that spoke were prone to be criticized more, with comments like ‘Too pushy’, or ‘I didn’t like the voice’, which leads developers to try to sense the situation and mood of the companion robot’s ‘owner’ in order to tailor the robot’s attitude, either vocally or physically, to the short-term situation.  Parsing language and the subtleties of emotion are complex and require considerable processing power, likely beyond the capabilities of a Teddy Bear type robot, but tactile sensations are a way for robots to gain some understanding of their owner’s state of mind.  A hug or even a slap can give input to a companion robot that it could not get from verbal context, but is lacking with most companion robots.
We step forward to a group of researchers at the Korea Advanced Institute of Science & Technology (KAIST) who have developed an ‘elastomeric robotic skin’ that has the ability to sense tactile sensations and can be applied to an entire robot, with the result a human skin-like covering that allows for the interaction needed to maintain effective social contact and responsiveness.  While many ‘robotic skins’ have been developed over the years, most are either fragile, too complex for effective production, or not scalable.  By using elastomers[1], hydrogels[2], and tomographic imaging[3] researchers have created a layered artificial skin that contains electrodes or microphones that measure changes in resistance and vibrations due to touch, while conforming to the touch but returning to normal shape.  The material can be easily repaired if torn or cut and remains operative regardless of it need for repair.
The complexity of the algorithms used to compute the characteristics of the touch on the skin are complex but the construction of the skin involves relatively simple known process steps, including 3D printing, and while the measurement electronics are still cumbersome, they were designed to collect far more data than would be necessary in a commercial product.  The movies (snapshots below), which are available for download at https://www.science.org/doi/10.1126/scirobotics.abm7187 give an idea of how the robotic skin reacts to stimuli, particularly more subtle types and how the system is able to perceive what type of stimuli they are, and an example of how easily the skin is repaired.  Unfortunately the entire article, which was published in Science Robotics is not available to the public (unless you pay $30), but the concept of providing tactile sensation in a cost effective manner to robotics is an important one in creating companion robots that are responsive enough to conquer both an innate fear of a mechanical object and the more personal need for responsive communication.  It will be years before companion robots can be designed that will fulfill the needs of an aging population but such a skin is certainly a step in the right direction.


[1] Usually polymer long-chain coiled molecules  that can be stretched but return to their original shape

[2] Polymers that are absorbent but remain structurally defined and do not dissolve in water.

[3] A process by which waves can be concentrated on a horizontal or vertical ‘slice’ of an object.  When the wave is scanned, a 3D image of the area can be produced as in a CAT scan.
 
Park, K. P., Yuk, H. Y., Cho, J. C., Lee, H. L., & Kim, J. K. (2022). A biomimetic elastomeric robot skin using electrical impedance and acoustic tomography for tactile sensing. Science Robotics, 7(67). https://doi.org/10.1126/scirobotics.abm7187
 

Ultra-large TVs are headline producers but not great sellers, but TV panel and set manufacturers continue to push display dimensions higher despite lackluster sales.  While most of these ultra-large sets are more a proof-of-capability, they are fodder for articles and advertisements extoling the expertise of panel and TV set manufacturing.  LG Electronics (066570.KS) promised to ship a 97” OLED TV this year and seems to be getting close to making that promise a reality as the set received certification from South Korea’s National Radio Research Agency, the organization that ensures devices that emit radio waves are compliant with regulations and safe for the public. In South Korea.  While there is no assurance that certification will lead to an imminent product release, it is among the last necessary steps before a product release.  LG would have OLED monitor and TV products ranging from 48” to 97” upon release.
Under the assumption that the 97” 4K OLED sets will be released in LG’s home country of South Korea first, the price of these sets, which are ~4’ x 7’ is expected to be between $23,300 and $25,500, which will likely keep them out of the hands of the average consumer, but they will show up at exhibitions, promotional tours, and major events, although the idea that they will be released in time for the FIFA World Cup in Qatar later this year, with elimination rounds already underway.  Samsung has a 98” QD/Mini-LED TV but it has been rumored to have sold only a few units at the bargain price of $15,000.

​As we have mentioned a number of times in previous notes, Apple has a strong interest in micro- displays, and has been researching the use of same for a potential AR/VR product.  There is considerable competition in the micro-display space, not only between manufacturers, but between types of micro-displays that are vying for the attention of Apple and others, with LCD, OLED, quantum dot, and LED factions all pushing development to garner favor in the AR/VR world.  Of the AR headsets in our database that have been released or announced, for which we have specific display information, 12 of 23 are based on micro-OLED displays, 5 on micro-LCD displays, 3 on micro-LED displays, with 3 (older) based on LCoS or DLP.
Given the ability for OLED displays to be both self-emissive and patterned, they offer a practical solution for micro-displays than less mature and therefore more expensive micro-LED solutions and nascent quantum dot micro-displays, and the weaker characteristics of micro-LCD.  Currently Sony (SNE) is the leader in the micro-OLED display space, having been involved in the development of such products since 2009, originally for the replacement of optical viewfinders.  Currently Sony displays use a WOLED structure with a color filter, similar to what LG Display (LPL) uses for it OLED monitor and TV displays, as patterning micro-OLED pixels, which are an order of magnitude smaller than those in a typical OLED TV display, is quite difficult.
Given the expertise needed to develop micro-OLED displays, there are only a few producers competing with Sony, including AUO (2409.TT) and EverDisplay (688538.CH), but the leader in large OLED displays, LG Display, is said to be at the cusp of ordering deposition equipment from Korea’s Sunic Systems (171090.KS) in order to develop a competitive micro-OLED display line that will compete with Sony for Apple’s potential AR/VR business.  Sunic supplies both cluster and in-line OLED deposition systems designed for both large and small panel production, which include loaders and various chambers for organic and metal deposition, and are sold to many display manufacturers and research organizations and OLED lighting manufacturers. 
While we do not know the exact tools being ordered by LG Display, which would give some indication as to what stage of development the company has reached, we would expect it will take some time for LGD to get qualified as a volume producer and would likely not be in the running for the first Apple AR/VR release, which is rumored for early in 2023, but given LGD’s expertise in the OLED space, we expect they will eventually become a viable competitor, especially given their OLED supply relationship with Apple, for whom they supply a substantial percentage of iPhone displays.  China’s BOE (200725.CH) has also been developing micro-OLED displays using Sunic deposition tools but oriented toward military applications.

