​You don’t usually hear that a major CE company is refusing to take new orders for a product, but Sony (SNE) is doing just that, not because they want to, but because they could not fill the orders if they took them and its not because of a monstrously popular product, but a lack of components that is leading the company down this path.  Sony is not taking new orders for its popular mirrorless cameras, the Alpha a7 II ($1,598) and the Alpha 6400 ($1,000), despite the November and December holiday period when sales for such cameras are the highest.  Component shortages have left the company to apologize to consumers on its website and hand over the individual customer issues to retailers, who have been told that customers will have to wait until early 2022 (no specific date) before they can take delivery. 
Such ‘mirrorless’ cameras fall into an unusual class, as technically your smartphone camera is considered ‘mirrorless’ , as are many point-and-shoot digital cameras, but in this regard the term is used for cameras with interchangeable lenses.  The big difference however is the addition of the EVF, electronic view finder, which shows exactly what the image will look like using current settings, allowing the user to adjust those settings to optimize the image before taking the shot.  Additionally such systems can include an image stabilizer, which keeps the sensor steady, even when shooting without a tripod, allowing for slow shutter speeds (better for low light) that would be impossible for most SLRs.
That said, as such devices continue to increase semiconductor content, they fall prey to the same shortages that other CE products are seeing, and given the more specialized nature of some of the components, they tend to be short run products that get bumped by high volume silicon.  Sony is not alone here, as Nikon (7731.JP) was forced to delay the release of a new interchangeable lens camera for 45 days when factories producing components in Asia were shuttered due to COVID-19.
Its not like the camera business can easily withstand a bad month or quarter either, as the increasing quality of smartphone cameras has pressured stand-alone camera sales for the past few years, leaving manufacturers and component suppliers wary of increasing capacity, and while the industry saw a bit of a recovery in 1H, with Sony and others raising forecasts, August saw y/y shipments go negative, followed by a 30% drop in September.  Sony says they will minimize the impact of the shortages by redesigning and sharing parts, as well as increasing inventory, but the former takes time and the latter caused prices to rise further for other CE products.

​OK, you did it, you bought an 8K TV despite the fact that there is little native 8K content to watch.  The salesman was quite good at describing how ‘smart’ the TV was, taking your mundane 4K content and amping it up to 8K, and he was also convincing with the story that you want to be ready when native 8K content becomes available, so you won’t have to rush out with all of the other luddites to buy an 8K TV.  Of course, he did not indicate that you cannot ‘create’ new image information when viewing a 4K image on an 8K TV, you can only duplicate more of what is already there, so you gain the ability to sit closer to the TV without seeing individual pixels, and little else.
But vindication is coming! Or at least it is for those who have purchased the TCL (000100.CH) Series 6 ROKU (ROKU) 8K TV , a 65” model that sells for ~$2,000, as TCL will soon begin to offer a native 8K subscription streaming service, giving you a break from those YouTube (GOOG) clips that you use to show buddies how cool your 8K TV is.  The content is part of a collection from The Explorers Foundation, an non-profit organization devoted to raising awareness of the challenges and issues associated with the preservation of the planet’s heritage through conservation and research.  This means you will eventually have access to 8K content from such projects as “American Crocodiles in Jamaica”, “Scarlet Macaw in Honduras”, or “Lemurs in Vohimana” (Protected Rainforest in Madagascar).
As big fans of nature content, we are certainly all for such access, even if we are still relegated to 4K, but while those who have actually purchased 8K TVs might have an interest in such content, we expect they are looking for a bit more than nature footage and the infrastructure for native 8K streaming is not available for broadcast.  You will have to be satisfied with those YouTube clips and a few 8K movies that have to be compressed in order to pass them through your fiber and Wi-Fi.  It is still a struggle to justify 8K TV, and will likely remain so through 2022, despite the offerings from CE companies looking to score in the category, so hold on for another year and watch any native 8K you can.  No information on the cost or the date when the 8K service will begin but the Explorer’s app is free.

