​Xinhua News Agency, the official press agency of the People’s Republic of China, is the largest media group in China, and is the media arm of the Chinese Communist Party.  While a vast news agency, Xinhua also is responsible for the dissemination of state propaganda, a conflict that appears almost daily as it condemns any criticism of state policies while reporting the news gathered by its news bureaus across China and the globe.  Only a few weeks ago, the People’s Daily, the companion newspaper to Xinhua’s broader media reach, had been speaking out about the increasing excitement surrounding the use of NFT (Non-Fungible Tokens) based investments, citing the prospects as ‘a zero-sum game hyped by cryptocurrency investors’, with the potential for investor losses, having already banned cryptocurrency mining and  trading.
That said, the Chinese government, despite the warnings, has not banned NFTs or the Metaverse itself, leaving open the prospects for NFT based investing and Metaverse development open to the Chinese people and businesses, and as we have noted frequently, a rash of virtual real estate companies have been hawking plots of ‘land’ in virtual space, along with a collection of companies selling both virtual items and digital media using NFTs to guarantee exclusive ownership through block chain transactions.  But nothing is stranger that the idea that on Christmas Eve the Xinhua News Agency itself will be issuing the country’s first ‘news digital collectibles’, a collection of over 100,000 selected ‘2021 commemorative news photos’ that will be given away for free, using NFTs, with the idea of promoting block chain rather than the speculation on the price of digital assets.
While the county has banned cryptocurrencies, stating that they are not legal and cannot be used as currency, NFTs are more of a means to an end for any kind of transaction (digital or physical), which puts them in a grey area.  That lack of definition is giving Chinese companies the ability to issue what are called digital collectables, with NFTs keeping track of both transactions and ownership.  Such collectables can range from e-mails or text from important or famous people to digital artwork or the aforementioned virtual real estate. 
While the Chinese government seems a bit more in tune with the digital world (listen to the questions asked by US congressmen during the recent digital media hearings if you doubt this), there seems to still be a bit of a divide between rules that are to ‘protect Chinese consumers from potential fraud’, ending the use of bitcoin and mining, and the potential for revenue from the sale of digital assets that have a value based on a highly speculative and unregulated market.  NFTs are block chain based as are cryptocurrencies, so it becomes difficult to tell the difference between why the government would ban bitcoin mining and not the sale of digital assets owned by an individual or corporate entity. 
One could make the case that as bitcoin could be mined and therefore supply could be increased leading to the devaluation of the asset, the owner of a digital asset can also duplicate that asset electronically before it is sold, as long as the sales are made under the disclosure that there are X number of exact digital copies of the asset.  While that might lower the value, just as multiple prints of artwork lower the value of each, mining bitcoin does the same.  These are new and complex issues that in many countries will face endless legal challenges, while in China, the government will make those determinations, and so it seems that buying Chinese digital assets could eventually face the same fate as bitcoin, pulling 1.45b potential buyers out of the digital market.  NFTs are a vehicle for digital transactions just as NFTs are, so its something to think about before buying Chinese digital assets.

​Jahwa Electronics (033240.KS) is expected to be the producer of optical image stabilizers for the iPhone 14 due out in 2022, the first time the company has become part of the Apple supply chain.  Optical image stabilizers are used to keep small device movements by the user from disrupting the image as it moves through the lens system to the image sensor and blurring the picture.  This is done by making small counter-movements to the lens or the camera module itself as the picture is being taken.  The company has expanded its OIS operation through the purchase of an idle factory in Gumi, South Korea, the location where LG Innotek (011070.KS), the primary supplier of camera modules for the iPhone has a number of factories. Apple management visited the Jahwa factory in Cheogju in June of this year, leading to the qualification.  We expect the new Jahwa plant will be dedicated to Apple exclusively, who was instrumental in choosing the location of the new plant.
As the sophistication and cost of camera modules used in the iPhone have increased over the last few years, Apple has begun to change the way it procures camera modules.  In previous years the company purchased double and triple camera modules from LG Innotek, Sharp (6753.JP), and O-Film (002456.CH), with O-Film having been eliminated from the Apple supply chain for ethical violations this year.  Going forward, it is expected that Apple will procure camera module components individually, with LG Innotek and Sharp now supplying the cameras themselves to Foxconn (2354.TT), who will now do the module assembly for Apple. 
While we believe the motivation for the change is cost based, higher resolution image sensors in new cameras make the necessity for OIS considerably greater, requiring Apple to have more control over both the components and the assembly process, which includes an alignment step that is critical for the modules to function properly.  Hyvision (126700.KS), a producer of camera module inspection equipment is supplying such equipment to Foxconn and to LG Innotek for both optical camera and TOF production.  As Apple is expected to increase 2022 iPhone unit volume by up to 30%, Jawah’s commitment to the new plant is testament to Apple’s supply chain strength.

