Yesterday we noted the panel price changes that have been taking place across the display industry this year.  Today we look at both how those panel prices have affected sales and shipments and how that sets up possible scenarios for 2022.  Fig. 1 shows the relationship between large panel display industry sales and aggregate large panel prices[1], which track quite closely over the last few years, with the January/February period each year being the most out of sync, due to the Chinese New Year Holiday.  As large panel prices began to rise in 1Q 2020, sales increased rapidly, peaking in July of this year, and began to decline as aggregate large panel prices declined.
Fig. 2 shows the same relationship between large panel industry sales but substitutes TV panel process for an aggregated overall price.  Industry sales can be seen beginning to decline in July, but at a slower rate than the decline in TV panel prices.  Fig. 3, which shows the relationship between large panel industry sales and IT panel prices, explains why the decline in industry sales is not declining as quickly as TV panel prices, as the slower decline in IT panel prices is acting as a buffer, but as we noted yesterday, also increases the industry’s sensitivity to IT panel prices.  To confirm that conclusion, we show Figs. 4 – 6, which show the relationship between large panel industry sales and large panel shipments, TV panel shipments, and IT panel shipments respectively.  With both TV and IT shipments relatively stable, the increase and decrease seen in industry sales over the last two years comes from price increases rather than variability in unit demand, with industry sales now more dependent on stable IT panel prices.
 


[1] While we aggregate all four panel types, creating a combined dollar value, it is a reference number only.

​More directly, we can use the same panel price data to compare against individual panel producers to see how sensitive each are to TV and IT panel price changes.  We note that there are certain exceptions to the data, as capacity expansion at some of the Chinese producers has a significant influence on sales, above and beyond panel prices, while the opposite is the case for South Korean panel producers, particularly Samsung Display (pvt), who have been pointedly reducing their large panel capacity. We note that Fig. 7 – Fig 13 show large panel sales only; devices below 9” are not included in totals.
AU Optronics (2409.TT) and Innolux (3481.TT) are both Taiwan based panel producers with relatively stable and mature capacity, however AUO has been shifting capacity from TV panels to IT panels, particularly in 3Q of this year, when the share of AUO’s sales from TV panels declined from 26% to 22% and panel sizes between 10” and 20” increased from 37% to 42% of sales, and while AUO’s sales have been declining since July, they have been less affected by the steep decline in TV panel prices.  Innolux however saw a greater share of sales from TV panels (32%) in 3Q and saw a larger drop in overall sales as a result, pointing to a higher dependence on TV panel prices.
LG Display (LPL) and Samsung Display are both reducing large panel LCD capacity on an overall basis and therefore have a lessening dependence on both TV and IT panel pricing.  LG Display (Fig. 9) generated 32% of sales in 3Q from TV panel shipments but that also includes OLED TV panels, which carry a higher ASP than LCD panels and would offset declining LCD TV panel production and lower TV panel prices, leaving LG Display with stable LCD sales for the latter half of this year.  Samsung Display (Fig. 10) has been more aggressive in shuttering its large panel LCD production, maintaining only one large panel LCD fab at the request of parent Samsung Electronics (005930.KS) and shifting much of that idled capacity to small panel OLED production and its new QD/OLED line.  While LCD large panel sales are much lower than last year, the lack of exposure to large panel LCD price decreases has helped to maintain large panel sales at a stable level for 2H ’21, especially as they are producing almost only for a dedicated customer, Samsung Electronics.

Chinese panel producers are a different breed when it comes to large panel LCD production as they have been increasing large panel LCD capacity at a rate of over 30% this year.  This makes the charts a bit more difficult to read, but even BOE (200725.CH), the largest of the Chinese LCD panel producers, saw a moderate decrease in sales over the last few months, a result of its shift away from TV panel production, while Chinastar (pvt) was a bit more affected by the drop in TV panel prices, as they have been a primary source for parent TCL (000100.CH), who has been quite aggressive in developing its TV set business, especially in the US.   Chinese producer HKC (0248.HK) has been ramping capacity, which we believe obscures the effect of large panel price reductions, and Sharp (6753.JP), owned by Foxconn (2354.TT), saw a big jump in sales in September but a big drop the next month as TV panel prices continued to decline.
The data points to an increasing dependence on IT panel prices for many of the major LCD panel producers, and while TV panel prices continue to decline, we expect less pressure from those price declines and an increased sensitivity to IT panel prices.  With the influence of the Omicron variant of COVID-19, we expect some renewed interest in notebook demand, as student laptop programs that had been winding down now look to potentially extend into 2022, which would keep IT panel demand higher than expectations, but if the variant proves less contagious or limited by current vaccines, IT panel prices would continue to slowly decline.  We don’t expect a rapid drop off in IT panel prices, such as was seen with TV panels, but the increased dependence on IT panels makes even relatively small price declines more troubling.  The ideal scenario for panel producers would be for stable IT panel prices and slowly increasing TV panel demand, a result of lower TV panel prices passing through the ecosystem, but we expect that is a lot to hope for given the unusually large number of variables the display industry faces again in 2022.