​Later today, the governor of Texas is expected to make an announcement concerning the location of the next Samsung (005930.KS) Semiconductor fab, whose location has been in contention for a number of months.  The odds-on favorite is Taylor, Texas, about a half hour from Samsung’s Austin fab, a town of ~17,000 residents, where the overnight hotel rates run about $100 and every Thursday is ‘Ladies Night’ at the Red Cap Cigar Lounge on Main Street.  The town seems to have topped the list of offered tax incentives, at $292m, bringing the $17b fab to the 1.87 mi2 plot outside of town, which is expected to be completed in 2024, the same year in which competitor Taiwan Semiconductor (TSM) is expected to complete its new fab in Phoenix.

​According to the South Korean press, Hyundai Motors (005380.KS) has cancelled plans to launch an electric kickboard due to changes that were made to the country’s traffic laws earlier this year.  The company is shifting development from the device to a ‘purpose-built vehicle for the delivery market’ and will expand that to a larger vehicle in the future.  The new laws, which were instituted in May, require all scooter, electric bike, and ‘personal mobility device’, users be licensed (minimum age 16, up from 13 previously) and must wear a helmet, with violations ranging from $17 (no helmet) to $85 for underage riders (guardian must pay). 
German kickboard producer Wind Mobility (pvt), a producer of kickboards and sharing services that entered the South Korean market in 2019, has seen it usage drop by 70% since the new laws went into effect in May and has decided to leave the market, although ridership for such devices had doubled between 2017 and 2019, while Hyundai Motors spent $3.4m to acquire a South Korean kickboard start-up in 2019 when it began development of its own kickboard.    
The laws for electric scooters varies considerably both by country and by city, with 12 states in the US requiring helmets and a few considering them tacitly illegal, although changes are afoot.  In Europe, rules vary by country or even city, so uniformity is certainly not a driving force, and in Asia, where e-bikes and scooters are quite popular, rules vary from Japan’s strict control (classified as motorcycles) to India’s lack of helmet requirements being the norm.  At a peak speed of 25nph, a fall or collision with another moving vehicle could prove fatal, as it did for 10 users in Korea, prompting the tighter regulations, but it seems some value vanity over the ability to have an intact skull.