Hyundai (006380.KS) is a big automotive company, owning much of Kia (000270.KS) and Genesis (pvt), along with its own brand, and Hyundai-Mobis (012330.KS) is the service arm of the company and one of the largest auto parts companies globally.  Mobis will be exhibiting updates to its M.Vision POP and M.Vision 2 Go ‘shared mobility vehicles’ at CES in January.  These battery based autonomous vehicles have the ability to rotate all four tires to allow for parallel parking and a ‘communication lamp’ on the front grill to ‘engage nearby pedestrians’ to avoid accidents, but while these are concept vehicles like many others to be shown at CES, that is not what makes them different.
Hyundai-Mobis will be giving in-person and on-line attendees a choice between seeing the vehicles in person or by visiting the company’s Metaverse site, where visitors can create their own avatar in ‘M.Vision Town’ and test drive each vehicle (starting January 4, 2022).  Of course the company will also have a private booth where a number of new products will be showcased for potential customers (and orders taken), while the company will also sponsor a 2D virtual showroom for those not attending the show in person.  No indication of whether the Metaverse site will require a VR platform for use, although we expect such a requirement would limit the number of virtual attendees.  Whether you want it or not, the Meatverse is coming.

​Genesis Photonics (3383.TT), a supplier of LED products including flip-chip and specialty LEDs, has sued Apple (AAPL) in the Taiwan courts for infringing 9 of the company’s patents concerning LED packaging, including mini-LED packaging and mini-LED backlight modules.  The Apple products that the Genesis suit is focused on are the iPad Pro, the iPad Pro Mini and related products, with the suit requesting that all infringement cease and the firm be compensated for the infringement.  The documents specify compensation of $7.55m, which is the minimum necessary for the filing, with the actual amount to be refiled after the number of infringing products is determined.  Genesis expects to file similar documents in other countries.

No this is not about inflation, although it is certainly a topic for discussion in the CE space; Its about the cost of producing semiconductors, actually the cost of building semiconductor capacity, a topic near and dear to those who have been told by foundries that they are ‘in-line to see actual product in about 6 to 9 months’.  Foundries, both mature and newer nodes, have been running at near or full capacity for much of this year and plans for capacity expansions and greenfield fabs are making headlines as fears that consumers will not be able to purchase all of the items they want during the holiday season and beyond.
Taiwan based Trendforce published data estimating the cost of building a 300mm 50,000 unit/month fab that shows how expensive it has become to build such facilities, even those at more mature nodes, and how this continues to narrow the number of companies that have access to such capital.  The top 5 wafer foundries accounted for 27% of global semiconductor investment in the 1997 – 1998 period, with that increasing to 58% by 2008, while the current top 5 now account for 72% of that spending.  While there was considerable focus on 5nm and smaller node development before this year, the capacity constraints felt by foundries has pushed that focus to more mature nodes where the bulk of commercial and industrial semiconductors are produced.
Not only is the cost of building semiconductor fabs increasing but the cost of designing the IC is also quite sensitive to the process node needed.  The design cost increase for ICs at mature node levels is between 32% and 37% for each incremental node, but once 16nm is reached that increment increases from 51.2% to 82.1% at 5nm, with ~50% of the cost being EDA tools, making it considerably more expensive and therefore difficult for smaller IC design houses to develop leading edge products, again shifting that development to companies large enough to support such development projects.

