​Meta’s (FB) Oculus Quest 2 is the best-selling VR headset, and while we expect Meta loses money on every Quest it sells, the idea of seeding the market to encourage consumers to try a new technology is certainly not a new one in the CE space, and the price of the Quest 2 ($300 to $400) is low enough to embolden consumers to take the plunge despite the rather limited content available to users.  While competitive XR headsets can run as high as $12,000 there are a number of soon-to-be released headsets that are expected to be priced in the $450 - $550 price category, with comparative specs to the Quest, but what makes this even more challenging for Meta is the price increase that they have just instituted for the Quest 2 headset, which will raise the price of the two models between 25% and 33%, along with accessories and refurbished headsets.
Understandably the company has indicated the need for the change in order to compensate for the increased cost of materials, silicon, and logistics, which it has likely been eating for the last few quarters, and with thye macro situation putting pressure on Meta’s base businesses, the word likely came down that it was time to at least catch up to those increases.  While it would be difficult for almost any CE brands to generate comparable share to the Quest VR line, there are a number of potential contenders, particularly Chinese brands, that will likely give Meta a run for their money, with Skyworth (751.HK) among the most aggressive as to price and Pico (pvt), owned by Chinese content giant ByteDance (pvt).   Skyworth is expected to release two VR models this year, both in the $450 to $600 price range, and PICO’s Neo 3Link, released in May, sells for ~$450, while the price of the Sony (SNE) Playstation VR 2 that was announced in February 2021, albeit not a stand-alone device, remains a mystery.
While VR is certainly far from being a consumer ‘must-have’, some CE companies are willing to stake a claim to the space with low-cost headsets that likely generate immediate losses but establish the name of the brand in the VR space.  For companies the size of Meta, Sony, and ByteDance the cost of R&D and production/sale losses can be absorbed, while smaller VR brands must still price far above to recover even part of their development and production costs, but the specter of inflation and slower economic growth could put a damper on even the largest companies’ efforts to build a VR name in the near-term as pressure to cover mounting costs pushes up the price of headsets at a time when the industry needs a lower price point to pull in potential buyers.  There are still wildcards in the brush, with Apple (AAPL) having the greatest ability to move the needle but we expect Apple will have more sensitivity to creating a profitable overall business that would encompass a premium priced headset and an absolute necessity for concomitant software sales before marching into the VR arena.

