​While Corning is making some headway at LG Display, the battle between Corning and Schott for Samsung Display’s new foldables seems to be going Schott’s way.  Schott has been the incumbent in Samsung’s previous foldables but was facing significant competition in the UTG (ultra-thin glass) space from Corning, along-time supplier to SDC.  The new version of Samsung’s Galaxy Fold series (see above) has been developed to use the S-pen writing stylus, formerly used on Samsung’s Galaxy Note line.  As the stylus touch system adds a bit of thickness to the device, it seems that SDC has chosen Schott’s 30um UTG over Samsung’s 50um UTG for the new devices to compensate for the added thickness.  Corning’s UTG would have had to be thinned, post production, to bring it to the same size.
While this means that Schott will supply the majority of the glass for these two new devices, there is still the question of cover glass, which in the case of the Fold 3, must also be able to protect the display from stylus pressure.  While we do not know yet know who the folded cover glass provider is or whether a plastic cover has been used, we know that Corning’s Victus (Gorilla Glass) is being used for the back of the Fold 3 and the Flip 3.  More to come.

​Samsung Display (pvt) has been working on the development of QD/OLED technology for years and much of the recent speculation about the potential commercialization of same has been focus on when production will begin and when consumers will be able to purchase sets using the technology.  There has been considerable nuance from prognosticators, some saying production has begun and sets using the technology will be out before the end of this year, while others say that actual production will not start until later this year, with a product release some time in 1H ’22.  Samsung Display has not made any official comments about the new process, but recently a number of low-tier blogs have picked up on the fact that Samsung Display’s corporate site has, in the quantum dot section of their site, a picture titled “Blue self-luminescence”, which they have decided means SDC is readying their QD/OLED product.
Along with that ‘revelation’, Korean firm UBI noted that based on the scheduling for the CES in 2022 (January) they expect an official announcement from Samsung (Display or Electronics) at the show and a release in the 1st half of the 2022 year.  Citing an additional article in the Korean Economic Daily (which is also based on the same information), the blogs have suddenly decided that something new and exciting is going to emanate from Samsung in the near future.  As it turns out the “Blue self-luminescence” panel that is shown on the SDC site does not specifically indicate that it is an OLED panel, but just that it generates its own blue light which leaves open the idea that it could be OLED or LED nano-rods or micro-LEDs, so we see this sudden ‘new information’ as nothing new unless you are new to the display space. 
As we have noted in a number of previous notes, we believe SDC is producing QD/OLED panels for evaluation, which means they go to potential customers who test the panels and make suggestions as to how to improve or make the panels more practical for commercial use.  When SDC believes it has met the bulk of both its internal goals and those of its potential customers, it will produce a ‘final’ panel and potential customers will test and make a final decision on whether they will place orders.  Either Samsung Display or Samsung Electronics (hopefully the later) will show a QD/OLED or QD/Nano device at CES 2022, but the timeline is no different today than it was yesterday, despite the blog headlines. 

Since the Chinese government put its foot down on the bitcoin industry, a few things have changed.  Aside from the price of bitcoin itself, which had increased from 32,782 to a peak of 63,314 on April 15 and then dropped into the ~ 33,000 range when the ‘announcements’ were made (currently back up to 46,644 or thereabouts today), the price of graphics cards, which are used by bitcoin miners to generate hash calculations that create bitcoin, have also changed.  Those cards, which are also necessary for display monitors, particularly gaming and content creation, had seen massive price increases to the point where two or three year old used cards were being offered at premium prices on Amazon and current cards were simply unavailable.  Component shortages for some parts did play into this to some degree, as they have for many other CE devices, but the driver here was demand from miners who were desperate to add capacity, especially in locations (such as China) where the energy to run such bitcoin farms was low.
In our note on 6/21/21 we showed a table we developed that showed the declines seen in graphic card prices in late June after the Chinese crackdown.  In that table the average price decline across all of the models we tracked was 21.6%, still 30.7% above the average low price for the composite group.  Rather than add current data to the set, we offer a chart or two to show how those prices have moved since our examination, based on 3rd party offerings on Amazon (AMZN). Fig. 1 shows an Nvidia (NVDA) GeForce RTX 3060 based card from ASUS (2357.TT) that was selling for $1,039 on 6/21, down 13.4% from its peak price of $1,200, and is now selling at $834, now down 30.5% from its peak and 19.7% lower than when we showed the data.  On the positive side, it is up 11.2% from its low reached on July 20.
Fig. 2 shows another card, this one based on AMD’s (AMD) Radeon RX chipset that saw a peak of $1,918 on May 25, and was at $1,202 when we checked in June, already down 37.3% from its peak.  Based on today’s price of $1,077, down 43.8% from its peak and another 10.4% from June, things have not seem to recover for this model.  .. Others look basically the same with some at new lows and some having recovered slightly, and suddenly availability, especially from 3rd party sources, is considerably better than in June.  Fig. 3 shows another example of supply and demand…

