​Florida Senator Marco Rubio and a number of other Republican senators called on President Biden to add Honor (pvt), the independent spin-off of Huawei’s (pvt) smartphone business, to the ‘entities’ list that would keep company’s in the US or those using US developed equipment from sourcing product to the Chinese company.    Rubio described Honor as an ‘arm’ of the Chinese government that is now able to access US technology that has been denied to Huawei.  With the spin-off of the Honor business, Huawei has stated that they have no financial or management influence over Honor, which has given the company the ability to access the Google App store and associated products, which opens the company’s products up to the world market, while Huawei remains unable to do so, which has severely limited its smartphone business.
Rubio’s letter goes further, stating that the Chinese government has been able to dodge a ‘critical American export control’, and by failing to act the US Department of Commerce is setting a dangerous precedent, ‘and communicating to adversaries that we lack the capacity or willpower to punish blatant financial engineering by an authoritarian regime.’  Last August a group of Republican Congressmen also called on the DoC to add Honor to the list, under the assumption that keeping Honor ‘unlisted’ would allow Huawei access to semiconductor foundries and equipment that has been restricted by the listing, although no proof of Huawei’s alleged access to the Honor supply chain has been given in either instance.
Honor might have caused this latest political diatribe by mentioning earlier this week that it had ‘succeeded in confirming cooperation with a number of supplier partners in the early stage” and that upcoming Honor 50 smartphones would include Google Mobile Services, the most onerous part of the Huawei ban.  This seemed to have attracted the attention of China hawks and put Honor back in their field of vision.  While Honor might find it necessary to announce its current independence from the Huawei ban, it might have served them better to wait until they were able to both secure substantial component inventory from foundries and to release at least one major product using Google services and letting the ‘chips’ fall where they may after that.  Now the increasing pressure to focus on China as an adversary will likely pull in any decision by the current administration and could end Honor’s elation over being able to release its first truly global smartphone.

​Yesterday we indicated that rumors were circulating that Apple (AAPL) was expected to cut orders for the iPhone 13 family by between 10% and 12% due to expected delays in components, particularly semiconductors.  We believe much of the speculation is based on delivery delays that have extended into November, feeding speculation that overall orders for this year will be reduced.  The good news is that thus far we have not heard of any suppliers that have received order reductions from Apple, and while rarely would that data be readily available, especially this early in the cycle, with the US press so focused on supply chain issues, that kind of chatter has a way of leaking out.
Many CE supply chain participants have indicated that they are a bit more cautious about 4Q than they were in 3Q, with some citing component issues, but logic holds that anyone watching panel prices has some indication that demand for TVs has been weak, and that demand for IT products has leveled off at the least.  Coupled with logistics issues and sporadic COVID-19 outbreaks in manufacturing hub cities, the prudent CEO/CFO would add a note of caution in anticipation of any of such factors increasing.  We focus attention on a daily basis to signs of changes in various points in the CE supply chain, and hopefully can spot deviations from current norms as they might happen, but we note that companies have been trying to be a bit more careful about leaks, product related or otherwise, and most suppliers would not risk losing Apple as a customer by slipping some order information to a blogger.  Assembling data from as many sources as possible seems to be a more realistic approach to us.

