​How can you prove you know the answer to a question without revealing the answer, or to put in into crypto terms, “How can you do a transaction that absolutely verifies you have possession of an item to the buyer, without revealing who you are?”.  Hard questions to answer as even in situations where transactions are done on the blockchain, there is a record of the buyer’s identity and the seller’s identity in the public domain.  It might be hard to reconstruct that information, but it can be done and has been done to prove the illegitimacy of fraudulent NFT or cryptocurrency transactions.  But what if you could find a way to prove you are the legitimate owner of something without reveling who you are?  Would that be a good thing, or would it lead to even more fraud?
A small start-up in South Korea, Zkrypto (pvt) seems to have found a way to solve this enigma and is currently working with the Bank of Korea (024110.KS) to run simulations to prove the practicality of their software.  The company was founded by a professor at Hanyang University and carries the university’s support, having already won the ‘Best Innovation Award’ at the upcoming 2023 CES, so it seems to have at least caught the eye of those who have the ability to evaluate such complex software.  The concept is called “Zero knowledge Proof”, and has already been incorporated into the company’s product known as ‘Azeroth’, a digital asset trading platform that can be used for cryptocurrencies and NFT assets while revealing no information about the seller, but can also supply anonymous transfer and audit information to regulatory authorities if necessary, essentially proving a transaction without revealing details about the parties involved.
Of course this immediately sounds like a way for the criminal element to hide all sorts of illegal transactions that might normally need more specific verification and proof of ownership, but before dismissing the idea, there is another application that makes far more sense, even if the crypto application is likely to get the most press.  As the generational gap across the voting public widens, there seems to be a trend toward digitizing some of the voting functions, sometimes just counting cards or tabulating verified votes, but a true electronic voting system has yet to be devised that satisfies both the anonymity of the voter and the ability to verify the same voter’s legitimacy as a single-vote caster.  With accusations of voter fraud causing such a massive rift across the US, the chances for a move to an all-electronic voting system in the near-term is quite small, but as time passes, a generation of those who consider using an electronic device to feed their dog or to show their approval (or disapproval) of someone’s latest comments on social media, that will eventually change, and the Zkrypto system seems like the first step toward that end.
The company already has a voting application called zKVoting, which the company says is the most secure electronic voting system available, as the information resides on the blockchain and can be verified by anyone, yet provides complete anonymity to the voter, while being able to verify that the vote is legitimate, with both individual votes and the full vote system data being  spread across the blockchain and therefore unable to be manipulated.  They even have a voting app that can be downloaded from Google (GOOG) Play or the Apple Store. 
Unfortunately it is almost impossible for us to verify the software itself, so we have to acquiesce to the praise given by those in the know among CES cognoscenti, but if it is even half of what is said about the software, it seems to have the potential to usher in a new level of digital transactions that could give legitimacy to a wide variety of digital functions, particularly the idea of voting without having to fill out ballots or travel to vote drop-off sites or polling places.  While its just another reason for the eventual evolutionary changes that will give subsequent generations fingers with pointed tips and an inability to walk further than the front door, it does seem like a step in the right direction toward legitimizing electronic transactions past current levels.
Ctl+Click to see company video.  It is in Korean so click the closed captions and the settings to get an English translation.
https://youtu.be/keYwJZDNYBo
 