​In 2015 two violent extremists attacked the San Bernardino Inland Regional Center killing 14 and injuring another 22.  The attackers were killed during a later police shootout and the phone of one was recovered.  The FBI requested that Apple (AAPL) create a software program that would enable the agency to unlock the iPhone 5C it recovered and other devices operating under iOS 7 and recover information under the ‘All Writs Act’, a piece of legislation that originated in 1789, after the FBI found that the phone had been rigged to delete all of its information after ten attempts to discover the password.  Apple declined the request but the day before the hearing the FBI said it found a 3rd party who was able to unlock the phone correctly.  Apple has faced a number of similar situations in terrorist or drug related cases but has been able to avoid tainting its staunch privacy mandate, one that its users find quite attractive.
Last week Apple announced that it would roll out a system called neuralMatch that will be an update to iOS 15 later this year.  The simple part of the system would watch for searches relating to child sexual abuse through Siri and the Apple search application and would direct the user toward ways to report such abuse or how to get help with such a problem.  The second part of the system is a bit more invasive, essentially giving parental control to the messaging application that would blur sexually explicit images for any user under 18 and would notify parents if a child under 12 years old is trying to view or send such pictures.  But the third part of the system is where much of the controversy lies as it scans the images in the iCloud Photos folder, and if it finds such material reports it to Apple moderators who have the option to pass it on the National Center for Missing & Exploited Children.
The messaging portion of the system gives parents the choice whether to opt in and if so, an image processor that has been designed to focus on pornography will look for sexually explicit images in the app, obscures the picture, and asks the user if they really want to view or send the image.  In the update family account systems will also check to see if the user clicks through the warnings and is under 13 years old, at which point they will receive a warning that their parents will receive a warning, although the actual image will not be seen by the users parents.  Parents will be notified if the user continues through the process, either viewing or sending such content, although they will not if the user only receives the images but goes no further.  We note that this system actually checks images on the user’s phone rather than in the cloud, which some privacy groups look at a violation of the very privacy rules that have been cited in court cases.
The Apple system does scan images in iCloud accounts, so if you sync to same, all of your images reside on iCloud servers, which are then scanned against a list of ‘known CSAM’ and if enough matches are found the account is sent to a moderator who can confirm, close the account and notify the authorities.  Apple is certainly not alone here as many social media companies use a Microsoft (MSFT) tool to scan servers for CSAM but until now Apple has resisted, scanning only iCloud Mail.  If the new system is implemented it will differ in that it will check images directly on the user’s iPhone rather than on servers, which brings the privacy question a bit closer to home.    Interestingly, the software that actually does the ‘checking’ is not really ‘looking’ at photos as would a facial recognition system, but breaks the images into a hash, or digital signature (a big list of numbers) that represents the key features of the image.  That hash value is compared against a list of millions of image hashes provided by the NCMEC and if a match is found an alert is placed on the account.
Apple is want to point out that it is only looking at photos that are synced with an iCloud account, meaning by turning off a user’s iCloud sync will disable the system completely and no image hash generation will occur, but while the system will certainly work toward outing those that traffic in CSAM to a larger degree, others say that upping the game by adding surveillance directly to a user’s iPhone opens a pathway to a way to break end-to-end encryption[1] and disable the privacy and lack of a backdoor that Apple has worked so hard for in the past.  There is some nuance here as end-to-end encryption does exist in Apple’s messaging application which means Apple will have no access to the messages themselves, nor will parents, but that is not the case on iCloud servers (not only Apple) which makes it possible for companies to run such CSAM searches. 
This difference is Apple’s defense against criticism of the new system, along with the claim that only 1 in 1 trillion accounts will be incorrectly tagged, but there is great fear that other countries will use the Apple precedent as a way to disengage encryption in the name of fighting terrorism or misinformation, and that Apple itself has the power to modify the safeguards it has put into the system.   Apple responds as follows:
Apple’s CSAM detection capability is built solely to detect known CSAM images stored in iCloud Photos that have been identified by experts at NCMEC and other child safety groups. We have faced demands to build and deploy government-mandated changes that degrade the privacy of users before, and have steadfastly refused those demands. We will continue to refuse them in the future. Let us be clear, this technology is limited to detecting CSAM stored in iCloud and we will not accede to any government’s request to expand it.
This is a very complicated issue that almost all admit is misunderstood by most and has the potential to become highly politicized.  It is a very important question that we could not even begin to feel we understand or answer, but when change is underway, we thought it important for our readers to be aware of. 
For further reading:
https://www.missingkids.org/HOME; https://www.apple.com/privacy/docs/Building_a_Trusted_Ecosystem_for_Millions_of_Apps.pdf;
https://www.apple.com/child-safety/pdf/CSAM_Detection_Technical_Summary.pdf;
https://appleprivacyletter.com/


[1] End-to-end encryption is a process by which there is no ‘key’ to decrypt the date being sent between two parties.  Lesser systems encrypt in the same way but a company holds a key that would allow encryption.