Item ‘finders’ or personal trackers are a handy item to have if you are one of those people that tends to lose things of value, and by value we mean things that are essential to life as we know it, like car keys, smartphones, and wallets, but Apple’s Air Tags and Samsung’s Smart Tags, while both will (eventually) work through UWB (Ultra-Wide Band) networks, they are proprietary to the operating system, meaning Air Tags will only work on Apple products and Smart Tags will only work on Galaxy (Samsung) devices.  But there is hope, again eventually, as the third supplier Tile (pvt) finders will work on both Android and iOS systems and has just announced that it has developed its own UWB enabled tracker, the Tile Ultra.  While the Ultra is not yet available (‘early next year’) it has the advantage over both competitors in not being dedicated, but will lack the vast network of users that the Apple and Samsung products have, limiting the device’s ability to be located by passing users unless they happen to running the Tile app.
This would make the Tile Ultra best for items that are used locally, meaning remote controls or similar items, while both the Apple and Samsung tags would be more effective for items that are carried into public places, although Tile says it has sold over 35m tags since inception.  (we expect only a percentage of the early devices are still in operation given the short-term batteries)  Tile does have an agreement with Amazon (AMZN) to give access to the company’s Amazon Sidewalk Bluetooth/900 MHz network, which would include other devices on the Sidewalk network acting as additional ‘points’ of discovery, so if you left your phone at a friend’s house who had a Ring () doorbell system, there is a chance that your phone would be identified by the network.
While each tracker has its plusses and minuses, potential users should evaluate the circumstances under which they are using the devices.  If they are constantly traveling in the US, the Apple network, with its millions of active users might make the most sense, while international travelers might rely more on the Samsung product, while Tile seems to be working towards making itself as agnostic as possible, which, in the final analysis, should be the determining factor, although the big marketing machines at Apple and Samsung do exert a lot of influence over consumer attitudes.  The one thing that is common to all trackers however is the need for security, as surreptitiously placing a tracker on a person or object would allow a stalker to track that person’s or object’s location down to an accuracy of ~16’.  All three tracker companies have their own version of security, but so far none are foolproof, so it is imperative to understand the balance between the merits of trackers and the pitfalls.  They will continue to get better but caveat emptor…
For more information on UWB tags see:
8/5/21                  Air Tag Tussle
4/2/21                  The Tags are Getting Close
1/18/21                 ​Lost in the Leaves

ToF technology is a way of using sensors to measure distance, a logical function for setting camera characteristics when taking photos or video, but the technology has seen its prospects change a number of times since it began to be used in smartphones in 2014 as the ‘phase detection/laser autofocus’ feature in the LG (066570.KS) G3 and appeared in the Blackberry (BB) PRIV smartphone in 2015, but interest waned until 2018 when a number of Chinese brands included the technology, with Samsung (005930.KS) taking up the TOF cause in 2019 with the Galaxy S and Note series, with it showing up even in Samsung’s lower priced A80 series.  Apple joined the TOF cadre in 2019, including it in the iPhone 12 Pro and Pro Max, and it seemed the technology was off to the races.
That optimism waned a bit when Samsung decided to drop the technology from its 2021 smartphone line, which was particularly unusual in that Samsung began producing its own TOF sensors in late 2020, and while others continued to build in TOF hardware and functionality, without the backing of smartphone giant Samsung, interest in TOF seems to have cooled a bit this year.  But why would Samsung drop the technology, especially given its ability to self-source and its 2 years of promotion with little explanation other than saying it did not spur developers to come up with applications that used the TOF data and that consumers did not seem to care if it was removed.
That said, we believe it was not that simple an explanation, as there is some nuance that separated Samsung’s TOF ‘flavor’ from the TOF used by Apple, and that difference resulted in relatively poor TOF performance on Samsung’s phones and better performance on others.  That nuance is in the two possible ways in what TOF can collect distance data.  In the ‘direct’ method, such as is used in Apple’s TOF, a laser is pulsed at intervals less than 5nsec.  That light, which is outside of the human visual range, bounces off objects and returns to the device to be captured by a SPAD (Single Photon Avalanche Diode) array.  Given the speed of light is a constant, the system can calculate the distance based on how long it took for the reflection to appear; simple math, right? ( L = c 2 φ ω = c 2 φT 2π ), but such systems need lots of pixels to ‘see’ the reflections and must process a considerable amount of data, although they are fast and are able to understand ‘echos’ that occur when the laser bounces off other objects on its way back to the device.
The ‘indirect’ method, the one championed by Samsung, is a bit more esoteric in that the laser sends out a continuous signal and the system measures the ‘phase’ difference between the laser signal and the return, with ‘phase’ meaning a point in each light wave’s cycle.