​Honor (pvt) was the #1 smartphone brand in China in 2Q and the #2 brand in 3Q.  The brand has been around since 2013 but went through a major change in November 2020 when the brand was sold by then parent Huawei (pvt) to a group of the company’s suppliers and distributors, and a state-owned supervisory organization.  The reason for the sale was the sanctions that the US government had placed on Huawei, with the company’s founder indicating that while Huawei itself would fall under the US rules, if Honor was an independent company, it would be able to avoid the US sanctions and survive as a company.
Honor has done well for itself over the last few years and has challenged Xiaomi (1810.HK), typically the smartphone share leader in China, a number of times since its divestiture from Huawei and continues to grow its base in China while expanding its product offerings to laptops, tablets, and wearables.  With just a bit under 50% of Honor’s phones being OLED based, a number of Chinese OLED producers are vying for the company’s smartphone business.  China’s Visionox (002387.CH) has most recently supplied the OLED display for the Honor 70, released in June, while BOE (200725.CH) has supplied displays for the Honor 60, Magic 3, and Honor’s Magic V foldable.
It seems that BOE is not taking any chances that it might fall behind other suppliers with Honor as the fastest growing Chinese smartphone brand, and has taken a stake in the company, although has not disclosed the size of the investment, stating, “It has not reached the disclosure standards”, meaning it is not large enough that it has to be disclosed in a filing.  That said, with BOE’s investment, once again rumors that Honor will be filing for listing on one of the Chinese exchanges have resurfaced, as they have a number of times since the spin-off.  Some Chinese tipsters have insisted that there was a requirement in the purchase agreement that the company would submit an IPO within 3 years from its separation from Huawei, which would be November of 2023, although that remains unconfirmed.
This is the second recent investment BOE has made recently, after taking a ~$291m controlling stake in HC Semitek (300323.CH), a supplier of LEDs for BOE’s mini-LED array business, so it seems that BOE is bent on making sure it has a favorable position with suppliers, in this case both semiconductors and LEDs.  BOE calls these acquisitions ‘anti-cyclical’, which seems a bit confusing as we expect the LED business in China follows the same basic economic patterns as does the display business, and while the semiconductor business is a bit more of a wild card (or has been recently), we expect the ‘anti-cyclical’ theory is really the idea that under poor macro-economic situations, BOE will still have direct access to basic components, avoiding the shortages that plagued the CE space last year and earlier this year, and even more pressing problem that could recur in the future.
These protective moves by BOE are commendable, and while the company will still be at risk for display glass substrates, given China’s lack of reliable large-area display glass production, BOE has had a long-standing relationship with Corning (GLW), who has built glass substrate production facilities alongside BOE display fabs.  Further, they would be in the same situation with Universal Display (OLED), who is the exclusive supplier of phosphorescent OLED emitters that are the basis for BOE’s OLED display production.  We only mention this because there has been considerable chatter about the US government adding the display industry to the trade restrictions it has imposed on the Chinese semiconductor industry, and while we expect a portion of BOE’s motivation for its recent acquisitions and investments might have something to do with that fear, we expect the shortages the company experienced is the key motivation.
From the perspective of how a ban on trade with the Chinese display industry would affect the companies mentioned above, 31.8% of Corning’s sales in 2021 were in China, along with 23.2% of its long-term assets, while UDC saw 34.7% of its revenue in 2021 come from the Mainland.  Aside from the considerable damage such a ban would do to the two companies mentioned above, there are innumerable other US companies in the display supply chain that would also be affected if such a ban were to be enacted.  Since the US does not have a localized ‘display’ industry that competes directly with China, it seems a stretch to envision such a ban, so we are doubtful that there is reasoning behind such talk, other than from a political standpoint, but we also note that the semiconductor trade bans have gone further than we would have thought, so we cannot rule anything out.  As BOE seems to be proactive, even in the midst of a weak CE scenario, we give them credit for at least trying to avoid the same issues that caused problems during the throes of the COVID pandemic and perhaps the foreshadowing of another potential issue that could face the Chinese display industry.

​As we have noted previously results from China’s 11/11 shopping holiday were tepid at best for the CE space, with some categories seeing considerable declines on a y/y basis.  Data from Strategy Analytics concerning smartphone sales during the holiday paint a bleak picture, with ~9m units sold, down ~35% y/y and lower than the 9.6m units sold in 2020.  On the ‘almost’ positive side, the retail value of those sales was up 10% y/y as the mix of higher-end devices was better than last year, but the overall value of smartphone sales during the holiday was down ~29% to $5.28b US.  Apple (AAPL) was the winner in terms of both unit volume and dollar value, selling 3.5m units, down ~27%, staying ahead of the overall market, and generated ~$3.5b in sales (~$1,000 avg. price), garnering a 39% share of units and a 68% share of revenue.  Xiaomi took 2nd place, selling ~2.8m units and generating ~$670m, while Honor (see above) generated a roughly 8% volume share, up slightly y/y.  TV sales during the shopping holiday were also rumored to have been weak this year but we have yet to see quantifiable data.

