​As we have noted, Chinese panel producer BOE has been working toward inclusion in Apple’s (AAPL) list of primary OLED suppliers, which is dominated by Samsung Display (pvt) and LG Display.  BOE has rule the Apple OLED display gauntlet before and failed to meet Apple’s stringent display specifications, which include both performance parameters and production metrics, but has returned again, this time making the grade as a ‘conditional’ supplier.  Apple is expect to give final approval to BOE within the next few weeks, allowing the company to begin producing in volume for the current iPhone 13.
Current expectations are that BOE will supply ~15m displays to Apple this year, which includes ~10m units for last year’s iPhone 12 and an additional 5m units for the iPhone 13 once final approval is given.  While the company hopes to hit the 5m unit mark for the iPhone 13 this year, suppliers are expecting closer to 2m units.  According to Korean press, BOE is currently producing between 1m and 1.5m flexible OLED panels for the iPhone 12 each month.
BOE is still somewhat limited in what it is able to produce for the iPhone 13 as Apple is considering changing the backplane of a third model from LTPS to LTPO, which heretofore has been supplied by Samsung Display.  LG Display will begin producing LTPO displays for Apple next year so that leaves the possibility that BOE, who is not yet able to produce LTPO backplanes, will be limited to one iPhone model in 2022.  While this is certainly a step in the right direction for BOE, it could prove to be a limitation that will keep BOE from achieving equal status with SDC and LGD until 2023.
Much of the numbers here are suppositions, coming from supposed supply chain sources, but there is much underlying conjecture about Apple’s actual orders for the iPhone this year, and obviously for next year.  As we have noted, we have yet to see any indication that Apple has changed order rates for this year, although Apple’s initial order rates are also still speculative, so for BOE much rests on Apple’s decisions on next year’s backplanes and how well this year’s models sell through. In any case, if BOE does get the final nod from Apple, we will hear about how the Chinese OLED industry will soon dominate the world and put all other producers to shame….

“Smart Home” products are becoming commonplace, especially doorbell cams and other types of home surveillance products, but a recent event in South Korea points to the level of security in many ‘smart home’ systems and how it can lead to some embarrassing situations.  A hacking website recently posted a large number of photos that showed the inside of homes, apartments, and offices in South Korea.  Many views were presented, both inside and outside of these abodes, including photos of the occupants, delivery drivers, parking lots, and pretty much anything near what is called a ‘wall pad’ or mounted device that includes a camera.
Millions of such devices are installed in residential and business settings, many of which use public networks, and while business related webcams are usually password protected and on private networks, wall pads and the like tend to be far less protected and in some cases can open a door to gateways that would allow hackers to control a variety of building resources including both information and building hardware.  In South Korea, a country with a decidedly technological viewpoint, the government has been trying for years to create a standard that would isolate security networks from more simplistic processes, but has faced opposition from both network operators and hardware manufacturers. 
When a hacker enters such a system, the first move would be to change the administrator’s password, which would lock out anyone trying to regain control over the system.  Once this is accomplished, the hacker has control over all aspects of the wall pads and can open the cameras and view anything within range of the ID camera.  The Korean Internet & Security Agency provides a “My PC Care” kit free of charge that can check system vulnerability and camera security, but you have to get one before hackers find their way in, which does not seem to be the case here.  Perhaps a new product might be called for, a sort of ‘privacy curtain’ for wall mounted cameras.  Checking GoFundMe…

We have seen estimates for OLED TV shipments increase this year, increasing from just under 6m units (est. in 2020) to over 6.1m and more recently to 6.5m units, with shipments in 1H more than double last year’s 1H.  There are two reasons for the increase in OLED TV sales this year, the first being LG Display’s (LPL) increased capacity, along with the increased availability of smaller sized (48”) models, which carry a lower price and therefore can increase the overall unit volume.  The second, and most important is the price of OLED TVs, which both in absolute terms and against rival LCD TVs have worked toward increasing overall unit volume.
LG Display continues to increase its OLED TV production efficiency using MMG (Multi-mode glass), a process that allows for the production of multiple size panels on a single sheet of substrate, which can improve substrate usage efficiency by very substantial amounts (see table below). This allows LG Display to reduce OLED panel prices while maintaining margins and allows OLED TV set brands to lower OLED set prices during a period when LCD TV set prices have been rising.  In order to quantify just how much OLED TV prices have moved this year, we looked at all 12 OLED TV models released by LG Electronics (066570.KS) this year and tracked pricing from its initial price through current selling price.  We note that all prices shown are from Amazon (AMZN) and not 3rd party sellers, and excludes a number of LG’s more esoteric OLED products such as its rollable TV.
Of the 12 OLED models, all were at their lowest price points for the year and only one model saw a peak higher than its initial price.  The entire line has seen an average price drop of 27.1% from initial pricing, and a 28.5% from peak pricing.  48” sets saw the biggest decrease, averaging 36.3% from peak, while 83” saw the least, dropping an average of 22.3% from peak, while 55”, 65”, and 77” saw price drops of 26.9%, 30.0%, and 25.7% respectively.  While OLED TVs are still generally more expensive than LCD or quantum dot enhanced LCD TVs, and still fall into the ‘premium TV’ category, they have become far more affordable this year than in the past, especially relative to their biggest competitor, LCD TVs.  We do note that as LCD TV panel prices decline, as they have been doing for the last two months, some of the relative price difference will be eaten away, but given that a considerable amount of high-priced TV panel inventory still exists in production or transport, we expect lower TV prices will take some time to appear in full stead.  In the interim OLED TV will have a good year.