​This method has less computing demand, which should make the module smaller, a big factor in smartphones, but has more trouble with echoes, which might explain the complaints that we were able to dig up concerning the TOF sensors in the Samsung phones.  We believe that Samsung was unable to compete with ‘direct’ method TOF sensors and recognized that the extra cost of the TOF sensor and the poor results were just not worth the inclusion in 2021 models.
Direct TOF modules for Apple are supplied by LG Innotek (011070.KS) and are used in the iPhone and iPad lines, but recent information has indicated that LG Innotek is also supplying TOF sensors that are expected to be used in VR headsets from Apple and Microsoft (MSFT) next year, similar to the ones it supplies to the Oculus VR headset produced by Facebook (FB), with all based on sensor arrays produced by Sony (SNE), with whom Apple has an exclusive contract.  While Samsung is said to be developing its own direct TOF sensor, we expect it would have been difficult for Samsung to have justified buying direct TOF sensors from rival Sony when it was producing and promoting its own indirect TOF sensors, thus the abandonment of TOF in the Samsung 2021 smartphone line.  If Samsung is able to develop a competitive direct TOF sensor for the 2022 smartphone line, we could see a measured return to the technology for Samsung in 2022, while Apple and others continue to develop additional applications for the technology, pushing out into new products over the next two years.

China has power problems and the biggest cost of bitcoin mining is power.  In order to reduce power consumption China has essentially banned bitcoin mining across the country, forcing bitcoin mining organizations to move mining facilities to locations that are both amenable to mining itself and have exceptionally lower power costs.  Much of the equipment is transportable in that it is essentially servers with high capacity graphics cards that are used for performing complex calculations, and can be readily adaptable to server farms almost anywhere on the globe.
The portability of such equipment and mining itself can be seen in the two infographics below, with the first showing a global map of bitcoin mining power consumption in May of this year, with the darker colors indicating the most bitcoin power draw.  The second infographic shows the same map for the July period, where we note that China, dark brown in May, is devoid of bitcoin power consumption in July, and Fig. 6 shows how bitcoin energy consumption peaked in April, decreased quickly during the transition period and has begun to move back up as the miners relocated.
So where did all the bitcoin miners migrate to?  The US, which now makes up 35% of the bitcoin hash rate (roughly where China was earlier this year) is now the home to the most mining operations, with Kazakhstan (18.1%) and Russia (11.2%) in 2nd and 3rd place.  While you would never know such a trasition has taken place, China’s problem will eventually become ours, as bitcoin mining will continue to grow and capture more of the global power grid, with the result being the additional cost of power capacity being added to your utility bill, or power outages.  Perhaps a mandate from the government limiting bitcoin power consumption might be in the cards somewhere down the road, albeit a bit less stringent than China’s ‘all out’ decree, but the balance between making bitcoin miners wealthy and keeping the lights on seems an easy one to make.