​From the title, one might surmise that mobile phone shipments in China have been weak, which has certainly been the case, but more to the title is China’s strange delay in providing monthly data on mobile phone shipments in China through its usual source, the China Academy for Information and Communication (CAICT).  Typically, CAICT releases monthly smartphone shipment data a month or so behind the relevant month, although this year they seem to have slowed the process considerably, with the last release being for August.  Perhaps there has been a mandate from the government to slow the flow of negative data under the guise of COVID related issues, or just a general malaise over reporting what is likely increasingly bad news, but either way, the best we can see is August data as shown below.
August saw mobile phone shipments in China decrease by 4.6% m/m and by 21.9% y/y to 18.979m units, a bit below our estimate of 19.08m units.  Smartphone shipments were 18.135m units, down 5.1% m/m and down 21.5% y/y, while 5G phones represented 75.2% of total shipments, down 2.9% m/m and down 19.3% y/y.  Domestic brand shipments were 17.87m units, down 2.3% m/m and down 21.6% y/y but represented 94.2% of total shipments, the highest level we have seen since 9/2021.  We note that August data is rather opaque as it does not represent the most recent downward leg of the CE cycle, and our estimate for Chinese mobile shipments for the 2022 year drops a bit lower to 252m units, now down 28.2% y/y.
We would expect a continuation of the weakness seen to date in the Chinese smartphone market, with the only saving grace being a relatively large number of new models being released in August (albeit still down on a y/y basis), and the release of the iPhone 14 family, although as noted above, shipments of some models have been pushed to later in the quarter or into early 2023.  5G remains strong overall although y/y growth will be difficult for the remainder of the year as a strong 4Q last year will foil y/y growth and overall smartphone unit volume in China remains extremely weak.

​Qualcomm (QCOM) has released what we believe is the 1st chip set platform specifically designed for AR headsets/glasses.  Previously most AR glasses used Qualcomm Snapdragon 670 or 662 chipsets, which were designed as smartphone chipsets using typical X12 modems, Adreno 615 GPUs, and Kryo 360 CPUs.  Qualcomm saw VR as the more important device, having designed the XR1 (5/18) and the XR2 (12/19) specifically for VR headsets, although the XR1 had some features that made it at least a stepping off point for the Ar2 – Gen 1 noted here.
The AR2 – Gen 2 has been specifically designed for AR in that it uses a distributed architecture that processes latency sensitive information on the glasses themselves, while high-computational processing is transferred to the Snapdragon chipset on a smartphone, PC, or similar device with less than 2ms of latency.  The chipset uses ~50% less power than the XR2 chipset and, according to the company, has 2.5x better AI performance than the XR2, with the main processor being 40% smaller (PCB area).  The chipset supports 9 cameras, which goes toward the trend in AR for a shift from 3 degrees of freedom systems (3DoF)  to 6DoF systems that are common in VR, along with hand, eye, face, and body movement tracking.
Most significant is that Qualcomm has designed this chipset specifically for AR, which legitimizes the category further, especially as the platform is the basis for the Meta Quest Pro XR headset released last month by Meta (FB).  Qualcomm has also indicated that it is working with a number of OEMs to include the chipset in upcoming devices.  Qualcomm specified Lenovo (992.HK), LG (066570.KS), Nreal (pvt), Oppo (pvt), Rokid (pvt), Sharp (6753.JP), TCL (000100.CH), Vuzix (VUZI), and Xiaomi (1810.HK), among others as those developing platforms using the AR2 – Gen 1.  This comes in what is a particularly weak year for AR/VR after a strong growth year (units) in 2021. 
While we do see the AR/VR space as one that is growing, the industry and forecasts for the industry seem very oriented toward 2023 and 2024, likely based on expectations that Apple (AAPL) will release an XR product.  There is already some very significant differences in forecasts for AR/VR in forward years, 29.1% between high & low forecasts for 2022, 46.6% for 2023, and 105.1% for 2024, so we put little faith in any forward estimates after this year’s much revised forecasts, but we compile as many as possible to give a composite of group, and begin to map out our own set of unit volume estimates early next year.