will have to shell out more if you still want to surprise the wife with a new high-end Samsung TV.  With only two of the 35 Mini-LED/QD or QD only sets not at their lowest price (94.3%) last time we checked (11/26) Samsung has since boosted prices on many, leaving only 20 (57.1%) still at their all-time lowest price.  Samsung did not change the set prices on any of the six 8K Mini-LED TV sets, but made some serious changes in pricing on the 4K Mini-LED/QD sets, where prices increased between 7.7% and 35%, with only the 98” set remaining flat at $15,000 and a 43” Mini-LED/QD model seeing a 7.7% price drop, the only drop in the group.  The 18 QD only sets saw three price decreases (55” and smaller sets) ranging from -5.9% to -10.0%, but the rest saw price increases ranging from flat to an astounding 58.8% increase, with the average increase for QD only sets being 6.2% and the average increase across the entire Mini-LED/QD and QD only line 7.3%.
While Samsung is advertising these sets under the title of “Don’t miss Black Friday in winter pricing”, prices have increased over the last few weeks as a host of supply chain issues and COVID-19 take their toll on in-store sales.  Of the 35 Samsung TVs listed on the Best Buy (BBY) site, 23 were in stock (65.7%) and across all TV brands carried by Best Buy, 75.9% were in stock, indicating that little has changed across the TV supply chain.  While we expect few discounts between now and the end of the year, New Year sales will likely occur, at least to some degree, and with many new models from TV brands being introduced at CES in January, brands will start to focus on reducing 2021 inventory in anticipation of building 2022 model stocks, so 2021 models will likely see another round of discounts before the new models become available. 
At CES Samsung is expected to show the first iteration of its QD/OLED TV that is based on multiple OLED layers and quantum dots that convert the OLED light into RGB pixels.  While pricing will certainly be an issue given the new technology and minimal production, we expect the product to be of high quality and a step ahead of what is currently available.  While Samsung Electronics has a wide variety of TV technologies for consumers to choose from, and might be offering WOLED TVs at some point this year, the new QD/OLED product is more important to Samsung Display (pvt) who has ended most of its large panel LCD TV production and needs a product that can fill that gap over the next two years.  While SDC dominates the small panel OLED market, they have a need for a blockbuster large panel product that they can sell to parent Samsung Electronics and Sony (SNE) with enough success to justify capacity expansion.  Without that type of successful product, they will remain out of much of the TV panel market.

​The SIM card (subscriber identity module) in a smartphone is an essential part of the phone and most modern phones will not work without it.  It contains an international subscriber number and a key that identifies the phone to networks and specifies the services that the subscriber has access to on that network, along with a subscriber PIN and a PUK (personal unblocking key) to unlock the PIN.  Physically the SIM card is usually moved from an old phone to a new phone, or a new SIM card is burned, allowing thye device to be registered and identified on the carrier’s network, but over the last few years, the development of e-SIM, an IC that is part of the phone, is slowly changing how SIM cards work and what can be done with them.
Changing carriers with a physical SIM card usually entails going to a store location for that carrier, signing a contract, and having that carrier’s SIM card placed in your phone.  This is not something that most subscribers do on a regular basis and carriers are not want to make this an easy process to prevent subscriber churning as new rate plans are revealed.  E-SIMs however, are programmable, allowing the user to download a new carrier’s SIM information without the complexity of a physical trip to a carrier or smartphone brand store.  There was resistance from carriers when e-SIMs appeared, for obvious reasons, but they have been accepted by smartphone brands and are finding their way into a substantial number of popular smartphone brands.
Looking at the ~546 smartphone models currently available, 26 state that they contain an e-SIM and while that is a small percentage (4.8%), all of the iPhone 13 line and all of the Samsung S21 flagship line contain e-SIMs, along with the Google (GOOG) Pixel 6 line and a smattering of Chinese branded models, among which are some of the most popular Chinese brands.  The problem with e-SIMs however is not that they are not available in many phones but that they are not always supported by local carriers.  In the US AT&T (T), T-Mobile (TMUS), and Verizon (VZ) support e-SIMs, along with Verizon sub-brand Visible (pvt), Truphone (pvt) and Ubigi (9432.JP). 
E-Sims are slowly being adopted by government telecommunication groups around the globe and while this will take some time, it does open up prospects for a concept that might appeal to subscribers, that of being able to have two carrier subscriptions on one phone.  By using a U-SIM (a SIM card for 3G carrier services) and an e-SIM on the same device, the user can have a work phone account and a personal phone account on the same phone, without the complexity of having to allocate a portion of the phone service cost to each account.  Services for the business number will be allocated to that account while calls to a personal account will be so routed, with both numbers ringing on the phone.  This idea can also allow the user to subscribe to a discounted carrier plan for personal use while using a more robust plan for business.
While e-SIMs are still a bit esoteric for the average subscriber, and carriers are not usually the ones to be proselytizing such a service, e-SIMs are just another cog in the wheel of digitalization, which has already changed the face of telephony over the last few years.  It will be nice to be able to change carrier plans without having to wait on line for a carrier employee to tell you that ‘we don’t do that here, you have to call the 800 number first’ or telling you that they need to keep your phone overnight to make the change, and even more important, the competition that such an ability will generate among carriers, which will benefit all subscribers.
 