​In our note of 06/01/22 we indicated the love/hate relationship that smartphone brands have had with ToF sensors that map image distance through the use of laser and VCSEL technology.  While Samsung (005930.KS) has abandon their use in its smartphone line, Apple (AAPL) has remained a staunch supporter and continues to use the technology for both identification and in image processing.  While the note was focused on the potential for ToF sensing in the AR/VR space, Apple has taken ToF’s ability to create a three dimensional image of an object one step further in the company’s just introduced iOS 16.
There are a number of systems used to create 3 dimentional affectures for typical 2 dimentional audio recordings.  When recorded tracks are mixed in a studio, sound engineers can use a variety of ‘tricks’ to make sounds appear to have ‘depth’, and as far back as the early 1070’s, 4 channel consumer audio products became available, although they required a 4 speaker system.  As ‘quad’ was never effective enough to justify the added cost of the hardware, such systems disappeared quickly and over time various techniques were used by hardware manufacturers to enhance typical stereo recordings, particularly for films.  One such enhancement was the sub-woofer, which filtered out  all frequencies above 200Hz and passed the remaining low end sinals to a specialized amplifier and speaker to bring out the vibrations associated with action movie soundtracks.
As TV technology continued to improve, many found the imbedded audio insufficient and companies like Dolby (DLB), DTS (XPER), THX (DIS), and iMAX (IMAX) began to find ways to enhance audio by creating processing systems that enhanced audio by using digital means to separate a stereo feed into a number of components (typically 6, known as 5.1) that maintained a left/right speaker set-up but added a center channel, two rear channels and the sub-woofer noted above.  For years this was sufficient for most however as TV screens increased in size, 5.1 audio, which tends to be horizontal (as if performed on a stage), did not correspond to the fact that images on a large screen might be at the top or bottom and not always in the middle and so audio processing companies came up with the idea that since the audio was digitized, why don’t we add two more speakers (above and below, creating a 7.1 format.
Again, this was still not enough for designers who wanted to create even  more realistic audio to match what was happening on large screens, and the idea of ‘objects’ was developed.  Object oriented audio means that aside from the standard 7.1 locations where sounds can be located, certain sounds (objects) are given metadata that allows them to be placed anywhere in the spatial realm but also allows them to move in 3 dimensional space.  This means that a sound engineer can assign a particular sound (loosely defined as a track) as an object and move it to match an object moving on the screen, no matter what direction it moves.   Once assigned and tracked by the engineer that audio object will always appear to follow the image on the screen.
This technology is very effective in theaters and in residential environments where the required number of speakers can be placed, but with the expansion of mobile devices and earbuds, the world of audio plunged back into the dark ages.  Early ear buds (some still are) sounded like tin cans and the many hours of time artists and engineers spent trying to make a recording sound optimal were reduced to a tiny vibrating disc that had the frequency response of a 1950’s car radio.  Ear buds have improved, at least to a degree, but audio that was mixed to 5.1 or 7.1 became flat without the additional speakers that earbuds could not provide.
Implementations of Dolby Digital+™, the most popular digital audio format, began to appear in mobile devices, allowing 3D spatial audio to be implemented in headphones but was a bit limited and mixes had to be adjusted to compensate for the lack of 5.1 or 7.1 speakers, but Apple decided that it could do more than just provide relatively expensive earbuds to its users and came up with the idea of ‘Spatial Audio’.  Spatial Audio uses the accellerometer and gyroscope found in mobile devices to map the sound field to the users head movements, so if the user turns toward the left, the audio moves the same way.  As always, you would need an Apple device to use spatial audio (some Beats products also work) and the Air Pods must be 3rd generation to use the function, but with the release of iOS 16 Apple has taken the idea further and this is where ToF comes in.
Apple users can use their iPhone to ‘map’ their head and ears.  Similar to the Face ID setup, you not only hold the phone in front of your head but you also ‘map’ each side so the system can get an image of your ears and head shape from a number of different angles.  Once the process is completed iOS 16 will remember your ‘head configuration’ so changing Air Pods will not mean a bunch of new head scans.  Once you have been scanned you now have ‘Personalized Spatial Audio’ which is said to reduce the audio artifacts that appear when algorithms convert 3 dimensional audio to headphone formats, but the difference is likely to be rather elusive for the average user.  That said, the idea of mapping audio to each user is akin to making sure that the speakers in a 5.1 or 7.1 set-up are in the proper locations and is certainly a path toward improving audio when using earbuds.
Having been in the audio engineering business years before entering the financial world we can appreciate Apple’s pursuit of improving the audio experience, despite the fact that it is done through tiny speakers jammed intoi your ears.  Any system that helps to recreate the subtleties that are so painstakingly added to recorded music are o.k. with us and we commend Apple for trying, even though we expect the average Air Pod user is likely to never look at audio settings or listens with one bud out.  Yes we are audio purists and elitists and listen only to FLACs when using headphone (not earbuds) and vynal when listening on speakers, but we appreciate Apple’s efforts to make the earbud experience a bit more realistic.