​Global warming or not, this has already been a hot summer for many US residents, particularly in the Pacific Northwest, but down in Texas, where they have a particularly unusual power grid, they have a way of reducing the power burden when those air conditioners are going at full blast.  The “Smart Saver Texas” program, which trades a chance to enter a sweepstakes for the utility’s right to control your thermostat during period of high demand.  While that seems to be a visible ‘opt-in’ program, not all device manufacturers and utility companies make it quite so visible, with language buried in pages of 5 pt type.  Some folks have been surprised when their thermostats were changed without their permission, only to find that somehow they were enrolled in such programs that enabled the utility to control their thermostats.
Of course, if one is notified by the utility that such an event will be taking place, they can reset the thermostat manually or just opt-out of the program completely, but officials have indicate that over 600,000 smart thermostats in 23 different states are under utility control, likely with less than that number actually understand that others can control the temperature of their homes.  There is considerable debate on whether utilities should have this ability and whether it is the responsibility of the device manufacturer or the utility to explain the ramifications to a customer before they sign up, but there is a big contingent that is fighting to keep the government from ‘entering’ people’s homes through the utility company or through your video doorbell.  While IoT is an infinitely beneficial technology it does carry some interesting consequences, which can present issues that we did not think about when we were musing over how great it would be to be able to set your thermostat with you smartphone on the way home.

Weibo (WB) is always abuzz with glowing commentary concerning China’s prowess in the OLED space, with constant pointing to new fab capacity being brought on line weeks or months earlier than planned and Chinese branded smartphones sporting OLED displays with smaller camera cutouts or a camera that can take SLR quality pictures 3 feet underwater.  We certainly don’t disparage these accomplishments but they tend to paint a picture of the global mobile OLED market that looks like the planting of the Chinese flag in the middle of Seoul, South Korea.  Just to make sure we were not fooling ourselves, we went back to our OLED production data to see how much the balance between OLED producer share had changed over the last few quarters. 
Rather than work from raw capacity data, which does not take into account whether the fab is running all of the installed lines, the utilization of the lines that are operating, and the line-by-line yield, we are starting with unit volume production data and breaking that down according to size.  This gives a clearer picture of actual production in m2, rather than trying to make assumptions on the parameters just mentioned, particularly as panel producers are a bit loose on how they characterize production levels.  In fact we recently received clarification on a statement from a Chinese producer who had stated that a new fab was ‘open at its stated capacity’, which after a bit more detailed questioning, turned out to be, ‘the fab is complete and is ramping production’, giving a far different perspective on actual production than the original statement.
Looking at the data in Fig. 1, which shows the unit production share for flexible OLED panels, it is obvious that Samsung Display (pvt) holds the greatest share, although it certainly has declined over the last five quarters, especially if the 2Q forecast turns out to be correct, deteriorating from 81.7% in 1Q 2020 to a forecasted 51.5% in 2Q of this year.  Combining Samsung Display with LG Display (LPL), its South Korean rival and counterpart, their share of flexible OLED panel production declined from 90.3% in 1Q 2020 to (forecasted) 63.9% in 2Q 2021.  At the same time the share of Chinese flexible OLED panel producers rose from 9.7% in 1Q ’20 to 36.1% in 2Q 2021, which begs the question, are the Chinese OLED panel producers right to boast about releasing the strangle hold South Korean OLED producers have had on the market?
Before we answer that question, there is another chart to look at.  Fig. 2 depicts rigid OLED panel unit share over the same period, and while the basket of producers is the same as in Fig. 1, there are a number of major differences.  First, LG Display produces almost no rigid OLED panels, nor does China’s largest display producer BOE (200725.CH), leaving the market essentially to Samsung Display, EverDisplay (688538.CH), and Tianma (000050.CH), with the latter two being Chinese OLED producers.  Here again, Samsung Display’s share has declined from 93.5% in 1Q 2020 to 89.9% in 2Q, a far smaller decline than seen in flexible displays, but everyone knows that flexible displays are the most popular so the value of rigid OLED production is minimal, right?
Not really, and Fig. 3 shows that visually.  This chart combines the unit data from flexible and rigid OLED production, and Samsung Display’s dominance is even more obvious here, although still dropping from 88.3% in 1Q 2020 to 71.1% (f) in 2Q 2021.  But we still have not answered the question about flexible OLEDs being the more popular over rigid OLEDs.  The data in the table below shows the share of the composite data as to both flexible and rigid area, and while rigid starts the period at a higher share, by the end of the period, they are almost evenly split and average only 0.6% apart.  This belies the fact that flexible OLED displays are the more popular type, and while they capture the bulk of the press and a higher valuation, rigid OLED displays are the backbone of the mobile OLED space.
While there is certainly more nuance that can be derived from such data, China’s original premise, that they have ended the South Korean dynasty that has been ruling the OLED market since its inception is a bit premature, and with OLED display production for the iPhone 13 just underway, we would expect the South Korean share to rise for 3Q and 4Q, given that they are both the primary suppliers.  That said, the Chinese government has not backed away from supporting the Mainland OLED production space with subsidies and tax incentives, while producers outside of China must rely on self-financing or the global financial markets and Chinese OLED producers have certainly not backed away from the challenge of becoming the dominant supplier for mobile OLED displays, but we expect it will take some time to reach a point where they can claim a truly dominant share.  Raw capacity is important but filling that capacity is even more so.