 

Since Facebook (FB) made the Meta-verse an official ‘thing’ the overwhelming interest in the concept, especially in China, has pushed companies in fields far from hardcore VR/AR hardware and software to find ways to include ‘Metaverse’ in promotional literature and comment on how they will benefit from the soon to be developed technology.  We have seen chemical companies indicate how they produce materials that are used in displays and are therefore beneficiaries of the Metaverse and electronics companies from processors to resistors referencing how they might be the beneficiaries of the next internet revolution, the Metaverse.
Google (GOOG) search results are a basic way to track how much interest is being generated by a topic or specific word and the results seen in Fig. 2 and Fig. 3 indicate that there was little interest in the term until October of this year, when Facebook rebranded itself ‘Meta’ and teased the world into the Metaverse concept.  While we have mentioned China as a region where the Metaverse has been a focus of attention, on a regional basis there seems to be no rhyme or reason as to regions where search results for ‘Metaverse’ are the highest.  Singapore is at the top of the list, but neither China, the US, or South Korea was in the #2 spot, which was given to Myanmar, followed by Turkey, Hong Kong, Cyprus, and Nigeria, with South Korea #7 and the US #14, indicating that ‘Metaverse’ interest seems to be boundless across the globe.
Since the term Metaverse’ is relatively new, but the concept for immersive 3 dimensional worlds has been around for many years, we took a look at a number of companies and how they have been involved in what could be construed as the Metaverse, starting with Apple (AAPL).  We chose Apple as they have a reputation for secretive in-house technology development but are quite conservative about implementing said new technology, and while they acquire many small companies each year, the Metaversey acquisitions Apple has made point to where Apple’s development focus has been oriented.
As far back as 2010 Apple has been interested in the technologies that are or will be part of Metaverse development, and facial recognition was among the earliest Metaversy acquisitions.  While the idea of facial recognition was focused on identification, eventually leading to Apple’s Face ID system, it is a key component in developing a Metaverse that looks realistic and lifelike and PrimeSense was a key asset as it was the basis for the Xbox Kinect (MSFT) system, with similar systems used for VR gaming movement analysis.
In the 2015’s Apple was interested in navigation and positioning, and while much of that interest was to offer a competitive map solution for the iPhone line, positioning is also a key component for the Metaverse, as the concept allows users from any location to be positioned in an open Metaverse, along with the concept that real estate in the Metaverse can mimic physical real estate, which makes precise location necessary.  However by the end of 2015 Apple was back to looking at ways in which it could capture physical objects and convert them to 3D graphical images in ways similar to how object overlays can be inserted in AR images.  Apple does have its own AR SDK (ARKit) that supports a number of AR/VR development engines and states that more than 10,000 iOS applications support AR and has added over 100 patent filings in the AR space this year.
While many of Apple’s Metaversy acquisitions were software based, they did purchase a company in 2017 that had developed (but not released) a combination AR/VR headset, and while the device never saw the light of day, the team became part of Apple’s AR/VR headset development team that gets a bit of publicity every time someone predicts an imminent AR or VR headset release from Apple.  Later acquisitions focus more on 3D content creation systems and animation and editing systems, as we expect Apple would be remiss if they were to eventually release an Apple VR/AR headset that did not have an Apple content platform able to be accessed directly.  While VR and AR headsets could eventually be a viable and profitable product for Apple, the real game is in the services space, where an ‘Apple Metaverse Store’ would open up Apple users to content developed for the platform, just as it does for games and other applications.
As we noted, Apple is slow to add new technology, but they have been developing software and hardware related to AR/VR for many years, a luxury afforded those who have billions in FCF, and we expect when the company does release a device, it will be sleek, sophisticated, and expensive, and will legitimize the Metaverse far more than any other CE company.    More to come…
Apple Metaverse related acquisitions (not all):