​As we noted previously Foxconn’s (2354.TT) smartphone assembly plant in Zhengzhou has faced continuing COVID restrictions that have limited its ability to assemble the iPhone 14 family.  In October the wait for delivery of some iPhone 14 models was extended by two weeks and in November, extended for another week.  It seems that while the iPhone 14 and the iPhone 14+ are available for store pickup or same day delivery in China, the iPhone 14 Pro and Pro Max are seeing delivery dates that extend in January.  The iPhone 14 and iPhone 14 + displays are produced by Samsung Display (pvt), LG Display (LPL), and China’s BOE (200725.CH), while the iPhone 14 Pro and Pro Max displays are produced by Samsung Display and LG Display.
With ~15% of iPhone sales occurring in China, and the same issue facing both orders placed on the Apple store (on-line) and other local e-commerce sites, potential customers have been vocal about the delays on social media, especially as most are used to Apple delivering before the promised date in previous years.  Foxconn’s plant, which employs up to 300,000 workers during peak season, is said to be short by ~100,000 currently as many left at the onset of the lockdown last month.   Apple’s warning about delays in shipments seems to have not satisfied Chinese consumers but little data as to cancellations has appeared, so we expect most will complain about their deliveries being pushed past the end of the year, but there is little that can be done until Foxconn is able to restore full service in Zhengzhou. 

AR/VR is a controversial subject in the CE space, with some CE companies making big bets on the technology, while others are still skeptical as to the validity of the technology as a competitor to more typical visual modalities.  We understand that those who have a stake in the AR/VR world will be far more optimistic about its prospects than the average Joe, and we therefore take most forecasts, especially those in the out years, with a grain of salt, and rightly so as estimates, even for this year, have come down considerably.  For example an estimate made in 2020 for XR unit shipments in 2025 has been reduced from 43.5m units to 23.8m units, with similar changes in earlier years.  That said, our attention to the space is predicated on the eventual adoption of XR by a number of major CE companies, whose motivation is not to promote a ‘new world’ or lifestyle, but to sell devices, assumedly the goal of all CE companies.
We do believe that the adoption of XR will be somewhat generational, with those that have grown up with smartphones as an extension of their bodies and personalities more willing to accept the notion of XR without the trepidation that comes from a generation that grew up with radio and TV as ‘social media’, and that will take time, but we believe the adoption of XR by Apple (AAPL) will help to legitimize XR and push it further into the more consumer oriented spotlight.  We do see a bit of a divergence between the two components of XR, with AR being the more practical application and VR having a more entertainment oriented focus, although AR will continue to have a smaller share of the XR unit total at least for the next year or so.  We also expect the two segments to merge somewhat, with a number of devices allowing the user to use the headset as an AR device, while also providing for a ‘blocking’ system that will allow the user an immersive VR experience.
Aside from the potential usage characteristics for XR, there is another important aspect of XR devices that needs to be addressed, that of ‘wearability’, and by wearability we do not mean how comfortable a headset might be but more how it looks to the outside world.  We have all seen pictures of those wearing VR headsets wildly gesticulating as they stand in the middle of a room or sit on a couch, and that is certainly an image that does not serve to entice a broad swath of consumers to try such a device, although it is likely quite attractive to the gaming population.  More to the point would be AR headsets, which are slowly evolving into devices that are close to normal glasses, thanks to optical solutions like pancake lenses, that reduce the bulk behind AR headsets, which makes them more practical for their use as an ‘everyday’ item that can be worn without the stigma of a VR headset, and will eventually become unobtrusive to consumers.
Of course there are many practical applications for both AR and VR, but while VR unit volumes are substantially higher than AR unit volumes, we see AR as the more ubiquitous device for the long-term, especially from a generational standpoint, with the information currently presented on a smartphone display projected in front of you, without blocking normal vision, a way of reducing the need to look at a screen that you have to take out of a pocket as it is always on and in front of you.
Right now, we have to look at the XR space more from the standpoint of a typical consumer device, and as almost all consumer devices have a visual interface, we start with the displays that have been and will be used in AR and VR devices.  There are a number of existing and potential displays that have been and can be used in AR and VR devices, so we offer a bit of a primer on what they are, how they work, and our data on which are gaining or losing traction.  We note that these displays tend to be more complex to manufacture than smartphone displays, particularly as they are situated within millimeters of the user’s eyes, making the resolution and pixel pitch[1] key metrics.  Such displays are considered ‘near-eye’ displays and while they are typically produced on display production lines similar to those used to produce CE displays, their characteristics are pushing the technology needed to satisfy near-eye criteria toward less typical production methods.
Most CE displays are based on a glass or plastic substrate, and while those platforms are certyainly acceptable for typical CE displays, the higher tolerances of near-eye displays have pushed development toward silicon-based displays, which are just beginning to show merit as to reducing the feature sizes needed for near-eye displays.  What makes this even more attractive to display producers is the processes use equipment that display producers already have on the fab floor, particularly semiconductor lithography tools that are used to make display TFT backplanes.  This gives the DoS (Display on Silicon) world a path into the future that requires potentially less capital and infrastructure than would be the case for a ‘new’ display technology, and gives the industry an easier path to building pilot DoS lines to further develop the technology.
That said, the AR/VR industry still has the necessity of having access to mass production that can keep costs at reasonable levels and that tends to lean toward existing display modalities, so we looked at all of the AR/VR devices produced since 2013 and traced the display types used in those devices.  Not all of the device manufacturers have been forthcoming about the type of display used, so there is an ‘unknown’ component, but we broke down the display usage into groups for those that disclosed the information, using the manufacturers ‘classification’ as to the type of display.  In some instances there were nuances that made us wonder if the AR/VR brand was accurately portraying the dive display, but without disassembling a multitude of AR/VR headsets, we took the brand’s word at face value.
This broke down the displays into eight categories based on four technologies, Liquid Crystal displays (LCD), OLED displays, LED displays, and DLP, which we describe in brief below.