We have noted China’s push toward expanding OLED capacity, particularly that of China’s largest panel producer BOE (200725.CH), who has now entered Apple’s (AAPL) flexible OLED supply chain.  Chinese small panel OLED producers added considerable capacity in 2020, up 23.4% y/y based on our fab survey database, but only added an additional 13.2% capacity this year.  While this seems a rather large reduction, it should be taken in context with expected small panel capacity expansion in 2022, as a number of this year’s expansion projects will not be completed this year.  This leads us to forecast a 23.4% increase in small panel OLED capacity in 2022 as these projects actually reach their targets. 
One issue that remains however, is the need for such capacity, and while each small panel OLED producer is focused on existing and potential customers and their ability to meet customer demands, the net increase in capacity is of a more direct concern to us as an observer of the industry, and the utilization rate of that capacity is key.  While ‘adding 16,000 sheets/month’ is what might be noted by a panel producer, 16,000 sheets do not usually come on line all at once.  OLED lines are based on both the TFT component, where circuitry that sits under each pixel is constructed, and the deposition of the OLED structures themselves, accomplished within a multi-chamber evaporative deposition tool (see Fig. 1), followed by an encapsulation process that is either part of the same tool or a separate process step. 
The Canon tool shown in Fig. 1 can process a substrate sheet (usually ½ sheet) in ~5 mins., which is over 90 6.5” smartphones.  Such a tool should be able to operate continuously for ~6 days, producing roughly 600,000 units/month including down time, particularly chamber cleaning and mask replacement and alignment.  Since each deposition tool processes ½ substrate, two such tools are needed to match the processing capabilities of the TFT structures in order for there to be no bottlenecks.  Equipment supplier backlog and build times for such tools are a consideration for OLED panel producers, so a line with 15,000 sheet stated capacity, might begin operation at half that rate until both deposition tools are operating at their target rate.  The equipment utilization rate, or the percent of a line’s equipment that is in operation, is different from the line’s yield, which is a bigger determinant as to actual production, and the above numbers assume 100% product yield, which is a theoretical number.
Product yield varies with each product and is initially low, especially with products that differ from previously produced displays.  Much fab equipment is dedicated to examining displays coming off the line, both optically and electrically, with the objective to trace back yield issues to the source, but such iterations can take time and are not always easy to correct given the complexity of the tools involved.  Product yield issues can keep an OLED fab from profitability for an extended period of time depending on the experience of the producers, and while the stated capacity of the fab might be 30,000 sheets/month, the yielded capacity can be far less.
The last contributor to fab output is customers.  The cost of producing OLED displays is high enough (the deposition tool mentioned above cost between $100m and $150m each) that small panel OLED producers tend to produce against customer orders and do not want to build unallocated inventory unless they see demand from distributors, or significant demand from parent or internal subsidiaries, but even the latter can leave the fab with excess inventory if parent demand changes, so again, while a fab might be able to produce 30,000 sheets/month, there are many reasons why that number tends to be more theoretical than actual.  More mature small panel OLED fabs, during periods of strong demand, can and do see high utilization and high product yield, but we have and continue to caution investors that stated capacity does not mean yielded capacity, and yielded capacity is what makes such fabs profitable. 
Based on our data, we believe the small panel OLED industry saw a utilization range between 29.6% and 49.5% over the last 8 quarters, and while that would be considered low in comparison to LCD production fabs, with the continuation of small panel OLED capacity expansion, relatively easy capital sourcing in China, and seasonal demand patterns, it is not surprising, but it does beg the question, “Does the industry need all of that new capacity?” 
There are a few other factors that play into such calculations, individual or otherwise, such as conversions of existing small panel OLED fabs from LTPS (Low Temperature Poly-Silicon) to LTPO (Low Temperature Poly-Crystalline Oxide), which affects the TFT portion of fab throughput, and LG Display’s (LPL) loss of its parent’s smartphone business, but even with expanding demand from OLED notebooks and similar new applications, the desire of some small panel OLED producers to gain share continues to push capacity expansion at a rate considerably higher than actual production, as noted in Fig. 2, leaving some suppliers facing losses in what has been a positive environment for small panel OLED displays. 
As we have seen in the LCD space, there is no way that individual small panel OLED producers will be convinced that continued expansion is not the best objective and the concept that growth will continue forever will remain the driving force for such expansion, that is until demand plateaus are reached or questions concerning the profitability of smaller producers become foremost in the minds of funding sources.  There is still demand expansion in the small panel OLED space with OLED displays now represent over 50% of all smartphone displays (see our note 11/22/21) but new markets develop slowly and any slowdown in small panel OLED area growth could puncture the expansion balloon, which, if rational behavior is not possible, could be a solution to the problem, albeit a less desirable one.

The Wi-Fi Alliance is a global group of companies that are allied in developing, promoting, and standardizing Wi-Fi to create a common ground that allows consumers to have to pay little attention to device compatibility.  Sponsoring members are the biggest CE companies (Apple, Microsoft (MSFT), Samsung (005930.KS), Qualcomm (QCOM), etc.) and contributing members number in the hundreds, with over 50,000 products having the Wi-Fi Alliance certification.

