​Simply put, Apple (AAPL) has very stringent rules as to components and suppliers and maintains a list that can be the difference between a good and a bad year for suppliers. The most current list, which was recently updated, added seven Taiwanese companies while removing six, added four Japanese suppliers while removing five, one South Korean company was added, and two US companies were added while two removed.  While the list covers Apple’s suppliers primarily for 2021, the list is updated periodically.  Here are a few of those public companies that have been added and removed.  The full list is here.
Adds:

• Taiwan Surface Mount Technology – 6278.TT
• Wingtech – 600745.CH
• LX Semiconductor – 108320.KS
• Toyoda Gosei – 7282.JP
• Lattice Semiconductor – LSCC
• Power Integration –POWI

Removals:

• Jones Tec PLC – 300684.CH
• Auras technology 3324.TT
• Primax Electronics – 4915.TT
• Maxim Integrated Circuits – ADI
• Sumida Corp – 6817.JP
• TK Group – 2283.HK

 
 

​Chinastar (pvt), a subsidiary of TCL (000100.CH), celebrated the opening of its T9 LCD display fab in Guangzhou, China last week, with considerable fanfare and the usual ‘glorious’ description of how the new fab, along with Chinastar’s T8 OLED fab that is under construction, will push Guangzhou to become the display capital of the world, generating over $35b US, up from $25.3b that was generated in 2019[1].  The T9 fab however, will not be in mass production until 3Q ’23, running what we expect to be two 30,000 Gen 8.6 sheet/month lines at the onset.  Phase two of the project, another two 30,000 sheet/month lines are expected to become producers in mid to late 2024, while plans for phase 3, another two 30,000 sheet/month lines are a bit too far out for speculation.
The T9 fab will be initially producing IT panels, automotive displays, and PID (public information displays), but is also expected to, at some point, incorporate an ink-jet printing line, along with the T8 fab.  We expect the IJP line will be used for Mini/Micro-LED products at T9, while for OLED materials at T8, although actual IJP based displays at Chinastar are still at the technical demo stage.  Both fabs are expected to be producing IGZO backplanes for the displays they produce and the T9 fab, which is expected to cost upwards of $5b US, will have a module production facility in the complex to take the open cell panels and create display modules that can be sold to OEMs..
Note that Figure 1 shows Chinastar’s large panel sales and Gen 8+ capacity (dotted line), with large panel LCD industry sales scaled to match Chinastar’s January 2019 sales.  Chinastar’s growth through 2021 has been based on the company’s ability to fully utilize the new capacity it has added over that time period, however since the beginning of the year sales have declined rapidly as utilization rates for existing Gen 8+ fabs declined.  The industry has seen sales for large panel LCD displays decline by 32.3% since the end of 2021 while Chinastar has seen sales decline 39.3% over the same period.
While the celebration ahead of actual production is typical, given the current circumstances in the display space, the addition of new LCD capacity, especially Gen 8 type capacity is of little use to an industry that is facing low utilization rates at many Gen 8 and Gen 10 fabs due to weak demand.  Chinastar, now the 2nd largest LCD panel producer in China (19.3% sales share) and the 5th largest (sales) globally (9.3% global sales share) as of August of this year, so we would expect to see sales continue to increase next year as the T9 fab begins production.  That said, a continuation of weak overall display demand next year, T9 could prove to be a significant burden on the company as it will be difficult to fil the new lines along with added depreciation.  Under that scenario, we would expect the phase 2 schedule to be slowed, but with a year between now and the planned phase 2 opening date there are a lot of parameters that could change.


[1] According to Guangzhou Bureau of Industry & Information Technology.

WIPO (The World Intellectual Property Organization) is a body that represents 77 member nations, including China, the US, and Russia, that creates IP policy under which its members are supposed to operate and maintains an IP database for many of the members that do not have a substantial IP system.  While policy still varies from country to country, there is a topic that has become a talking point for the IP world and that is artificial intelligence.  “The Next Rembrandt”, a portrait created by an AI system that sampled 168,263 Rembrandt painting fragments coupled with a facial recognition system or Google’s GOOG) Deep Mind AI system (WaveNet) that has been used to create short snippets of “Chopin-like” music based on millions of Chopin samples, are bringing up questions as to ownership of such IP, and that creates considerable controversy, but it goes much further.

​Things get really confusing when the AI itself is the applicant for its own ‘created’ works and while discussions at WIPO and other IP venues continue, it has been up to the courts in each country to rule on whether such applications are valid.  AI developer Steven Taylor submitted an application to 16 countries last year with the inventor’s name “DABUS”.  He had no knowledge of the devices described in the application and claimed that DABUS had created two inventions after developing the general knowledge to devise such items.  The Korean Intellectual Property Office asked Mr. Taylor to amend the application using a natural person as the inventor, however Mr. Taylor did not make such a change, and the application was rejected.
The basis for the rejection was that patent law and precedents state that only ‘natural persons’ may be inventors, with a number of countries, including the US, Germany and the UK using this as a guideline for applications, although a lower court in Australia recognized AI as an inventor last year, although it was later overturned  by a higher court.  A conference held late last year  that represented seven patent offices (including the US, China, and Europe) came to the conclusion that those countries have not yet reached the level of technological sophistication that would allow an AI system to ‘invent’ without human intervention and therefore could not consider an AI as a natural person/inventor, but as AI systems become more refined and make an increasing number of decisions on their own, the definition of natural person does not seem to meet the necessary level of breadth that is needed in such cases.
In most instances where such decisions have to be made, the application is either denied or is attributed to the developer of the software that is the basis for the AI creation[1], but copywriting of works generated by AI does not seem to have been specifically prohibited, although there are many countries, including the US, that specify a copyright must be created by a human being, or as US case law[2] stated it, “…the fruits of intellectual labor that are founded in the creative powers of the mind”.  Hong Kong goes in the other direction, along with India, Ireland and New Zealand, and the UK, based on the UK’s Copyright, Designs, and Patents Act, which states: In the case of a literary, dramatic, musical or artistic work which is computer-generated, the author shall be taken to be the person by whom the arrangements necessary for the creation of the work are undertaken”.
But referring the patent back to the software ‘s author would be the same as assigning a patent to the actual writer of the patent, not the one who came up with the invention, and call into question an almost infinite number of semiconductor patents that were designed on software developed by a relatively small number of companies.  Should all of those semiconductors be the property of the companies that developed the design software?  It’s not a question we can answer and one that will get harder to answer as AI systems become more able to make basic decisions on their own. The underlying program that runs the basic functions of the AI are the framework under which the system runs but that framework allows an increasing amount of decisions to be made by the system itself as it learns.  There will be a point at which AI systems can get close to synthesizing human thought or creativity, at which point the question becomes far more difficult to answer, but there will always be the case that the software is the basis for the higher level AI decisions or creativity, which would give credence to the ‘human only’ ideology.


[1] Guadamuz, Andreas. “Artificial Intelligence and Copyright.” WIPO MAgazine, May 2017.

[2] Feist Publications v Rural Telephone Service Company, Inc. 499 U.S. 340 (1991))