​Huawe (pvt), whose smartphone business has been devastated by US trade sanctions, is still hoping to regain some ground in the global smartphone market and to that end is preparing to release their next foldable iteration, with a design similar to Samsung’s Z Flip line.  The new foldable, tentatively named the Mate V, would be the fourth foldable for the company after the Mate X (11/2019), the Mate Xs (3/2020) and the Mate X2 (2/2021), none of which have been ultimately successful.  As new leaks and renders are beginning to appear, it seems that Huawei has moved from the full-sized foldable to the pocket-size foldable that Samsung and Motorola (MSI) have championed.
A number of questions remain about the Huawei device however, and while some are excited about the new hinge system that Huawei has developed, we wonder how the company will attempt to convince those outside of China that such a phone can compete with Samsung’s Z-Flip, which runs a Qualcomm (QCOM) Snapdragon 888 5G Chipset produced on a 5nm node and runs on Android 11, while the Huawei phone is still expected to have no Google GOOG) Play services that limits its ability to be sold outside of China.  We also wonder what processor will be used in the Mate V, as Huawei has limited or no access to 5nm nodes, and while this might be an issue for gamers, who demand the highest performing CPU, it will be more of a marketing issue for Huawei, having to convince buyers that the device can perform as well as those produced at 5nm.
There is also a question as to the size of the secondary screen, which is still in question.  As this style foldable is a small device when closed, the secondary screen is more a message display than one that will be used for movies or other media.  The Samsung Z Flip 3 has a 1.9” secondary screen, so the Huawei device should have something close to that size, but questions remain as to whether it will have any secondary screen or a 1.35” display that Huawei has specified in patents.  As Samsung is selling the Z Flip 3 for $899 (128GB) and throwing in a pair of Galaxy Buds2 ($149 list), Huawei will need to be competitive just to stay in the ball game.  Hopefully they have been able to cut hinge costs and get a local OLED panel supplier to give them a good price for the foldable display, but it is going to be an uphill battle unless they have some featured ‘surprise’ built into the device.  We will have to wait until January (CES) or February (Mobile World Congress) to get full details, but we are keeping expectations low, especially with the Google Pixel Fold, the company’s first foldable, also expected around the same time.

​Samsung Electronics has asked Samsung Display and AU Optronics to develop a 12.7” TFT module for its micro-LED TVs.  Not to be confused with its Mini-LED TVs, the Micro-LED line, which was originally designed for commercial installations, is built form modules that can be attached to form a seamless display.  With each sub-pixel a single LED, a 4K display will require 24.88m LEDs, all of which need to be powered and controlled by a TFT (Thin-film Transistor) circuit.  Since the distance between the LEDs (pixel pitch) is high enough that Samsung was able to build the TFT on a PCB board, that has been the way the company has been producing modules in the past, however as the pitch gets smaller and the resolution increases, such as in 8K resolution, it becomes difficult to produce the control circuitry using the same TFT technology used for smartphone displays.
The complexity of a TFT circuit using LTPS (Low Temperature Poly-Silicon) on Gen 6 is a 12 mask process and the cost of the equivalent for Samsung’s Micro-LED circuit is considerably more (24 masks).  The 89” model that Samsung is expected to release next year will need 49 12.7” modules, the cost of such ‘TV sets’ will be quite high, high enough that Samsung is expected to cancel plans for smaller models (70”) as the competition from OLED, Quantum Dot, and Mini-LED TVs at that size would make the high cost unmarketable.  At sizes above 80”, the competition falls away, giving some room for the high cost of Samsung’s TFT based Micro-LED TVs to garner some sales.  From a technical perspective moving away from PCB based modules is a positive but it will take lots of unit volume to scale down the cost of the TFT (along with other issues), so we are expecting little from Micro-LED TVs in 2022.