​Last week we noted that Samsung Display has been considering adapting an idle Gen 8.5 LCD fab to the production of OLED displays.  While little has changed on an absolute basis, meaning SDC has not made any comments or decisions regarding such a conversion, but in our 08/02/21 note, we mentioned that Samsung and tool vendor Ulvac (6728.JP) had been developing a deposition system that would allow SDC to produce RGB OLED displays on a Gen 8.5 platform, a process that required the use of fine metal masks that were unable to scale above 6.  The tool, which is currently under evaluation by SDC, has a vertical deposition chamber, which eliminates the fine metal mask sagging issue that occurs when the deposition chamber is horizontal.
However, the SDC supply chain also seems to have caught the Gen 8 OLED fever as local tool vendors are said to be developing dry etchers that will be used during the TFT process, should it move forward over the next few months, with Wonik (240810.KS), and ICD (040910.KS), both local suppliers and Tokyo Electron (8035.JP) are all competing for such a potential order.  Dai Nippon Printing (7912.JP) is said to be developing the Gen 8.5 fine metal masks and Hims (238490.KS) is developing the tensioning frame for the masks.
What makes this a high risk game for all of these suppliers is the fact that Samsung Display has yet to make a final decision on whether to move the project forward, with the financial burden of the development costs resting on these potential suppliers.  If SDC does not qualify the Ulvac deposition tool, or at least allow it to move to the next stage of development, it could postpone or end the program, as the deposition tool modification program is the most important part of SDC’s potential for producing larger RGB OLED panels.  SDC and parent Samsung Electronics have rejected the concept of WOLED (White OLED), which is used by LG Display to produce its OLED TVs because it is not an RGB process and uses a color filter.  SDC has been very successful in producing small panel RGB displays, and is the global leader, but because of size limitations of the fine metal masks, it could not be scaled above Gen 6.  If successful with the new deposition process, SDC will be able to produce both OLED IT panels and potentially OLED TV panels under the process, which would have a marked impact on the OLED market.
There are a lot of ‘ifs’ here, and significant risk being taken by tool vendors, but if successful could lead to another Samsung Display equipment cycle that would broaden the OLED market and give SDC an alternative to the development of new technologies, such as QD/OLED or Micro-LEDs.  While we expect a final decision before the end of this year, the timeline for this type of project is still convoluted and open to speculation, but we expect that these tool vendors have been in discussions with SDC about the potential for the project’s implementation and have taken the R&D costs under the encouragement of SDC.  It’s a risky business, you’ve got to be in it to win it.