• 2010 - Polar Rose – Sweden - ~$25 - $30m – Add –ons for browsers that used facial recognition to tag people in photos
• 2013 - PrimeSense – $360m – Fabless semiconductor development company that created sensors that used structured light to create 3D object maps.  Eventually used by Microsoft for Kinect™ gaming system.
• 2015 - Coherent Navigation – Location based navigation and precise positioning
• 2015 - Metaio – Germany – SDK AR Applications – Junaio (AR Browser) – The company’s tool was used to produce AR type videos and had 150,000 users until it was purchased by Apple in 2015.  Most of the information on the company has been taken down.
• 2015 - Mapsense - $25 - $30m – SF Startup – Cloud-based developer platform for graphical model data
• 2015 - Faceshift – Zurich – Markerless Motion Capture SDK – Used in film and animation.    (https://youtu.be/RLfAmNDNgHk)
• 2016 - FlyBy Media – US – 3D sensor based application that scans objects and builds virtual maps (objects) that can be used in messaging, advertisements, or any applications.  Originally developed as part of a Google (GOOG) project.
• 2017 - Vrvana – Canada - $30m – Combination VR/AR headset – Announced but never released.  Had early 6DoF (6 degrees of freedom) capabilities, something not every current headset is capable of.

The Global Mobile Suppliers Association is a trade organization that promotes the use of 3GPP (3rd Generation Partnership Project) standard protocols for mobile telecommunications.  Such standards cover those related to 2G, 3G, 4G (LTE) and 5G and the organizations executive members include Apple (AAPL), Ericsson (ERIC), Intel (INTC) Qualcomm (QCOM), Huawei (pvt), Samsung (005930.KS), Nokia (NOK), and ZTE (000063.CH) along with thousands of members and the association also amasses global data on a variety of topics related to the current state of mobile communication.  Based on that accumulated data we have put together a sort of 5G year-end summary that points toward the state of 5G today.

• 481 operators in 144 countries/territories have invested in 5G to date.  That is up 16.7% y/y.
• Of those 481 operators, 189 in 74 countries have launched one or more 5G services, up 40% y/y.
• There are 81 operators offering residential or business 5G FWA (Fixed Wireless Access) services, up 84% y/y.
• 32% of FWA service providers offer speed-only based rates, while 36% offer volume-only based fees, with 9% offering both plans.
• FWA quoted speeds range from 50Mbps to 4.2Gbps, with just over half between 250Mbps and 1.0 Gbps.
• 207 5G FWA CPE (Customer Premise Equipment) devices have been announced (up 92% y/y) with 61.8% for indoor use.
• Private network deployments (664 total) are primarily LTE, but currently 5G private networks hold a 20% share, with combined 4G/5G adding another 5%.
• The total count of announced 5G devices is now over 1,200 with 832 commercial devices
• 5G form factors continue to increase (22 currently), with phones making up the largest share (~50%) (See Fig. 1)
• 596 5G phone models have been announced with 530 commercially available from 40 vendors, with 8 additional vendors with announced models.
• There are 5 suppliers of 5G chipsets and 47 commercially available 5G mobile processors/platforms (up 88% y/y) and 17 commercially available 5G modems, up 70% y/y.
• 55 5G Chipsets support sub-6 GHz spectrum (60.4%), while 36 support mmWave (39.6%)
• 82.1% of all announced 5G devices support sub-6 while 12.4% of announced devices support mmWave.