November panel prices came in a bit worse than expected, continuing the downward trend seen over the last three months for most display types.  While some had expected a more stable November and December, based on the data, the rate of decline increased for monitors and notebooks, with TV panel pricing declining at a lesser rate than October, but still at an extremely high monthly rate (-6.7%).  Typical (5 year average) declines for TV panels in November have been -1.0% and +0.1% for December, with Monitors typically -1.0% and -0.7%, and Notebook typically +0.1% and +0.1% for the last two months of the year.

Most important for the TV space is where TV panel prices are relative to the highs and lows seen over the last two years, as many panel producers still have a large portion of their capacity allocated to such panels, representing a sizable chunk of sales dollars.  While Fig. 1 gives some indication as to the TV panel price declines seen over the last few months (the thin line below each plot represents the low point), the table, particularly the column indicating the percentage remaining between the current price and the lowest TV panel price point, is the most critical, as many panel producers were operating at or below cash costs for such panels when those lows were set.  Continued TV panel declines, even at a slower rate, would push TV panel production into the red for some producers.  Details on how panel pricing has affected specific panel producers tomorrow.
From the perspective of TV set producers, TV panel price decreases are a godsend, although lower TV panel prices will take some time to filter through TV panel and set inventory.  TV set demand should see a boost from lower set prices during the next few quarters but the specter of silicon component shortages still plays into volatility at that level.  Consumers will have quite an array of different types of TV sets to choose from in 2022 and set brands will do everything possible to keep that product differentiation producing premium prices.  With generic LCD, LCD with Quantum Dots, LCD with Mini-LEDs and Quantum Dots, OLED TV, and soon Quantum Dot/OLED sets, there will be considerable competition in the premium TV market.  As always TV brands are expecting a boost in sales due to the 2022 Olympics (2/4/2022) and FIFA World Cup (11/21/2022), but there are a lot of moving parts to the TV market next year and fears over the new COVID-19 variant go toward continued uncertainty, which leads us to expect little change toward Chinese New Year (2/1/2022).  

On the positive side, IT products (Monitors, Notebooks, and Tablets) still remain substantially above lows, with all three panel categories within 15% of their peak panel prices.  While TV panel prices are a sensitive point, the movement in IT panel prices is now the focus, given the dependence on those panel products as the major component of panel producer sales and profitability, and while the rate of change over the last three months has been moderate, Fig. 2 and Fig. 3 show the trend has turned negative for such panels.  While the monthly declines are small compared to the TV declines seen over the last few months, it is essential that panel producers are able to offset the declines in TV panel prices with IT panel stability, or they will be facing a 2022 scenario that returns some to an unprofitable status.

The CEO of Samsung Display (pvt) spent some time with the company’s executives and employees discussing the company’s achievements and future plans, during which he gave some specifics as to the status of the company’s QD/OLED display project.  He indicated that mass production was to begin at the end of this month, with 55” and 65” displays, but also a 34” monitor, which was a bit unexpected. Since the production fab is a Gen 8.5 line, 55” panels are quite efficiently produced, while 65” panels less so, but the fab is said to be using an MMG process, which allows for different size panels to be produced from a single Gen 8.5 substrate.  The 34” panel size would increase the efficiency of the less efficient panel size production.
Yield, at the initial production point was ~33%, which is to be expected given both the process and the fab are new.  The utilization is expected to increase as production ramps, which should increase yield in the short term according to the company.  The fab, which is Asan, South Korea, has a maximum capacity of 30,000 sheets/month when running at full utilization.  As we have noted previously, Samsung is expected to show at least a prototype at CES 2022 in January, although no formal release date for the actual product has been set.  SDC has been sampling product to parent Samsung Electronics, and to Sony (SNE), both of whom are expected to release QD/OLED product in 2022.

Simply put, there were only two special deals offered by Samsung (005930.KS) for their 2021 Mini-LED/QD and QD only TVs.  Based on prices tallied on 11/9/21, again on Black Friday, and today (Cyber-Monday), prices on all the TVs in the Mini-LED/QD and QD only lines, which includes sets from 98” to 32” and between $15,000 and $400, differed only on Samsung’s 43” 4Q QD TV (60A), which dropped from $600 to $500 and the similar 32” QD only model, which dropped from $450 to $400.  Other than those two changes at the very bottom of the line, prices remained the same as they were pre-holiday, other than one model, an 85” 4K QD set that increased in price by $100.
Of the 35 TV sets in our survey, 33 are still at their lowest price point since they were introduced in late May of this year.  As the charts are almost the same as our last posting, we will show the initial price, the current value, the change, and the corresponding value/in2 of the Samsung Mini-LED/QD and QD only TV line in the table below.  We note the 98” 90A ($15,000) is essentially an ‘on order’ set and the 90A 43” ($1,300) is in short supply and is not available in all regions.  We have highlighted the best ‘value’ (cost/in2) in each category.