• Liquid Crystal Display (LCD) – A display in which light is generated by a BLU (backlight unit), which passes through or is blocked by a liquid crystal material.  The liquid crystal is ‘controlled’ by TFT (Thin-film Transistors) circuitry that can shift the optical characteristics of the liquid crystal to let the light through or block it.  If the liquid crystal is ‘open’, the light passes into a color filter, essentially a sheet of red, green, and blue phosphors that change the white backlight to their respective colors.
• OLED Displays (OLED) – A display that uses phosphorescent and fluorescent materials that emit light when controlled by a TFT system similar to that used in LCD displays.  In small OLED displays, the OLED materials are arranged to form a pixel composed of red, green, and blue OLED materials, each of which can be individually controlled.  Since these materials are self-emissive, there is no need for a color filter.
• LED displays (LED) – As mentioned above, LCD displays require a backlight that is usually an array of LEDs (Light-emitting Diodes), and in most cases the term ‘LED display’ is used to mean an LCD display that uses an LED backlight, however, there are also display technologies that are based on the LEDs themselves as emitting devices.  In some cases individual red, green, and blue LEDs are used as self-emissive components, similar to the way OLED materials are used, and in other instances single color LEDs are used, using a number of methods for converting the color of the light (more below).
• DLP (Digital Light Processing) – This technology uses a white light source that is split into primary colors.  Three micro-mirror chips for each pixel, which are individually controlled, reflect the prism’s light or block it, to create each pixel’s color combination.  More commonly used in cinema projection systems, the technology is rarely used in near-eye devices.