​We have mentioned the expansion of OLED into notebooks and monitors often over the last year as Samsung Display (pvt) and parent Samsung Electronics (005930.KS) try to stimulate that business into one with dedicated capacity and high volume customers.  Both can see that the growth of OLED in the smartphone business, while robust in terms of units and share, will slow overall as penetration rates reach almost 60% next year and competition continues to increase, particularly from Chinese small panel OLED producers.  While the share for individual Chinese small panel OLED producers is relatively small compared to Samsung, China’s largest LCD producer BOE (200725.CH) has been relentless in pursuing Apple (AAPL) to enter their small panel OLED supply chain, and has recently been given preliminary status, and in the OLED wearables market, primarily watch displays, almost every OLED producer has a few offerings, including a number of producers that are passive matrix OLED display suppliers..
Given that Samsung Display is essentially out of the large panel OLED business currently, the logical extension of their OLED business would be into what would be called medium panel sizes, the home of notebooks, monitors and tablets, otherwise known as IT.  Samsung is the dominant producer in the OLED IT space, and at the distribution level faces competition from China’s Everdisplay (688538.CH) and Japan’s JOLED (pvt) (monitors), and in the tablet space comes up against BOE, Chinastar (pvt) and EDO, but Apple’s adoption of OLED display technology in the Apple Watch in 2016 and its full adoption of OLED across the iPhone line, lead many to believe Apple will continue to push OLED technology further up the product line into the iPad and eventually to the Mac line.  That said, Apple is certainly not one to rush into a technology change and rumors about plans for Apple’s continued display transition to OLED are fraught with delays, technical considerations, and capacity issues, so in the interim Samsung is the leading voice in pushing OLED further into the IT space.
2021 has been a good year for OLED laptops, albeit a good year (thus far) for laptops in general, but there are a number of notable brands, particularly Asus (2357.TT) and Lenovo (992.HK), that have been marketing OLED laptops, and to a lesser degree, with a number of brands offering OLED displays as an option in a number of products.  The biggest issue for OLEDs in laptops is price, although we expect to see a number of models fall below $1,000 before year end, as on a general basis OLED displays are more expensive than LCD displays, particularly for sizes where volumes are relatively low, however that gap has been narrowing as LCD panel prices have been increasing through much of this year.  Samsung is evaluating its expansion plans for medium size OLED panel capacity and could add Gen 6 or Gen 8 dedicated IT capacity that would help to lower the cost of OLED IT panels, with the biggest risk to that scenario being the rate of Apple’s adoption in products larger than smartphones. 
Samsung certainly has been known to build capacity in anticipation of market growth, and can absorb some of that potential capacity itself (expectations are for 6m to 6.5m units this year and 10m in 2022, with 80% going to laptops this year), but Apple is not going to make a large jump until it is assured that its specifications can be met, and that could take time.  LG Display (LPL) is also a supplier of OLED displays for the iPhone and has built out dedicated capacity for Apple in the past, so there is competition for Samsung right from the start, but Samsung’s massive promotion machine seems to have been able to gain traction this year, and we expect will be working at full steam as we get closer to CES 2022.  There are competing LCD technologies, particularly quantum dot films used to enhance LCD displays and potentially Mini-LEDs, but Samsung is a leader in the QD space and can offer a wide variety of IT products that will satisfy almost any user without having to take a singular stance on any one technology.  Sometimes its good to be Samsung when you want something to be noticed.

More on OLED Laptops:
http://scmr-llc.com/blog/oled-laptops
http://scmr-llc.com/blog/notebook-whos-who
http://scmr-llc.com/blog/the-price-of-an-oled-notebook
​

​With the amount of uncertainty facing the CE space, the press has almost infinite grist for speculation.  Cuts in Apple’s orders for the iPhone 13 family are the latest, likely an outgrowth of the delays seen in receiving various iPhone models after ordering and the effects of power limitations across the Chinese supply chain.   Taking into consideration those factors, along with well-known distribution and logistics issues, such speculation draws eyeballs.
There are delivery delays with the iPhone 13 and currently there is no in-store pickup available in the US, with today’s delivery wait times (ordered today) being 12 to 15 days for the iPhone 13 and the iPhone Mini, and 30 to 38 days for the iPhone 13 Pro & Pro Max models (NY delivery).  These delivery dates have been increasing since the initial announcement, although they can vary based on location, color and memory configuration.  While Apple might have reduced its orders from assemblers a bit for the 2021 year (rumors are for between 10% and 12% reductions), those units are more likely pushed into 2022 rather than cancelled as it is still too early in the iPhone 13 family sell cycle for Apple to be cutting 2022 projections.  Should the limiting factors above begin to abate in early 2022, the iPhone 13 family could see a bit of a boost, but that is still a lot of ‘ifs’ so for the time being, we are going to assume that any potential order pushouts will reduce 2022 orders by a like amount, leaving the full year total for 2022 unchanged.

​Samsung (005730.KS) continues to play with its Mini-LED/QD TV pricing, almost on a weekly basis, and while two of the 36 sets in the 2021 Mini-LED/QD or QD only line-up are at their highest price point since release, 23 are at their lowest price point, with all 8K Mini-LED/QD sets at their lowest price points.  The biggest changes from our last pricing (2 weeks ago) show up in the same 8K Mini-LED/QD group, where the average price drop (wk/wk) is $400, with those sets down 25.3% from their original price on average, however as the largest size (85”) set has changed little in price over the last month, the two other sizes are down 29.3% from their original price.
A number of the QD only sets also moved considerably over the last two weeks, with one model (75QA) dropping from $2,700 to $1,900, an almost 30% discount, while most other 4K Mini-LED/QD and QD only sets are down from their original prices between the high teens and low 20% range.  While all TV brands play with TV pricing, Samsung seems to be far more willing to offer discounts on this year’s line, particularly with Mini-LED/QD sets.  While taking advantage of a particular bi-weekly change might get you some short-term savings, the trend has been downward, which will likely continue for the rest of the year.