There has been some focus on component price increases in South Korea recently, with graphics cards being singled out as one component seeing rapid price increases over the last few months.  Back in August we noted that the prices of graphics cards has fallen as China began restricting the mining of bitcoin, one of the primary demand drivers for graphics cards, and such cards had suddenly become available after being in short supply.  We went back to the same two cards that we used as examples in the 8/11/21 note to see how prices changed over the last 2 ½ months.  While China has virtually eliminated the big bitcoin farms across most of the country in their push to conserve power, as we have noted previously, bitcoin farmers have moved to other countries where power is both inexpensive and the regulatory climate is a bit more amenable to such non-essential industries.
In South Korea graphic card prices, based on 20 major graphics cards checked between August and the 2nd week in September, increased between 6% and 100% according to local tech press, while the four examples given in the graphic (Fig. 5) saw increases between 23.2% and 65.3%, with an average of 47.8%.  This compares to the two cards we used in our last check, which saw increases of 13.9% and 16.1% based on current prices, although when each of the two reached peak levels in mid-September, they were up 27.1% and 78.1% from our August check points, much closer to the increases seen in Korea.  It would seem that using the most current data here, which comes from 3rd party sellers on Amazon (AMZN) (Amazon does not have many cards directly available), we should expect some moderation to graphic card prices overseas.  That said, with the price of bitcoin nearing its all-time high, such a theory, based on what we have seen in the US, seems unlikely as the economics of bitcoin mining get better as the price/hash rises.  If you need a graphics card, despite the rise in prices, it would seem to be the time to buy, as odd as that appears.
 