While those are the main near-eye display categories, there are a number of ‘flavors’, as noted below:

• Mini-LED – Essentially an LCD display, but with much smaller LEDs in the backlight, giving a higher level of control over each pixel.
• QLED (Quantum Dot) – Similar to the Mini-LED above, these displays use quantum dots to narrow the spectrum of the LED light and enhance the color characteristics.  In some cases, the quantum dots can be used as a substitute for the color filter, shifting the white light to red, green, and blue, rather than filtering to preserve brightness.
• LCoS (Liquid crystal on Silicon) – Similar to DLP and LCD, LCoS uses liquid crystal to reflect or block the RGB light sources, and is based on a silicon substrate.  LCoS is also used for projection devices but has been used in some near-eye displays.
• Micro-LED – Micro-LED displays are based on self-emissive LEDs that are either a single color or have a red, green, and blue LED for each pixel.  In single color micro-LED displays quantum dots are typically used to shift the single color light to RGB as RGB micro-LEDs are relatively difficult to produce.
• Micro-OLED – Similar to more typical self-emissive RGB OLED displays, micro-OLED displays are produced on silicon and do not use typical evaporative OLED material deposition.  While there are a number of potential micro-OLED processes, rather than the masks used to create pixels with OLED materials, micro-OLED displays are created using photolithography on silicon.
• eQD – While not in our data for existing AR/VR headsets, we note that at some point in the future we expect that quantum dots will also be used as a self-emissive light source, likely based on silicon photolithography.  Right now QDs are typically used as ‘color shifters’ converting one color of light to another, a step above phosphors which filter out other colors.  By electrically or optically stimulating QDs, they give off light that is easily tailored to specific colors.  Not yet a product but one that will inevitably be used in near-eye displays.

As noted above, we traced the evolution of Ar and VR display technology back to the early days of XR and mapped the progress (or demise) of each technology according to the number of devices that used the technology.  This data is not unit based in terms of units sold but based on the technology share of the number of models available to consumers on a yearly basis.  While this would not be a basis for determining which technology ‘sells’ the most units, it does show trends, especially the right-hand column noted as ‘unreleased’.  This represents those AR and VR devices that have been announced but have yet to be released and would represent the (hopefully) leading edge of AR/VR display technology.  While Figure 1 and Figure 2 show the composite AR/VR Display history and Figure 3 shows the combined totals, the AR/VR Display History Individual Charts (Figure 4 - Figure 12) tell more of a story.
LCD is still the Oculus 2 (FB), the only release in 2014 contained an OLED display, giving it dominance that year, and while OLED has seen its share decline in both AR and VR over the last few years, Figure 11 shows that Micro-OLED is gaining traction over the last two years, and in those devices still unreleased.  Mini-LED, Micro-LED and QLED near-eye displays are still in the emerging category, while DLP has disappeared.  LCoS, as a reflective technology remains viable for AR (Magic Leap (pvt)), but we expect micro-OLED and modern optics will lessen its appearance.
Once again, we note that regardless of the forecasts for XR, the CE space is always looking for new hardware to sell, and while AR/VR is a bit different than your usual CE fare, it has the potential to become another revenue source for CE companies and the display industry.  As few CE devices are not display oriented in some way, we focus considerable attention to the display space to spot trends, both in the near-term and on a long-term basis.  Should a large CE company decide that XR is a viable consumer product, the media will blast the web with headlines about the merits of AR/VR and how it will change the world and the way we see it.  Therefore, we look to keep one step ahead and look to spot trends and direction that will move the XR space ahead or delay its (2nd or 3rd) ‘dawning’.


[1] Pixel pitch is the distance from the center of a pixel to the center of an adjacent pixel and is usually measured in millimeters or microns.