All in, despite any issues surrounding the mobile phone business, it has been a good year for 5G overall, with almost every metric expanding on a y/y basis.  While Sub-6 is the dominant spectrum, with a slower data speed than mmWave, overall 5G speeds continue to improve and the auctioning of C-band spectrum should continue that trend in 2022.  5G deployments globally have been delayed somewhat due to the COVID-19 pandemic, and we have little trust in coverage maps, but as deployment expands in 2022, mobile users will see less 5G drop and 5G FWA will continue to expand as a business or residential alternative to fiber and cable.  Phones with 5G capabilities continue to expand penetration in mid and lower priced tiers and consumers seem to have accepted that 5G capability is the obvious choice if you live in any urban or suburban area.  5G device suppliers are so common that Huawei, the supplier with the greatest 5G device share, has just over 5% of device share, and Samsung, one of the biggest proponents of 5G in the early years, remains under 5% in terms of device share (Fig. 2).

We have spent considerable time recently concerning the state of the VR/AR world.  VR headsets have made some significant improvements in metrics such as pixel density, FOV (field of view), and weight, but the dreams of a world full of folks wearing VR headsets during much of their waking but non-working hours is still pretty far off.  AR glasses are also improving, and while they do not provide the all-immersive experience demanded by the upcoming Meta-verse, they do provide considerable help to those in industrial environments.  However, as Google (GOOG) and others have found out, consumers do not want to wear AR glasses that are bulky or look like you have just stepped off of the Space X (pvt) Falcon 9, passing on the idea of ‘instant data’ for a good pair of Gucci (KER.FP) frames. 
The idea of always being in touch with social media, the internet, and just about any sort of mobile communication, while wandering around a city such as New York, does have appeal to many, despite the dangers it might create, but implementing such a system still requires considerable expertise in a number of CE specialties and while continuing to evolve, is not easily implemented in a ‘cool’ way.  That was until a California based start-up called Mojo Vision (pvt) began developing an AR device that is not only unobtrusive but would be invisible to the casual observer.  The company is developing an AR ‘contact lens’ that would allow the user to see the same superimposed data that a pair of AR glasses might provide, just by wearing what looks like a contact lens with a bit of a ‘Terminator’ cast. 
The device is powered by a Micro-LED display that is ‘the size of a grain of sand’ and sensors that are internally powered, along with a lens that corrects your vision.  The ‘correcting’ part was what gave the company’s founders the idea that a bionic eye might be able to be used to correct severe vision issues and finding an engineer who had considerable experience in AI, computer vision systems, 3D graphics, and VR, who had his own vision issues, began the push toward the development of what is now getting close to reality.  The display, which has ~70,000 pixels, and is less than half a millimeter across, projects the overlay image directly to the back of the eye (fovea), which is the area of the eye that detects fine detail and is essentially a dense collection of photoreceptors taking up less than 5% of the retina.  Being .48mm in size and having 70,000 pixels, gives the display a ppi (pixels/inch) of 14,000, which is ~300 times that of current smartphones.  The display projects a mono-color image, essentially data, which precludes the necessity of a more complex full color display, and the internal battery, which is rechargeable, can last for an entire day, with future versions wirelessly powered by a device worn on a necklace, although that is still quite speculative.  The device does need a smartphone or similar device to connect to the outside world, with future versions containing communications hardware, but again, that is in the future.
The company, which has raised $159m in seven rounds, including Dolby (DLB), LG (066570.KS),  Motorola (MSI) and a number of VCs, is focusing (sorry) on developing some very specific applications for the device, among which is an application for firefighters, which lays out build plans as the user moves, along with outlining objects that might be difficult to see under smoky conditions (imbedded camera), along with oxygen levels and messages, although the usage shown on the site is more pedestrian in nature.  There are still a number of hurdles that need to be met before such a device can actually be used, some of which might keep the device out of the public eye (sorry) for some time, but with 150m contact lens wearers globally there is certainly a market for just the ability for such a device to improve eyesight, and with the promise of a connection to a world of data without the need for glasses, the incentive is certainly apparent.  While an actual product is still in the future, it’s worth a look at the website to get an idea of what such a device would be capable of[1].


[1] SCMR LLC, has not connection with Mojo Vision, its employees or its partners, and has no investments in any companies, public or private.  We present this information as a reference only and do not suggest that investors take the information as a recommendation to buy or sell companies mentioned.