​The Chinese trade press has been extolling the virtues of BOE’s (200725.CH) tacit acceptance into the Apple supply chain and the company’s dominance of the LCD panel space, as it has in the past, and while BOE does get closer to becoming a major supplier to Apple, the gist of some of the ‘glorious’ press is that BOE has also broken into the Samsung Electronics supply chain and is poised to ‘dominate the industry’ as it seeks to replace South Korean (and other) OLED panel producers that have been suppliers to Samsung in the past, particularly affiliate Samsung Display (pvt).
Various statements as to BOE supplying displays for the Samsung Galaxy M series, a low-end smartphone sold in the Mid-east and Asia carries some truth as far as our checks go, but as to whether they are the exclusive supplier (not likely), eliminating  Samsung Display as a supplier from this line, we cannot confirm.  Stories about BOE becoming a potential supplier to Samsung’s “A series” line, among the most popular of Samsung’s phones in terms of units, are also unconfirmed, but we expect much of the talk about BOE’s potential for supplanting Samsung’s typical OLED display suppliers, Samsung Display and LG Display (LPL), is likely coming from the potential approval of BOE into Apple’s iPhone supplier list, which is expected to receive final approval next month.
BOE has been supplying some displays to the iPhone supply chain, but has yet to become a primary supplier, although we do expect that to happen in 2022.  That said, the question remains as to what percentage of the display demand from the iPhone 13 and future series BOE will garner, something we have spoken about a number of times in the past.  Apple not only has display specs that are demanding, both from a technical standpoint and a capacity standpoint, but is very wary of jumping into new technology unless they are fully satisfied that suppliers can meet consistent quality standards.  This tends to categorize suppliers, even existing ones, as to what model’s displays they will produce, sometimes limiting a model to only one supplier if the capacity or quality is still a question.  BOE will have to prove to Apple that it can meet the same specs and volumes that both Samsung Display and LG Display produce in order to become a volume supplier in the same vein as the others, a task that will likely take a number of years.
As to BOE supplying OLED displays to Samsung Electronics, we see that as a somewhat different animal, given that Samsung Electronics has a vested interest in Samsung Display.  That does not mean, at least over the last few years, that Samsung would not use other display producers, and certainly has in the LCD space where a number of LCD suppliers, including BOE, have replaced Samsung Display in the large panel space, where SDC has reduced its production to almost nil.  Where the questions arise however is in the OLED space, where SDC is the leading supplier of flexible and rigid OLED displays for smartphones, and Samsung is their primary customer. 
Samsung Electronics does have to compete with other smartphone brands, especially Chinese brands, well known for producing smartphones that rival feature sets on flagship phones from Samsung.  This competition continues to push Samsung Electronics to find ways to cut costs, especially on low and mid-priced phones, where they face the most competition from Chinese brands.  Given that the display is the most costly single component of most smartphones, logic holds that reducing the cost of OLED displays is the focus of Samsung’s attention and while they are the parent of SDC, SDC is not usually the lowest cost producer.
This is both a function of production costs in Korea vs. those in China, and the fact that most Chinese panel producers are supported financially by the Chinese government through capital project and operating subsidies.  SDC also has the burden of maintaining profitability, especially in the OLED space given it waning LCD capacity, which is not the case for Chinese OLED producers, who have yet to turn profitable in the OLED display space on a yearly basis.  This leaves parent Samsung Electronics to push SDC for lower OLED panel prices, and what better incentive than to give some of its business to Chinese competitors, to make sure SDC understands that it must remain competitive with other OLED panel suppliers.
 We don’t doubt that Samsung Electronics will continue to use Chinese OLED display producers as leverage, encouraging them to continue to develop new products, and would increase usage of same if SDC does not respond in terms of price.  But in the long run, if Samsung Electronics is still going to maintain a smartphone business that is based on premium products, be they the traditional Galaxy S line or new foldables, they will be using SDC in as many instances as possible, and while Chinese OLED producers will make inroads, they will have a far more difficult time replacing SDC with Samsung than they might with Apple, where the brand has no vested interest.  JOHO.

​According to the local press in Ho Chi Minh City, a number of major CE companies located in or around areas affected by the recent COVID-19 outbreak in Vietnam, are expecting to resume full production by the end of November.  A number of these companies are located in Saigon Hi-Tech Park, about 10 miles from the center of Ho Chi Minh City, and is the home of the Vietnam operations of Intel (INTC), Jabil (JBL) and Air Liquide (AI.FP), and about 10 miles from Samsung Electronics (005930.KS) Vietnam plant.
 Locals indicate that many of the large plants in the Saigon Hi-Tech park are operating at ~70% capacity due to travel restrictions, but are expected to see full production within the next few weeks.  Samsung’s factory, which shuttered ~19% of its lines as workers at its main complex were reduced by more than half, and was providing local sleeping arrangements for workers to entice them to remain at the factory.  Samsung generated more than $56b in export sales last year and had been on a pace to exceed that this year, with the possibility still existing if they can resume full production quickly.
Ho Chi Minh City itself began to reopen on a conditional basis this month and has been seeing strong demand from consumers who have been under extended social distancing and quarantining.  However, with factories still operating at reduced rates, shortages have been seen in retail consumer electronics, even after a number of retailers had been building larger than usual inventories in anticipation of the increased demand.  Local CE retailers indicate that shortages continue with laptops and tablets, and even smartphones more recently, where Chinese smartphone brands are in shorter supply than those from Samsung and Apple (AAPL), due to power issues in parts of China.  In all cases however, supply does not meet demand.
One of the large retailers gave the example that they sell ~15,000 Samsung devices every day, but Samsung has been able to supply only 30,000 to 40,000 per week during the lockdown, and other retailers indicate that all iPhone models are in short supply, with iPhone 11 (released 9/2019!) deliveries delayed until next year and iPhone 13 (9//21) deliveries at ~50% of the order rate currently.  Smartphones priced below $265 are out of stock at most retailers and laptops in a similar price range, which are typically used for on-line learning, were sold out quickly when they appeared, as Ho Chi Minh City students will be studying on-line for at least the remainder of the year.
With Ho Chi Minh City representing ~80% of Vietnam’s COVID-19 cases as of last month, and fears that due to the exclusion of rapid test results in government figures, the number of cases during the outbreak peak were underreported, the city was on lockdown for roughly three months.  As of the beginning of October restaurants were able to serve take-out meals again and essential businesses were able to reopen.  Residents having at least one dose of vaccine within 14 days or having recovered from COVID-19 within the last 6 months were allowed to leave their houses, and while inner city checkpoints were being removed, security personnel are continuing to patrol the city and travelers must submit a request to the Transportation Department to enter.  All restrictions on construction projects, office parks, and export zones are also allowed to reopen, although indoor activities are limited to 10 people if unvaccinated and 70 if vaccinated and public transport will operate at 50% capacity, however bars, spas, and cinemas remain suspended.  Most travel guide services tell those entering the city to “remain cooperative if approached and questioned by law enforcement officers and make allowances for business disruptions” which seems to give a good indication as to how things are progressing in the city.