While looking at data for only the Android smartphone market is a bit narrow considering that iOS is typically between 26% and 28% of the totals market, but data is data, and data on 5G smartphones can be a bit difficult to come by.  That said, the data for Android OS 5G smartphones has confirmed what it seems Samsung Electronics (005930.KS) already knows, that it was not the leader in selling 5G smartphones in 2Q.  Samsung’s share of the Android Smartphone market fell to 15.2% from 16.5% last year, and while the company certainly sold more 5G smartphones this year, against last year’s COVID-19 depressed 2Q, it seems others sold more.
In last year’s 2Q, the Android 5G smartphone leader was Huawei (pvt), with a 47.5% share, with Samsung in 2nd place, however this year, because of the severe trade restrictions placed on Huawei, the share of the former leader has fallen to a mere 3.3%, with other Chinese brands fighting to pick up Huawei’s lost customers.    Chinese brand Xiaomi (1810.HK) seems to have been the most successful, shipping over 24.3m 5G Android smartphones in 2Q, bringing its share up from 9.7% last year to 25.7% this year and taking over 1st place.  In 2nd and 3rd places were Chinese brands Vivo (pvt) and Oppo (pvt), who saw their share increase from 12.1% to 18.5% and from 11.2% to 17.9%.
Across the Android 5G smartphone market, all major players except Huawei and ZTE (000063.CH) another trade sanctioned Chinese smartphone brand, saw share increases, with the total market seeing 107.8% unit growth, again, against a very weak 2Q 2020, according to our aggregated data..  It is hard to tell whether Samsung’s share loss in a category that it pioneered, was jingoistic (love that word) in nature, but that was likely a good part of the share loss, but, as we have mentioned in recent notes, Samsung’s mobile division is currently under an extended audit by a senior level team that will ultimately answer to the about-to-be-released Vice Chairman of Samsung, who has been serving time in prison for a bribery conviction.  We expect current division management will have to do some planning on how to avoid a similar situation over the next few months or face the wrath of Lee.

​Ennostar (3714.TT), the parent company of LED producer Epistar (pvt) and Lextar (pvt), has indicated that Epistar has been at full, utilization concerning its Mini-LED production capacity since May and expects to remain so through the end of the year.  The company is targeting ~30% of its revenue from Mini-LEDs this year and has yet to decide on the implementation of a planned capacity increase dedicated to that product line.  At the same time it has also been indicated upstream that Apple (AAPL) has begun volume production on its new MacBook Pro, which is expected to include a Mini-LED backlight, with a target level of between 600,000 and 800,000 units/month over the next four months.  With Epistar one of the companies developing Micro-Led and Mini-LED technology at Apple’s ‘secret’ factory in Taiwan, it does seem coincidental that Epistar is seeing such strong demand through the end of the year for Mini-LED product.  We can’t make the assumption that Epistar is a/the Mini-LED supplier for the MacBook unless direct evidence is shown, but it seems to walk like a duck.
As an aside, the management of Ennostar responded to reports that tablet producers would be shifting displays from LCD to OLED next year, which would imply lower demand for LED backlight suppliers as OLED displays are self-emissive and therefore do not require backlighting.  The company response was that yield rates for OLED tablet displays were low and would therefore be expensive and thus would only be used for small sized tablets where the yield would be higher.  This would leave the high-end tablet market open to Mini-LED backlighting. 
They cited the opposite for TVs, where OLED panels would remain the choice for high-end large TVs, while Mini-LED backlighting would be used for smaller LCD TVs.  While this sounds a bit self-serving it does make sense at least for the near-term, but as OLED panel producers gain experience in producing IT product panels, those yields will improve and costs will decrease.  Mini-LED costs will also have to decrease to broaden their ability to compete directly with OLED, so the cost comparisons that are being cited today will likely look quite different in a year.  We expect Mini-LED prices will decline a bit faster than IT panel OLED displays but not because of issues with OLED production but because of the limited number of producers as compared to the number of possible Mini-LED suppliers.  There will certainly be some price push from Chinese OLED suppliers who are trying to break Samsung Display’s (pvt) strangle hold on the OLED space, but SDC has the advantage of both experience and a large captive customer.

​Samsung Electronics (005730.KS) Vice-Chairman Lee Jae-yong has been granted parole for the remainder of his 30 month prison term, after public opinion pressure from some 5m Samsung shareholders in South Korea, his exemplary behavior during his incarceration and the impact of COVID-19 gave the Justice Minister the impetus to move Lee out of prison and back into the public eye.  However, South Korean law imposes a 5 year employment ban on those who commit economic crimes and parole will limit an traveling outside of the country, so much will depend on the court’s granting an exemption from those rules.
In particular, Samsung has been sitting on a decision as to where it will build its next semiconductor fab, with the final decision likely being held until Lee’s parole.    The $17b project has been testing the financial incentive  waters for months, with a site in Williamson County, the latest filing by the company, next to another proposed site in Travis County, while Genesee County in New York and sites in Arizona have also been proposed.  Whether a final decision can tacitly be made by Lee before an exemption is granted leaves a lot to lawyers, but the slow decision making processes that Samsung Electronics has been following should soon come to an end, and we note that the recent examination of Samsung’s mobile business by one of the company’s auditing groups (see our note 08-05-21), will likely result in management of directional changes.