The IEEE (Institute of Electrical & Electronics Engineers) is the organization that produces the technical standards that Wi-Fi is based on, while the Wi-Fi Alliance assures device compatibility, but the standards are always evolving, going back to 802.11a which was released in 1999 to the current 802.11ax standard, also known as Wi-Fi 6E, which was officially adopted last year.  With each new standard, the data stream rate has increased, from 6Mbs/54Mbs for 802.11a to 600Mbs/9600Mbs for the current 802.11ax (Wi-Fi 6E) standard and a number of other connection factors have also improved, particularly the ability to carry a higher number of streams in a given area, such as might take place in an office environment.  This prevents slow data rates and/or dropped connections, but with each new standard, the modems used, be it in a smartphone, laptop, or other device, must be upgraded to take advantage of the improvements.
Wi-Fi 7 will be the next iteration, and increasing requirements for data rates for streaming 4K or even 8K video, and the necessity for low latency required by AR/VR applications, will push the standard past the point where another ‘flavor’ of Wi-Fi 6 will suffice.  The new standard is expected around mid-year 2022 with full implementation in 2023, with a number of new features that will help to make Wi-Fi able to function under such more demanding scenarios. 

• Bandwidth will increase from the current 9.6Gbs to 30 Gbs and will utilize the 6 Ghz band to avoid latency issues.
• Wi-Fi 7 will allow data frames to be scheduled between different users, which is currently not allowed in Wi-Fi 6.  This means that rather than force all size data chunks to be scheduled with each user, data can be mixed to better fill the bandwidth, and then sorted back to individual users, increasing efficiency.
• Wi-Fi 7 will have a higher bit rate.  In the current Wi-Fi iteration, each signal carries 10 bits, Wi-Fi 7 will allow for 12 bits, a 20% increase.
• Wi-Fi 7 will allow the number of data streams to increase from 8 to 16.  While this means Wi-Fi 7 will have twice the number of data streams application processors will also need to be able to balance data loads and allocate resources to avoid interference.  Such protocols will also be included in Wi-Fi 7.

While the usual confusion will ensue when Wi-Fi 7 becomes a reality (“Is my current laptop able to use Wi-Fi 7?”), the standard will vastly improve the ability of local Wi-Fi systems, albeit after they are upgraded or replaced.  This will allow some of the more demanding bandwidth applications sufficient capacity to operate with the ‘loading’ or ‘buffering’ issues that plague many streaming or similar services, and will allow more realistic implementations of AR/VR when we delve into the soon-to-be invented Metaverse.  It would be sad if your personal Metaverse limited you to slow gaming or travel from one virtual location to another.  Wi-Fi 7 should help to keep you seamlessly able to remain on your couch for hours at a time, achieving the ultimate in instant gratification.

There are ads on TV and social media encouraging viewers to see the world as ‘reopening’ as the COVID-19 pandemic is said to be winding down.  Inherently skeptical and with many mixed messages coming from CE companies, we took it upon ourselves to see if those ‘feel good’ messages were based in fact or were just holiday hype.  Rather than take the word of CE company CEOs or calculating endless sales figures, we took the top 10 ‘electronic circuit’ component exporting countries and looked at where they are in terms of COVID-19 infection rates.  This is not a detailed comparison, just a visual look at where each of the top CE exporting countries is relative to COVID-19 cycles.  The charts shown the number of new cases per million population and while the starting dates for each are not always the same (depending on when they started reporting) the endpoints are all 11/18/21.  Export data is from 2020..
The top three countries represent 50.3% of the total value of circuit component shipments last year, and while each has seen COVID-19 spikes over the last 22 ½ months, they all are seeing small numbers of new cases.  While this should be associated with improving production and increasing exports, these countries take draconian measures when even small outbreaks are discovered.  This tends to be local, but well enforced, which can have an effect on particular production sites, but is far better than the broad travel restrictions found in countries where the virus is far less under control.
After the top three, things begin to deteriorate, with Singapore, South Korea, the US, and Vietnam still battling recent peaks or increasing cases, while Malaysia, Japan, and the Philippines have come off of the spikes caused by the Delta variant during the summer.  As we have noted recently, the recent Delta variant outbreak in Vietnam, where only 38.5% of the population is fully vaccinated, has been particularly intense, with factories in Ho Chi Minh City having been closed or working at low production levels for weeks at a time.  In comparison, 59.4% of the Hong Kong population is fully vaccinated and 67.96% have at least one dose.
While we don’t fully subscribe to the “We’ve got this under control” advertising, we do see some reasons to be optimistic, at least for the electronic component part of the global CE supply chain, but as the top 15 regions make up 97.7% of electronic circuit component exports, it is not only important that these regions see improving prospects going into 2022, but that the overall global consuming population also see pressure from COVID-19 wane.  Many of the countries on the top 10 list are also major CE product buyers, but a recovery in the global population is also necessary for a real CE recovery to be sustained.  41.4% of the global population is fully vaccinated and 52.6% have received at least one shot.  Most epidemiologists believe herd immunity becomes a reality when at least 70% of the global population has been vaccinated.
 