​Semiconductor Manufacturing International Corp (688981.CH), aka SMIC, is China’s largest semiconductor foundry, with 200mm and 300mm lines in 4 locations on the Mainland, and capacity for almost 400,000 wpm (including lines under construction).  The company, which has been running at near full utilization rates, has become profitable this year, hitting company records in 3Q, but has been unable to compete with foundries outside of China due to trade restrictions placed on the company by the US.  Such restrictions have limited the software and hardware needed to produce at nodes at or below 10nm, with only 5.6% of sales at nodes between 11nm and 13nm.  While this still allows SMIC to produce a wide variety of products, it keeps them out of competition with Taiwan Semi (TSM) and Samsung, who are able to produce at nodes down to 4nm.  SMICs formerly largest customer Huawei (pvt), also on the US trade sanction list, is unable to rely on SMIC to produce competitive APs for its smartphones, and has seen its smartphone business shrink considerably.
SMIC itself (SMIC & SMIC Holdings) are the primary shareholders of the company, holding 77% of the company’s equity, along with the Shenzhen Reinvestment Group, an organization run by the Asset Supervision & Administration Commission, a State-owned entity, but SMIC has decided to transfer a 22% stake in the company to the National Integrated Circuit Fund II, an investment group that was formed in 2019 to fund the country’s semiconductor industry.  The fund has 27 investors, 19 individuals with holdings under 7%, but the largest investors are China’s Ministry of Finance (22%), the China Development Bank (10.8%) and a number of provincial and city owned investment groups, including China’s National Tobacco Corp.  While SMIC itself will still have a controlling interest in the company, state-owned groups will now hold 45% of the equity, up from 22%.
While the rational for the transfer is given as a way for the company to access additional capital in the future, it seems an odd time in the company’s history to be giving away the company’s new positive performance, at least from the perspective of those used to public sector companies in democratic or quasi-democratic countries, but we understand that since SMIC is already earmarked by the US government as a company likely to aid the Chinese military,  it seems the state government sees little reason not to take a bigger role in SMIC’s future.    Whether the equity transfer will actually accomplish anything for SMIC in the long run remains to be seen, but when the state makes a request in China, it isn’t really a request, especially after much of the company’s early funding came from state capital.

​NCT Marketing (pvt) is a marketing consulting company in South Korea, whose experts are given hip sounding English names like Rosie (aka Hyun-Jung Park), Ryan (aka Yun-Ho Maeng), and B.I.G (aka Challenger, the office pup) and cool quotes on the website (still under construction)  such as “Users leave clues”, “Talk is Cheap. Show me the data.”, and “When I smell it, I challenge myself endlessly, run endlessly” (B.I.G’s quote).  They list companies such as Heineken (HEIA.NA), Hyundai Card (005380.KS), and Save the Children (pvt) as clients, and map out a playbook complete with “AI”, Neural Network”, and what they call their “Get Shit Done” (Their words) attitude, with the company’s NCT moniker meaning “Notorious Challenge Tribe”.
But what really caught our attention is something they have created called “Second Seoul”, which is a virtual real estate transaction platform, where subscribers that are qualified can purchase Seoul real estate in the virtual world, aka the Meta-Verse.  The transactions are made using NFT’s (Non-Fungible Tokens) with the first 69,300 virtual tiles (see Fig. 4) selling out in 24 hours.  An addition 50,000 tiles were added, with the site having to limit the number of applications to 100 for each real estate tile, and we note that the site has not yet officially opened (expected in December), at which point the first 100 applicants will be granted virtual real estate equal to 18 pyeong (equal to ~648 ft2), with the next 900 subscribers having to go through a lottery for ownership.
NBT Marketing is actually a wholly-owned subsidiary of a company called NBT (236810.KS) that is known for its ‘Cash Slide’ app that provides cash back on purchases made through the application, in addition to those credit cards might provide, but marketing seems a bit less lucrative than selling real estate in a virtual world.  Of course, using NFTs ‘guarantees’ your ownership of your little chunk of Korean real estate, even though it exists only in the Metaverse, but “Second Seoul” is chump change when compared to Earth 2 (pvt), which divides the globe into 10m x 10m chunks and offers them for sale, virtually of course.  You can buy a tile (100 m2) down near Battery Park for $63,971 or in Greenland for $1.13 and you can trade those properties as values change.  That said, even if you own that spot in virtual Battery Park, we doubt the authorities would see fit to let you build a nice house or even sit for more than an few hours in the real world, but Earth2 does give anyone who refers the site a 5% commission, so bloggers love to promote it, even though they get paid in virtual (Earth2) currency, which is easy to put in but hard to get out, a technique championed by these fellows.