Displays are devices that rely on electronics to refresh the image on the screen fast enough that raid changes in the image do not appear ‘jerky’, leave ‘trails’, or ‘smudges’.  This is especially important when watching fast moving images, such as in gaming or sports, and in the past the electronics in most displays refreshed 60 times each second, which seems like it should be sufficient.  However as the quality of images increases under 4K/UHD, those potential artifacts become more obvious, giving smartphone display designers the task of improving those types of images.  In order to do so, some display producers have doubled the refresh rate so that the screen is completely redrawn twice as fast as before, at 120 Hz.  This means that the movement of an object across the screen will be redrawn twice as many times as before, filling in the potential spaces that might have caused blur or other artifacts at 60 Hz.
This is an ideal solution in that it directly addresses the problem, however it does come with a negative.  Since the electronics is now drawing the screen twice as often as before, it consumes more power, and in mobile devices this means it reduces the time between battery recharging.  There are tricks that can help, such as ‘adaptive refresh’, which looks at the resolution of each image and adapts the refresh rate to that resolution, meaning that a higher resolution image would refresh at 120 Hz, while a lower resolution image, such as a static one or a news feed, would refresh at a much lower rate.  By adapting to the image quality, the display can conserve power, rather than being at 120 Hz for all resolution images.
This is a big selling point for displays, especially smartphone displays, as increasing battery capacity (usually along with size) is a difficult function is compact smartphones, so any way in which a smartphone can increase the time before charging is a big plus to users.  While 120 Hz refresh and adaptive displays are available from a number of smartphone brands, along with squeezing in bigger batteries, Apple has been particularly enamored with the idea of 120 Hz displays, and has employed then m in the iPhone 13 Pro  and the Pro Max.  While Apple did not detail test results, we have just seen the results of a test of the iPhone Pro Max as to how it would perform against other similar type phones as to battery life and the results are positive.  Here are the top contenders according to Anandtech.com:

​All in, even with differences in battery size, it seems that Apple’s processor, which is responsible for sampling the images and setting the refresh rate, does a better job at power efficiency than others, and Apple will eventually convert all of its iPhone displays to LTPO backplane technology which will add to the display’s power efficiency, as Samsung has begun to do, but the Apple hardware, despite a 13.1% drop in battery life vs. operating only in the 60 Hz mode, has already offset much of the higher power draw.

Visionox (002387.CH), China’s 2nd largest small panel OLED producer (units) released cumulative results for the 9 months ending September 30, with the focus on the increasing production volumes at its Gen 5.5 fab in Kunshan (up 85% y/y) and its Gen 6 OLED fab in Gu’an (up135% y/y), generating operating income between 2.7b yuan ($~$420m US) and 2.8b yuan, of which ~96% is from OLED production, an increase of between 93% and 104% over last year.  The company goes on to cite how it has launched a new generation of under-screen cameras and displays using a 165 Hz refresh rate and has been supplying displays to a number of flagship Chinese smartphones and wearables, including those from Honor, ZTE (), Motorola (MSI) and Fitbit ().
Where things start to unravel is when they get down to net profit, which is expected to see a loss between 330m yuan (~$51.2m US) and 430m yuan (~$66.8m US), a substantial increase over last year’s 9 month loss of 119m yuan (~$18.5m US)., some of which is explained by the fact that the company is no longer providing ‘patent technology licensing, consulting and management services’ to its parent, which generated 578.9m yuan last year (~$90m US) and would not recur this year and that 550.1m yuan (~$85.5m) in subsidies received last year would be reduced, along with the inclusion of depreciation expenses for the Gu’an fab, which began production this year.
Visionox has been increasing shipments, almost meeting last year’s full unit volume in the first three quarters, but as each new fab opens to production, subsidies will decrease, depreciation will increase and filling fabs will become the primary goal, rather than increasing capacity share.  Visionox has stated that the current yield for flexible OLED is ~80%, but added that is for mature products, which means the ‘real’ yield is lower.  While we are skeptical that the company’s overall yield is ~80%, we do note that if that were to be the case, and that still generated a substantial operating loss, it gives us pause as to what might happen if the industry were to see a slowdown in small panel OLED production, even for a relatively short period of time.  Share is a good thing but profits are better.