Micro-LEDs are a display technology that has the potential to revolutionize the display industry, realizing the goals of ultra-high resolution displays that have the ability to create images that mimic what the human eye can see.  With a 120° x 120° field of view, the human eye would need the equivalent of 576 megapixels[1] to fully capture the details of a scene, and with 8.29 megapixels in a 4K display there is lots of room for improvement with such a display having pixels 0.375mm apart while the human eye equivalent would have pixels 0.0486mm apart for the same 65” screen.  Of course these are theoretical numbers and the human eye does not take in an entire scene all at once, but the idea that higher resolutions lead to more realistic images is one that has driven the display industry since its inception.
Each display technology that has come along since Philo Farnsworth created the first television prototype in the 1920’s has strived toward creating images that give us the impression we are looking at a real scene and not a flat image on a display, with much of that technology trying to squeeze more pixels onto that screen and that means making pixels smaller and squeezing more of them together and that has caused display engineers to look for methods to make pixels and sub-pixels progressively smaller, but along with smaller ‘dots’ comes more precise tools and that leads to both technical and financial complications and solving those issues can take years and billions of dollars and once a solution is found and infrastructure must be built to support the technology.
Micro-LEDs are essential the same as the LEDs seen in lighting applications only much smaller, and by much smaller we mean very much smaller, with sizes down to 2um, and while growing such almost microscopic semiconductors on a silicon wafer is certainly possible, it also creates a number of problems, one of which is transferring those tiny LEDs to a display substrate, which we have noted on a number of occasions, but there are issues that are equally onerous, some of which are due to the fact that each pixel in a micro-LED display is made up of three sub-pixels, one each of red, green, and blue.  Green and blue LEDs are based on InGaN (Indium Gallium Nitride), while red LEDs are based on InGaP (Indium Gallium Phosphide), which means, in theory, that blue and green LEDs can be grown on the same silicon wafers, but red LEDs must be grown on a separate wafer, increasing the complexity of  transferring the LEDs to a display substrate, and to add insult to injury, as red LEDs get smaller they become less efficient and do not match the characteristics of blue and green LEDs, making the creation of a balanced pixel more complex.
One workaround that has become a focus for Micro-LED display engineers is to use only blue LEDs in each pixel and cover the pixels with a sheet containing patterns of red and green quantum dots.  The dots convert the blue light to red and green, while letting the blue light pass through, similar to the way WOLED displays use a color filter to create color by passing white OLED light through a color filter, essentially a sheet of red, green, an blue dots.  That said, color filters remove much of the light, while quantum dots shift colors with relatively little loss.  This helps to maintain a bright display and lessens the need for multiple OLED stacks or other enhancements that reduce the lifetime of OLED materials. 
Again, the practicality of Micro-LEDs is not perfect and while quantum dots are a more efficient way to generate color, they are not perfect and coating a Micro-LED with a thick film of quantum dots leads to a mis-match of the quantum dots to the blue Micro-LEDs, which reduces the efficiency of the conversion.  Figure 2 illustrates how the mis-alignment of the red and green quantum dots in the QD film can reduce the conversion efficiency of the converted light.  However a small company in Branfod, CT, Saphlux (pvt), a spin-off of Yale University, has come up with a solution that seems to have attracted the attention of a number of US and Chinese venture funds and Shenzhen Leyard Opto-Electronics (300296.CH) among the top Chinese A/V technology companies, who has just announced it has begun mass production of the NPQD R1 Micro-LED chip that was jointly developed by both parties.
Saphlux has developed a process that by electro-chemically etching they create what they call ‘micro-pores’ in GaN doped with Silicon, which allows them to reduces the quantum dot thickness layer by 50% and increases the light-conversion efficiency from 20% to 80% and improving wavelength (color) uniformity.  Once the micro-pores are created they pattern red and green quantum dots (leaving spaces for the blue to shine through), which fill the pores.  Due to the internal light scattering inside the nano-pores, the conversion efficiency is greatly improved, with the process using standard photolithography or inkjet printing, keeping costs low and the improvement in wavelength uniformity reduces the issue of ‘binning’ where each LED must be categorized and possibly skipped during transfer in order to create a display with uniform color and brightness.
All in, we see progress across a number of fronts relative to the practical commercialization of micro-LEDs, and while price comparisons to existing display modalities are still years away, over the last two years considerable movement in micro-LED has been seen, with quantum dots a way to both lessen the difficulty of producing RGB micro-LEDs and the complexity of micro-LED transfer.  Some of this push toward commercialization comes from the AR/VR space where there is a very distinct need for high resolution displays, but the attraction of applications in the more traditional CE space, encompassing TV and IT products including mobile devices, and the high unit volumes they generate seems to have lit a fire under Micro-LED R&D and process engineering that has moved things along more quickly than we had imagined.  We are not at a true commercial level yet, but the number of roadblocks is declining and that will encourage more focus on the Micro-LED space going forward.


[1] (Clark, Notes on the Resolution and Other Details of the Human Eye, 2005)

Xiaomi (1810.HK) opened potential customers to a crowdfunding source that will allow them to purchase the company’s Mijia AR glasses at a discount for a limited amount of time.  The headset, which was announced on July 31 of this year, will be available for pre-order for ~$370, a discount of 7.3%, from the $400 suggested retail price.  The device is a standalone system that is based on a single Sony (SNE) micro-OLED micro-display (pixel density of 3,281 PPI) that can generate 3,000 nits, although typically 1,800 nits and weighs ~100 g. (~3.53 oz.).  It runs on an 8 core CPU with a Qualcomm (QCOM) chipset and has 3GB of memory and 32GB of storage capacity, with  a 1020 mAh battery that is expected to last between 100 minutes and 3 hours and takes about a half hour to charge.  There is a 50mp wide-angle camera and a 8mp periscope camera with native pass through.
According to what we have seen and read, this device is less an AR device and more a mobile camera, essentially a wearable camera and Xiaomi seems to be promoting it as such, with additional applications such as Chinese to English  translation and one-click sharing and exporting of images to the Xiaomi smartphone app.  The design of the glasses does not seem to be oriented toward the sleek design approach we would expect from Apple (AAPL) or Samsung (005930.KS), but more of a ‘proud to be a nerd’ approach that might not help to create a broad customer base.  While one would expect Xiaomi to fund the development and production of such a device, the product is crowd-sourced and will begin production when it has raised sufficient capital to justify manufacturing (to be done by Seiko (6286.JP)), which is expected to be only available in China, at least for now.  A bit on the disappointing side.