Who is this man and what is he dreaming about?  He’s an engineer (not his real job) at Corning (GLW) and he is dreaming about ways in which the glass content of smartphones can be further increased.  What will put a smile on his face is a recently granted patent for what is a six sided, all glass mobile device, and to make the smile even bigger, the patent was granted to Apple (AAPL), and follows a series of other earlier Apple patents that describe similar devices.  In a true sense, the patent actually describes an all glass structure comprised of a transparent front and back, with touch controls, and four sides, with touch sensitivity for additional controls, such as speaker volume and power. 
While the entire body looks like a single piece of glass, it is actually two or more pieces joined using glass frit, a bonding material that acts as glass solder, melting at relatively low temperatures and then quickly hardening to seal the bond.  Such materials were used to join the glass parts of cathode ray tubes.  Panel producers also dream of such devices as the potential for a second display on the back and more simplified indicators on the side mean more panel content and more dollars/phone.  Of course, a patent, while an indication of potential direction, does not mean such a device is being developed, and there are still a number of issues, particularly the need for machining to create holes for microphones and speakers, but device producers have surmounted many such problems over the years in order to differentiate their products, and glass scientists continue to fabricate new materials that were not even dreamed about a few years ago. 
With ultra-thin flexible glass just beginning to have an impact and more mature hardened glass products moving from consumer electronics to the automotive space, the reality of a six-sided all glass smartphone no longer seems that far-fetched.  Samsung (005930.KS) originated mobile devices with rounded edges, which also seemed fanciful a few years back and now seem the norm, so the reality of such a truly six-sided device with multiple displays and indicators is both plausible and possible, but what will really put a smile on this man’s face is that the six-sided, all glass phone will need six sides of Gorilla Glass™ to protect it.  That’s a lot of glass.

​Earlier this month both AT&T (T) and Verizon (VZ) agreed to defer the launch of 5G services on C-Band spectrum (3.7 to 3.98 GHz), a portion of the 5G spectrum that they acquired during the last auction, until early January.  The postponement was at the request of the FAA who claims that the new service could interfere with altimeters used on aircraft  This comes in contrast to the FCC examination and approval of the band, finding no evidence to support the FAA’s claims, making sure that a wide spectrum guard band is left unused adjacent to the C-band spectrum.  That guard band is twice the width requested by the airlines to make absolutely sure the altimeters are protected.
What makes this a bit unusual is that the C-band spectrum is already being used in ~40 countries for 5G, with no reported altimeter problems, while the FAA recently stated, “Tick, tick, tick” in a Tweet, alluding to the eventual disaster they expect to occur, which has riled many, including a number of those normally critical of wireless companies and how they treat their customers.  One wrote that even after the FAA acknowledged that it had no proven evidence of interference from C-band operation, it continues to use contacts in Congress to wage a battle against the FCC ruling, which stated that “…further analysis is warranted on why there may even be a potential for some interference given that well-designed equipment should not ordinarily receive any significant interference (let alone harmful interference) given these circumstances..”
While the FAA is creating a logjam for 5G, they have also released a bulletin this month suggesting that “radio altimeter manufacturers, aircraft manufacturers, and operators voluntarily provide to federal authorities specific information related to altimeter design and functionality, specifics on deployment and usage of radio altimeters in aircraft, and that they test and assess their equipment in conjunction with federal authorities.” In other words, lets upgrade those altimeters, although they also indicated that such upgrading could prove costly to the industry, which seems to be listening to its constituency rather than facing the reality that such C-band issues have been under review for the last 4 years.  Those defending the FCC’s allocation of the C-band also cited a 2012 report by a White House advisory council that suggested methodologies for spectrum management that consider both transmitter and receiver characteristics because receiver (altimeters) constrain effective spectrum usage.
Rather than a battle between agencies for some sort of political cache, it would seem that if the US is in a battle for 5G dominance (why is still a question), it would seem better to work out such inter-agency differences before allocating and selling such spectrum.  The aviation industry has been under pressure due to travel restrictions during the pandemic and is likely quite sensitive to any suggestion that costs might need to increase, but scare tactics are not the best idea for helping to increase consumer confidence about aviation travel.  In the real scheme of things, the cost of a new and updated altimeter, although not necessarily needed, is likely far less than the cost of lobbyists….