The global population has faced some pretty serious epidemics over the last few hundred years, with biggies like Bubonic Plague in the mid 1300’s that took out between 30% and 60% of the European population, or the Spanish Flu of the early 1900’s that took out close to 100m.  HIV, still active since the 1980’s has taken over 36m lives, and our own generation’s COVID-19 has killed more than 4.5m and continues to do so across the globe, but we, as a society continue to survive despite these epidemics, yet there are some more subtle and perhaps even more insidious epidemics that afflict the global population at almost every level, and are supported by companies that generate trillions of dollars promoting such plagues, despite a level of addiction that continues to increase each year.
No, we are not talking about opioids, as that is a problem far beyond our area of expertise and scope, but one that afflicts consumers almost every hour of their waking lives and eats into the fabric of our society and lives a bit more each day.  Recent statistics on the use of mobile apps reveals that in 12 of the 16 markets shown below consumers spend more than 4 hours/day using mobile applications, and that number has increased from 8 of the 16 above 4 hours/day in just one quarter.  Assuming the average individual sleeps 7 hours a day, that comes to a staggering 24.7% of a US citizen’s time spent staring at a smartphone, while in Indonesia that number grows to 32.4%.
Rather than rant about how companies like Facebook (FB), Google (GOOG), and YouTube (GOOG) continue to work toward increasing that time so their user data becomes more valuable to those that want to sell you just about anything, we will let members of Congress embarrass themselves with their public display of their lack of knowledge concerning social media, so the question then becomes, what are we doing while we are staring at our smartphones?  We take the data one step further and break down the regions shown in Fig. 1 by the 5 most downloaded apps during the 3rd quarter. 

The obvious winner on a global scale is TikTok (pvt), which showed up in the top 5 in many of the major regions shown below.  Instagram (FB) was ranked second, followed by Facebook on a worldwide basis based on downloads, however in terms of spending, while TikTok still maintained the top position in 3Q, YouTube and Tinder (MTCH) were 2nd and 3rd.  Facebook continued to hold the number one position in active users, followed by WhatsApp Messenger(FB) and Instagram.

We break out the top 10 worldwide as to spending in the table below:

​It is hard to imagine that we spend so much time on our phones given that for those that are gainfully employed, the available time left, excluding sleep and work averages out to about 9 hours of ‘free time’.  For those in such a mode, 4.2 hours (US) would represent 46.7% of that free time spent on one’s phone, in theory.  There are times when our phones are used for work and other important communication, but given TikTok’s popularity, it would seem that much of that time is being idled away watching videos of anonymous folk doing odd things.  If that hasn’t changed the fabric of society, nothing will, but underlying it all is the need for content providers to hook you in to an ever increasing time on whatever application becomes tomorrow’s number one.  Sure, you can quit anytime, right?

​As we gather more data on 3Q OLED smartphone shipments, we get more of an understanding as to the discrepancies in such data between sources.  While we believe that in the case of LCD panels, where there are many variations, small panel OLED displays are less varied and should therefore be easier to track.  In theory that seems correct given that the distinct difference between rigid OLED and flexible OLED as to substrate should simplify calculations, as long as foldable OLED is included, but we see a much bigger difference between shipment estimates, both in the 3rd quarter and in previous quarters.  Last week we noted our expectations for 3Q small panel shipments, but feel investors would be better served with a range that would allow for some of the differences in estimates that we have found.
Based on that concept we offer slightly modified estimates for 3Q small panel OLED shipments:

• OLED smartphone panel shipments in 3Q – Between 160m and 165m units, which would be up between 23% and 25% q/q and between 14% and 31% y/y.
• Samsung Display (pvt) dominated small panel OLED shipments with between 62% and 64% of flexible panel shipments
• Samsung further dominated shipments for small panel rigid OLED rigid displays with a share between 83% and 86%.
• Apple’s (AAPL) portion of total small panel OLED shipments in 3Q was between 34% and 37%
• Apple’s portion of Samsung Display’s small panel flexible OLED shipments was between 65% and 68%.

Some of the biggest discrepancies between estimates were with 2020 quarterly small panel OLED shipments, where differences ranged between 0.5% and 14.6%, while this year the range was between 1.6% and 8.1%.  We expect the range between estimates for this year will expand a bit further as we access some of the more aggressive estimates from China, so we will continue to work with ranges, especially as smartphone brands adjust their full year smartphone shipment targets, but we expect the estimate differences, on a longer-term basis, to narrow in 2022.