​Late last month we noted that Vietnam, the home of a number of large CE assembly complexes, was hit by a serious COVID-19 outbreak and had limited travel in a number of major cities and regions to contain the spreading infection.  In that note a survey taken by the American Chamber of Commerce – Vietnam had indicated that by August 23, 13% of businesses had ceased operations or were operation with a skeleton crew to keep the lights on, while another 36% had reduced operations by at least 50%, a big jump from a previous survey only 20 days earlier, where only 8% had ceased operations and 23% had reduced operations by at least 50%.
At that time the government of Vietnam had implemented a “3 on Site” model a month earlier, which involves eating, sleeping, and working without leaving the factory site, however as the outbreak became worse, particularly in the more populous southern provinces, the wisdom of such a policy was questioned and suspended in Ho Chi Minh City where over 3,700 businesses had spent considerable sums to implement the practice.  The Vietnam government recently lifted such measures and travel restrictions in Ho Chi Minh City and nearby villages, allowing those who had been unable to travel to once again have the option to leave the city and return home after months of ‘artificial’ confinement. 
While this should have had the effect of relieving some pressure on commerce in the city, it had the opposite effect, with an estimated 2m+ workers leaving the city and returning to their home towns, leaving factories unable to fill production lines with workers.  In Ho Chi Minh City it is estimated that over 12,000 factories have suspended operations, with most being mobile phone, semiconductor, or electronics firms, and more than 40,000 have suspended operations across the country, worsening delivery schedules that had already been delayed during the summer.  The fear now is that it will be difficult for companies in Vietnam’s cities to attract workers back to the factories, with them now fearing that another outbreak will cause them to lose their jobs and be unable to return home.  Whether they are able to find work outside of the cities at a pay rate comparable to what they were being paid in the city remains a question, but the initial reaction of workers who had been stranded in the city was to get out as quickly as possible.
Again, with semiconductor shortages still a factor, cargo ships stacked up in harbors, and trucking firms desperate for drivers, longer assembly times seem just another convenience that will have to be faced during the holidays this year, along with higher prices, but the CE space seems to have reached a point where overall demand had hit a barrier, be it price or availability, and CE companies are throttling back on their expectations for the holiday season.  While that will do little in the near term, if demand remains slow through Chinese New Year (Feb 1, 2022), there is the possibility that some CE price deflation could occur in 1H, leading to a better 2H ’22.  Semiconductors will be the key however given the expense and long lead times for capacity expansion, but a broad slowdown in demand could ease those shortages a bit, especially at the more mature nodes.  We can always hope.
 

​LG Electronics (066570.KS) released preliminary 3Q results of 18.8t won ($15.7b US) in sales, up 9.8% q/q and up 22% y/y, above the 18.3t consensus, while operating profit is expected to be 540.7b won ($34m), which includes a 480b won provision for issues relating to the Chevy Bolt EV recall.  The preliminary results reflect the termination of the company’s mobile business at the end of July as a discontinued operation.  On the surface, without the provision, operating income would be ~1.02t won $852.5m US), a bit below consensus of 1.1t won, but we reserve judgement until we see if there were any other provisions that might have affected operating income. 
While the company gives no segment detail until the full release later this month, expectations are that the home appliance business drove sales and profits along with strong OLED TV sales while the automotive group is still facing shortages and will likely show a loss, as will the IT device segment, which is comprised of the company’s remaining mobile device business, solar, and robotics.  While some remain optimistic about 4Q, the weakness in TV and more recently notebook demand looms over expectations for higher 4Q profitability.  More to come after the full release.