​We have noted that the long-awaited standard protocol for smart devices known as Matter was finally released on September 30, with the hope that it will unify the smart home segment and allow consumers to choose what control systems they wish to use for their smart devices, rather than have to use a number of proprietary systems that could not communicate.  The smart home space has been plagued for years by high cost products, incompatible systems, and difficult procedures for getting smart products ‘paired’ to control devices.  Matter was devised to change all of those issues, first, by relieving smaller companies from having to maintain private networks and letting them  concentrate resources on their smart devices; second, giving all devices a common communication protocol that allows them to speak with each other; and third, making the ‘pairing’[1] of smart devices a simple task.
The CSA Alliance, the organization responsible for Matter, held a conference in Amsterdam this month to showcase Matter compliant devices such as smart locks, smart lighting, and a variety of more complex smart devices, all of which should be capable of running Matter of Wi-Fi and Matter over Thread[2].  Theoretically consumers should be able to buy any Matter certified device and use it on any platform, such as Samsung Smart Things, Apple HomeKit, Google (GOOG), and Amazon (AMZN), without the need for adapters or conversion devices, and while many Matter devices were shown, perhaps consumers should wait a bit before delving into the Matter world as there are still a number of issues that need to be resolved.
One major issue is that there are only a relatively small number of Matter certified devices with minor variations of devices being used to bring up Matter device totals, and many of those Matter certified devices are still limited in what devices can control them.  Thread devices require a border router in order to communicate with Matter devices, which defeats the purpose of the Matter concept, and some Matter certified devices are limited to Android based control devices, again limiting the ability of consumers to mix and match components and control devices, and the pairing process, while better that it is with Bluetooth, is still not what we would call ‘easy’ or anything close to self-discovery.
That said, Matter is a chicken and egg situation, and in the CE space, it usually takes a big CE name to hop on board and get the public to believe in the new protocol.  In this case however, while all of the big CE companies support Matter, they are want to give up the ability to force consumers to use their proprietary systems to control smart devices.  Smaller ‘smart’ companies are happy to leave behind their proprietary network costs and jump in with Apple or Amazon and concentrate on creating valuable smart devices, but the big firms are not nearly as willing to cede anything to the competition, and that will keep Matter from being the global ‘smart home’ savior that it should be and slow its pace of growth.  The concept is correct and the protocol will improve over time, but getting the big boys to play nicely together has never been a tenant of the CE space, unless it is collusion-based, so before you go out and start searching for Matter certified products, it might be worthwhile to let Matter stew for a bit to see how it develops.  The good news is that if you wait and it does catch on, again in theory, you should be able to ‘Matter’ your devices with a software update…in theory…


[1] Pairing is a Bluetooth process where devices exchange initial information to a control system or other device.  Once that has been accomplished the devices no longer have to ‘discover’ each other each time they communicate, which takes time and does not always work easily.

[2] Thread is an IoT wireless mesh network built on open standards.  Given its mesh configuration, it is able to function when a node is damaged or off-line, and does not need a router to integrate with a larger IP network.

5G growth continued in October, across  number of metrics, including new 5G phone models, however the rate of 5G smartphone growth slowed significantly in October to 1.3% m/m, the same growth rate as seen in February, usually the lowest point in the year.  While the obvious broad CE slowdown and the continuation of weakness seen in the smartphone space have taken their toll on 5G phone growth, we were surprised that there was any growth in new 5G offerings at all in October.  All in, it was a better than expected month for 5G but we temper our 5G expectations for the holiday season, both here and in China (January 22, 2023).
 

​Samsung Electronics 005930.KS) has changed suppliers for next year’s Galaxy Z Fold 5, and seems to be eliminating smaller level suppliers for the Galaxy S flagship line, as it moves more camera business to its affiliate Samsung Electro-mechanics (SEMES) (009140.KS).  For those high-end models, Samsung has eliminated Partron (091700.KS), who was a small supplier for the Galaxy line, and will be using SEMES, MCNEX (097520.KS), and Cammsys (050110.KS) for the Galaxy Flip 5 front camera, and for the Fold 5 Samsung will use the same three suppliers with Shenzhen Sunny Optical (002876.CH) as a secondary supplier, while the upcoming Galaxy S23 line will use cameras from SEMES, Sunny, Powerlogics (047310.KS), and Namuga (190510.KS), with Partron as a back-up supplier.
Partron is trying to diversity, lessening its reliance on the smartphone business, and hoping to move into the automotive camera sector, perhaps a result of Samsung’s supplier changes, but they are still expected to be supplying cameras for Samsung’s mid-to-low priced Galaxy A and Galaxy m series which are their higher volume models but face even more price pressure from Chinese brands.  All in, Samsung’s mobile division remains under pressure to reduce costs, and has been and is expected to push even more business toward OEM’s in 2023.  This could mean less business for South Korean component suppliers, as OEMs have component source decision making license, and as Samsung pushes more business toward its own affiliates, so the race to be included in those products, such as the foldables and flagship phones, becomes even more important.