​Back in 2015 Japan Display (6740.JP), Sony, and Panasonic (6752.JP) all contributed their OLED businesses to the formation of a combined entity known as JOLED (pvt), with Sony retaining some small panel OLED assets.  The venture was funded primarily by INCJ (Innovation Network Corporation of Japan), a partnership between the Japanese government and a number of major Japanese companies.  INCJ provided 75% of the funding with JDI 15%, Panasonic 5% and Sony 5% with the goal of utilizing Panasonic’s ink-jet printing technology and Sony’s OLED R&D to develop IJP OLED displays, with JDI announcing its intention to increase its stake to 50% in 2017, which unfortunately did not occur due to financial issues at JDI, but JOLED was able to raise an additional $400m in 2018 from a group led by automotive component provider Denso (6902.JP).
JOLED was the first display manufacturer to produce commercial displays using IJP and in early 2018 began shipping what were then high resolution medical displays, followed by a 21” monitor panel for ASUS (2357.TT) and a year later began producing IJP OLED panels from a fab in Nomi Japan and in 2020 TCL (000100.CH) took a 10.76% stake ($280m US) in JOLED in order to license the JOLED IJP technology to Chinastar (pvt), TCL’s display affiliate.   Unfortunately the supply contracts that JOLED has been able to secure have not been particularly large, making it difficult for the company to realize the cost benefits afford to IJP relative to other OLED deposition platforms, and while the company supplied the display for LG Electronica (066570.KS) first OLED monitor,  certainly a feather in its cap considering LG’s affiliate LG Display (LPL) is the premier producer of large panel OLED displays, volumes and yields have not been strong and deal with Lexus (LEXUS.IN) fell through after years of development when the company was unable to deliver product that met specifications.
A recent visit from the chairman of TCL and the announcement that Chinastar and JOLED are sharing IP to develop new products in addition to the 65” 8K OLED ink-jet printed TV that was jointly developed, gives some hope that TCL is serious about maintaining JOLED as a partner and could fund them further if necessary, but whether that means an additional stake in JOLED or a takeover of the entire company by TCL, JOLED seems to be in need of one of two things, financial aid or higher volume orders, and while TCL could certainly provide either or both, would that undermine Chinastar’s OLED efforts, which have been oriented toward developing enough expertise in the OLED space to gain entry into the Apple display supply chain.  We would expect some movement either way by the end of this year.

Fun with Data – iPad Procurement
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Chinese panel producer BOE (200725.CH) has been on a roller coaster ride with Apple (AAPL), with Apple rejecting the company’s displays for entry into the iPhone supply chain a number of times in 2020 and 2021, but the company persevered and was accepted into the exclusive fold typically dominated by Samsung Display (pvt) and LG Display (LPL).  Just when things seemed to be going well, stories began to circulate earlier this year that BOE had changed driver circuitry on a display it was supplying to Apple without permission, and they were suspended from iPhone production for a period of time.  Since then there have been various projections as to how much participation BOE will have in the iPhone 14 series, which should begin this month.
Much has been made in the Chinese trade press as to how BOE is now challenging South Korean dominance in Apple’s display supply chain, with considerable and mostly well-deserved nationalistic pride, but while the press champions BOE’s success with the iPhone, they miss the fact that BOE was the primary supplier of LCD displays to Apple’s iPad line in 2021 and is expected to remain so this year, despite reductions in Apple’s display procurement for the product., which is expected to decline by 25.8%.  In fact, if estimates for LCD iPad display procurement are correct, BOE will see only a small drop in y/y units shipped (-2.7%), while LG Display will see a 17.0% reduction in units and Sharp (6753.JP) will see a 59.2% y/y unit reduction this year.  MacBook shipments are expected to see a 1.9% increase this year, and while BOE will not have the dominant share, it will be the only supplier to see an increase in units (+87.5%), with both LG Display (-5.1%) and Sharp (-9.6%) seeing decreases, which points to the fact that BOE, while still facing some challenges in the OLED space, is seeing considerable success with Apple in the LCD display space.
While OLED displays, particularly flexible OLED displays tend to be the focus for number crunching and press releases, there is still a vast LCD display world that gets little recognition unless it has ‘quantum dot’ or ‘mini-LED’ attached, but that world is still a very large one with ~891.2m large panel LCD units shipped last year, generating over $85b in revenue and one that Chinese display producers dominate.  While the Chinese press glorifies any statistics that show Chinese supremacy in the display space, credit is due to BOE, Chinastar (pvt) and other Chinese LCD display producers, who hold the top share in the large pane LCD space.  One can question whether that will be as valuable a position 5 years from now, but currently they certainly have accomplished their goal of becoming the leading source of large panel LCD displays.