Small panel OLED demand increased display shipments in 3Q by 26.6% (16.5% y/y), with flexible OLED displays driving almost all of the q/q shipment growth.  The biggest increase from the demand side came from Apple (AAPL), who more than doubled its small panel flexible OLED panel purchases in 3Q in preparation for the iPhone 13 rollout, and Samsung Electronics (005930.KS) whose purchases were up 50% q/q.  Chinese brand small panel flexible OLED purchases were mixed, with Huawei (pvt) and Oppo (pvt) declining, and Xiaomi (1810.HK), Vivo (pvt), and Honor (pvt) increasing, albeit at much lower volumes, as shown in Fig. 1 – 3[1].
On the supply side Samsung Display (pvt) saw a 101% q/q increase (+15.7% y/y)  in flexible panels shipped in 3Q while LG Display (LPL) saw a 43.0% increase q/q (+68.5% y/y) as they fed the Apple iPhone supply chain, while BOE (200725.CH) saw an 8.1% q/q increase (+58.4% y/y).  BOE has recently celebrated its official entry into Apple’s iPhone OLED display supply chain, which will likely lead to improving shipments in 4Q.  Samsung Display’s share of the small panel flexible OLED market returned to 62.2%, a more normalized level, after a weak 2Q (47.6% share), although down from last year’s 3Q share of 70.0%, and the combined South Korean suppliers garnered 74.8% of the small panel flexible OLED panel production market, with the remaining 25.2% belonging to combined Chinese small panel flexible OLED suppliers.  When looking at both the rigid and flexible small panel composite, Samsung Display holds a 71.5% share with Chinese suppliers at 21.0% vs. 17.0% in 3Q last year.
On an overall basis, small panel OLED production continues to grow despite weak overall smartphone sales as the overall share of small panel OLED continues to grow across the smartphone market, reaching over 50% in 3Q based on our composite small panel OLED shipment data and our composite smartphone shipment data.  This year the number of mobile devices other than smartphones that are using OLED displays continues to grow, particularly notebooks, and while this will not have a significant impact on unit volume, it will continue to increment area shipments, which set the tone for capacity expansion plans.  There are few OLED suppliers that are not expanding capacity, and while much of these plans are for IT based OLED products, we expect the small panel and large panel OLED markets to become more converged as Gen 6 OLED fabs, usually used for small panel OLED production, are still efficient up to 32” panel sizes, making them viable for many IT products which might be considered ‘large panel’.  All in, OLED growth continues based on share growth in more mature applications and to early stage penetration in new mobile device markets.


[1] Note:  Figs. 1 -3 are all drawn to the same scale to show the lower proportion of rigid OLED displays compared to flexible OLED displays.