​So the entire objective here, and this is actually a preliminary stage to the real Metaverse, is to generate both fees and information, while you feel that you are now a real estate mogul, owning a portfolio of lucrative locations across the globe for the purpose of eventually building a virtual world that mimics those locations.  But we have questions about such ownership.  Does it mean that another person cannot build a virtual world that looks exactly like the location you own, or can a user add a little nuance that makes it different from your ‘wholly-owned’ chunk of the virtual world?  If I want to use or live-in your virtual chunk, do I have to pay rent?  When will users actually build out their ‘plots’?  Can they leave them undeveloped and if so can I build a virtual store on their property?
Before we go trying to find answers to these and the hundreds of other questions that the Metaverse brings up, we feel it is important to stay grounded in that the Metaverse is just a collection of AR/VR oriented websites.  Instead of being projected on a flat screen, such as a monitor or smartphone, the Metaverse world is seen through AR or VR displays.  The fun and fantastic worlds seen when Facebook (FB) CEO Mark Zuckerberg plays his Metaverse promotional video are being seen on a flat screen, so the only difference is that with AR/VR you are immersed in the image.  What you do in the virtual world would be similar to your search history, and the data that is collected in the Metaverse is similar to what is collected when you visit websites today, only it looks more realistic (or unrealistic), making it stickier than a flat screen image. 
Does it solve some of the problems created by social media? No, it actually will make them worse, keeping users on-line in an environment more closely tailored to their likes and dislikes.  Its good for companies that want to sell you stuff, especially if that stuff is particular to a type of user, it is definitely good for companies that make a living selling user data, and it will be good for those that like to speculate, as you no longer need a warehouse to hold the tons of virtual stuff you have acquired, but it is not good for those that are already metaphorically joined to their phones, checking for Tweets, likes, or hits on a minute by minute basis. 
While those on the profit motivation side will say it will be good for users, allowing them to scour the globe for stores they would be unable to visit or exploring virtual worlds that they would never see, the Metaverse is not being created to help humanity and bring us together, as social media was originally said to do, but to open a new path toward garnering the attention of users and keeping them on-line longer (generating user data) or spending more (generating sales).  When pressure on social media companies becomes the stuff of governmental inquiry, the smart folks at those companies understand that they need to move to another platform, and what could be better than a virtual world that is far too complicated and removed from reality for most to understand, giving those building the Metaverse years more of data to sell.  Today’s word of the day is obfuscation.  Don’t worry about that bad stuff, look at the shiny new stuff over here…