Back in  February we noted the continuing shut-down of 2G and 3G services in the US as carriers try to reallocate resources to 4G and 5G spectrum, while reducing costs associated with these older technologies.  The bulk of 3G network users would be for older smartphones but there are also older tablets, watches, medical devices, SOS (“I’ve fallen and I can’t get up”) services, and security systems that still operate on 3G, so there can be some fallout as these networks are shut down, but the shut-down process is not only happening in the US. 
According to data collected by GSA, at the half year mark there were 149 global carriers in 68 countries that had completed, planned, or were in progress of shutting down their 2G and 3G networks, with 32.2% of those completed.  As seen in Figure 7 Europe is considerably further along in the process while emerging regions are far behind, still relying on 2G and 3G for mobile systems and less aggressive on converting older technologies to 5G, but 53% of those upgrading older networks chose a combination of 4G and 5G, likely using 4G infrastructure as a mechanism for 5G transport, rather than building out 5G only (13%), which would limit the customer base until more of the population was able to convert to mobile devices that had 5G capabilities.
All in, as the availability of 4G and 5G phones continues to rise globally, more carriers will begin planning for 2G/3G shutdowns, with GSA predicting that while 2022 will see the highest rate of 2G/3G shutdowns thus far, 2025 will be the peak year, with over 3x the number of 2G shutdowns as this year.  Given the pervasiveness of 5G at that time, we expect 5G to be the most popular upgrade technology.

Back in February (02/23/22 & 02/25/22) we noted that Samsung Display had decided to vary the OLED materials it used to produce displays for the Galaxy S22 series of smartphones, using its M10 materials for the lower priced S22 and switching to the newer M11 material set for the Galaxy S22 Plus and the Galaxy S22 Ultra displays.  While the difference to the average customer would likely be almost impossible to notice, the basis for the divergence in OLED material sets is based on cost, particularly the cost of emitter materials, those that actually produce the RGB light that we see.  The red and green emitters used in OLED displays are produced and licensed to display producers by Universal Display (OLED), while the blue fluorescent emitter materials are produced by SFC (112240.KS) and Idemitsu Kosan (5019.JP).
As we have noted in the past, UDC charges for those materials based on long-term contractual agreements that are based on material volumes, with the price/kilogram declining as volumes reach various trigger points until the reach a ‘terminal’ rate that remains the same for the life of the material.  This implies that ‘newer’ material stacks would be more expensive until the necessary higher volumes are reached, while older material stacks would be less expensive.  That said, this would also mean that Samsung would have to dedicate a particular deposition line to a specific Galaxy S series model so as not to have to change deposition tool settings, and that would only happen if overall model volumes remain high enough to justify dedicating a line to that model, as it does with the Galaxy S series products.
It seems that Samsung Display has convinced Apple that such a split process is also a viable cost savings measure for the iPhone 14 displays it will be producing.  Not only will SDC be using an LTPO (Low-temperature poly-Oxide) backplane that will allow for a higher refresh rate without higher power consumption, but will be using a newer (M12) material set for the display stack for the 6.1” iPhone Pro and 6.7” Pro Max and the M11 material stack for the 6.1” iPhone 14 and the new iPhone 14 Max in order to remain price competitive against LG Display and BOE, who will be supplying displays for the iPhone 14 and iPhone 14 Max.  While SDC is the primary provider of LTPO displays to Apple for the iPhone 14, the company faces considerable price competition from BOE and LGD for the iPhone 14 LTPS models and while the difference in OLED stacks might seem negligible to most consumers, when multiplied across some 80m units that Samsung is expected to supply, it can help to offset the price effect from the lower margins that BOE is likely to settle for in order to develop its OLED display relationship with Apple.