The governor of Texas and Samsung Electronics (005930.KS) announced yesterday that the company would be building its next semiconductor fab deep in the heart of Texas, just a bit south of the town of Taylor and a ~30min. ride from Samsung’s Austin fab.   Now that the decision has been made, we were curious to see what were the details of the offer that enticed Samsung to the Lone Star State (Fun Facts: State Slogan: The Friendly State; State Bird: Northern Mockingbird; State Large Mammal: Texas Longhorn; State Small Mammal: Nine Banded Armadillo; State Flower: Bluebonnet; State Plant: Prickly Pear Cactus; State Gem: Blue Topaz; State Soil: Houston Black; State Colors: Red, white, and blue; State Dish: Chili; State Snack: Chips & Salsa; State Sport: Rodeo; Most Important Texans [our choices] Janis Joplin & Beyonce).
In order to bring Samsung to their fair city, the government of Taylor created what they called an ‘extraterritorial jurisdiction’ as a tax increment investment zone to ‘facilitate development or redevelopment by financing the costs of public works’, ’for the public purpose of developing and diversifying the economy of the zone, eliminating unemployment and underemployment in the zone.’ Essentially the city is saying that the area is undeveloped and Samsung Austin Semiconductor intends to purchase the property and build a 300mm semiconductor plant, the size of which will be no less than 6m ft2, plus ancillary buildings, and the city would like to facilitate the purchase and help to assist the $17b project.
In order to make the sale work, Samsung has to deposit $500,000 with the city during the 1st six months to cover the city’s ‘Development Review Costs’ and thereafter, up to a maximum of $5m, which the city will pay back yearly at a rate of 1% of the zone’s collected taxes for 16 years.  If it is not fully paid at that point, it comes from the city’s general revenue.  But the real kicker is the ‘Economic Development Incentive Agreement’, which says that the city will provide ‘tax grants’ of 92.5% of the assessed property tax for the first 10 years, 90% for the next 10 years, and 85% for an additional 10 years, which are estimated to total $467.8m, with the total expected tax revenue of $522.6m, leaving ~$52.2m for the city in actual tax revenue after costs over the life of the agreement, or about $1.7m/year.  Samsung’s restrictions as to what it does with the $11.7m (current assessed value) of land are few, other than a maximum building height of 250 ft, only one 6’ x 10’ sign at the entrance to the site, and being limited to two helicopter landing sites on the property.  The ~1,074 acres has little on it now, a few houses, storage facilities, and a baseball diamond, with most of the land devoted to agriculture, and the agreement states that ‘no persons will be displaced and in need of relocation’ from the plan’s implementation. 
All in, we expect the local and state government will take a hand in facilitating whatever larger scale improvements need to be made, such as widening access roads and providing power and water to such an operation.  Texas runs its own power grid, separate from much of the country-wide systems, so the ~100 Megawatts/hr. of power needed (enough to power ~20,000 homes) would be ERCOT’s responsibility, although we wonder where the 2m – 4m gallons of water needed for the fab each day will come from, as there was no mention of such in the proposal.  As we discovered during the Foxconn (2354.TT) Wisconsin fiasco, the devil is in the details, and while we have considerably more faith in Samsung’s commitment than that of Foxconn, politics plays a large part in such decisions.  Hopefully this project will move past the planning stage some time before the semiconductor space heads into over-capacity.

China’s smartphone shipments saw a large jump in October, far above expectations.  33.6m phones were shipped during the month, up 57.0% m/m and up 28.2% y/y, the highest single month increase since March, reversing the declines of the last two months.  While we have no company shipment data specific to October, we expect the unusually strong results for the month were due to the September 24 release date of the Apple (AAPL) iPhone in China.  According to JD.com (JD) and other on-line sources, there were at least 5m pre-orders for the iPhone 13 series on just the first day they became available and shipping dates were already moving to the 2nd week in October by the end of the day. Since the bulk of orders would ship in October, it would seem to account for the roughly 10m incremental shipments for the month, especially since the October data reveals that 25 of the 26 new phone models released in China in October were from domestic brands, leaving 1 new model from a non-Chinese brand.  The ‘iPhone bounce last year, seen in November, was a bit muted due to COVID-19.
5G smartphone shipments in China also increased in October, increasing to 26.6m units, up 76.2% m/m and up 58.7% y/y, reaching near the peak months of January and March this year.  Again, the increase of 11.5m units m/m would likely reflect the strong iPhone 13 shipments as all four iPhone models are 5G ready.  5G phones made up 79.2% of overall shipments in China in October, maintaining a share between 70% and 80% for much of the year, and 61.5% of domestic new models.  Based on 5 year averages, total shipments for China’s phone market in 2021 should be ~347m units, which would be up 12.3% y/y.  We make the assumption that November and December generate ~65m units shipped.
Early data on smartphone sales during China’s Single’s Day holiday (11/1 to 11/11) indicate that sales were down 0.7% y/y to ~12.9m units, due to the earlier release of the iPhone this year and the continuing weakening of Huawei’s (pvt) smartphone business.  Local brands Vivo (pvt) and Xiaomi (1810.HK) took the top sales share at 20% and 19% while Apple came in 3rd at 18%.  Huawei saw a meager 7% share of holiday sales, while former Huawei brand Honor (pvt) came in at 13%, almost double its former parent.  Alibaba (BABA) saw a GMV[1] of $84.5b, up 8.5% y/y, below the $86b to $90b forecasted, while JD.com fared better overall at $54.6b, up 28.6% y/y although a bit less than last year’s 33% gain.
With the potential for the first y/y increase in Chinese phone shipments since the peak in 2016, the Chinese press is extolling the ‘glorious recovery’, leading to ‘years of prosperous expansion in the industry’.  While this is certainly looking like a better year than the previous four, it is still only a single year indicator during a two year period that saw the world mired in a devastating pandemic which has destabilized the CE space and created many pockets of both positive and negative growth.  We have no vested interest in the Chinese smartphone market other than as an observer, and would wait a bit before calling a secular trend.


[1] Gross Merchandise Volume – A non-specified measure used by Chinese retailers.