According to the Semiconductor Industry Association (SIA), which represents 98% of all US semiconductor companies (by rev.) and ~65% of all non-US semiconductor firms, the Section 301 tariffs imposed in 2018 under the US Trade Act of 1974 are limiting the growth and development of the US semiconductor industry and are disrupting the US industrial supply chain.  The 25% duties on what the SIA says are critically needed semiconductors from China are exacerbating the US chip shortages, contributing to US factory shutdowns, reducing jobs and reducing working hours for the 277,000 workers in the US semiconductor industry, and the association has added its reasoning in a letter to the Office of the US Trade Representative.  Adding that the industrial production issues caused by the tariffs are contributing to the inflationary pressure on imported semiconductors and therefore the previous administrations hardline decision to deny or terminate product exclusions has been a bigger detriment to US companies and consumers than to Chinese companies.
In 2017, before the tariffs were implemented, Chinese semiconductors and related products imports were $2.501b, which fell to $2.28b in 2018 when the administration implemented ‘List 1’ & ‘List 2’ product tariffs.  In 2019 Chinese semiconductor imports fell further to $1.54b and again in 2020 to $1.49b with the implementation of ‘List 3’ and ‘List 4’, which further limited Chinese semiconductor imports.  While semiconductors are pervasive across much of the US industrial base, the SIA cites the semiconductor content in the healthcare and medical device sectors, where intermediate costs have affected the ongoing battle against the COVID-19 pandemic.  “Far from incentivizing U.S. manufacturing and bolstering U.S. competitiveness vis-a-vis China, the tariffs are actually pushing American firms to consider highly undesirable and counter-productive mitigation measures as means to offset cost increases, measures that run directly counter to the Administration’s goals.”
In response to the supply chain disruptions caused by the pandemic the global semiconductor industry has pushed production to its limits, at what the SIA calls ‘unprecedented levels’, and competition from multiple sectors of the economy, along with geopolitical tensions, has encouraged production expansion, but the longer-term nature of semiconductor capacity expansion is not expected to have an effect on the shorter-term challenges facing the industry.  The 25% tariffs, aside from the inflationary impact, also pushes global semiconductor producers to divert what scarce resources they have to customers that do not have tariffs, as opposed to the US, adding to the US semiconductor shortage issue.
The SIA states that China is not a major factor in global semiconductor technology and the $2.65b semiconductor import level from China in 2020 represented only 6% of total US semiconductor imports and 2.77% of the total US semiconductor market.  Further, ‘the reality is that most of the chips imported from China were developed and manufactured at plants owned and operated by U.S. semiconductor companies there. Most of these semiconductors are older, more basic, low-end and lower-value technologies,2 but are still widely used in certain industrial applications, e.g. automobiles.’  Most of the chips imported to the US are from Taiwan, South Korea, and Europe, which means State-owned Chinese semiconductor companies have little incentive to address the US trade, IP, and force technology transfers that were the basis for the original act, transferring most of the tariff burden to the US semiconductor industry and US businesses and consumers.
While China contributes 22% of the assembly, packaging, and testing services for semiconductors that are manufactured in other countries, which are low value and labor intensive processes, Chinese OSATs are less sophisticated technically than those in Taiwan, where much of the advanced packaging takes place.  With many of the ATP infrastructure in China being subsidiaries of semiconductor producers in other countries, the cost of moving that infrastructure away from China would further weaken the cost structure of the semiconductor industry and pull capital away from the US semiconductor industry.  Tariff exclusions from Section 301 would help to alleviate the semiconductor shortages facing the US economy and would remove the pressure on those companies that rely on imported semiconductors.  The SIA does not petition for the removal of all 301 tariffs, but provides a list of those products it feels would benefit the US economy the most if they were excluded from the tariff.

​Here are the categories requested for a continuation of tariff exclusion (soon to expire), followed by those categories of products that the SIA asks for further review and the reason behind the request.  We have highlighted those we feel would have a significant effect on the US semiconductor industry:

• Dual layer printed circuit board assemblies, each valued over $30 but not over $35
• Butt splice connectors, for a voltage not exceeding 1,000 V, each valued not over $3
• Ring terminals, for a voltage not exceeding 1,000 V

New Exclusions:

• Machine tools operated by electro-chemical or ionic beam processes - Essential high-end tool for semiconductor manufacturing
• ADP storage units other than magnetic disk, not in cabinets for placing on a table, etc., not entered with the rest of a system - Important electronic good that includes significant U.S. semiconductor content
• Electrical speed drive controllers for electric motors (static converters)
• Printed circuit assemblies  - Significant amount of U.S. semiconductors is embedded on printed circuit boards
• Electrical terminals, electrical splicers and electrical couplings, wafer probers, for a voltage not exceeding 1,000 V - Essential high-end tool for semiconductor testing
• Other electrical apparatus for switching or making connections to or in electrical circuits - Semiconductor related product that is majority produced by non- Chinese companies
• Transistors, other than photosensitive transistors, with a dissipation rating of 1 W or more - Semiconductor transistor that is overwhelmingly produced by non- Chinese companies
• Thyristors, diacs and triacs, photosensitive transistors, Parts of diodes, transistors, similar semiconductor devices, photosensitive semiconductor devices, LED's and mounted piezoelectric crystals
• Optical fiber cables made up of individually sheathed fibers
• Machines and appliances for testing the mechanical properties of materials other than metals and other instruments and apparatus, for measuring or checking electrical voltage, current, resistance or power, without a recording device - Essential high-end tool for semiconductor manufacturing
• Instruments and apparatus for measuring or checking semiconductor wafers or devices - Essential high-end tool for semiconductor testing

All in, while the SIA request is certainly one with a slant toward improving the US and global semiconductor industry and the shortages caused by the pandemic, the products described are not of significant technological value and their exclusion from the tariffs would help to relieve some of the bottlenecks facing US manufacturers.  Of course there would be some financial benefit to those Chinese companies that sell such currently restricted products, but the benefit to the US economy would likely be as great or greater, with little effect on technology development in both the US and China.  Many of the semiconductor related 301 tariffs were based on keeping the Chinese semiconductor industry from advancing and competing more directly with the US, however those tariffs have spurred the Chinese semiconductor industry to expand further. 
That said, most of the more technologically advanced products and equipment under the 301 tariffs and more restrictive trade sanctions will remain, even if these basic exemptions are granted, so the concept of stifling China’s advanced semiconductor industry growth, whether you agree with it or not, will remain, while low technology products will allow the US economy to see less price pressure across a wide variety of US products that do not require high-value semiconductors, a necessary step in our view.  The current administration is asking for comments as it reviews the status of 301 in light of the current state of the global semiconductor industry and expiring exemptions.

​Indonesia is not known as a country with a vast thirst for CE products, but with the 4th largest population globally (ranking just under #3, the US) it is certainly a big enough market and the country’s capital, Jakarta is the world’s 2nd most populous urban area.  The economy is ranked 16th in nominal GDP (just below Mexico) and 7th based on PPP GDP (below Russia).  One of the country’s largest TV brands and a producer of a number of appliance and CE products, Polytron (pvt) has entered the Mini-LED TV  space, with its first Mini-LED/QD TV offering.  This brings the number of brands offering Mini-LED TVs this year to 10, a significant increase from last year’s 1, from TCL (000100.CH), who also was the only brand with a Mini-LED TV in 2019.
As we have noted, Samsung (005930.KS) dominates the space with 16 Mini-LED models, with LG (066570.KS) second and TCL a close 3rd with 5 models and Philips (pvt) with 4.  All others have released single Mini-LED models ranging from 65” to 86”, with Skyworth (751.HK) offering two, a 75” and an 86” model.  While there is little detail on the Polytron set as yet, it is priced under $3,000, which makes it the least costly 86” Mini-LED/QD TV, however Xiaomi’s (1810.HK) 82” Mini-LED/QD set comes in at $1,549, making it the lowest in terms of cost/in2.
As Mini-LED backlight production expands in 2022, we expect most TV brands will either offer or add to their Mini-LED TV models, which in most cases will be at or near the top of their TV lines.  The missing brand this year has been Sony (SNE) who offers what they call ‘Full Array’ TVs, which could mean almost anything from more typical backlight arrays to more sophisticated modules, but with none of the Sony literature mentioning Mini-LEDs, we leave them out of our Mini-LED database, which now includes 39 models released this year.  While some have called 2021 the year of the Mini-LED TV, we expect 2022 will be the real breakout year for the technology as a broad range of Mini-LED backlight products will be offered by LED producers and packagers, along with a number of Mini-LED products that are produced in-house.  As Mini-LED products move into monitors and notebooks, championed by Apple (APL), production scale will increase and cost will be further reduced, although it seems TCL and Xiaomi have already taken the lead in offering relatively low-priced Mini-LED/QD TVs this year. 

The Metaverse obsession continues, not our Metaverse fixation, but the particular fascination that is seen in a number of countries around the globe, particularly China, where CE companies in a wide variety of sectors are constantly being queried about their connection to and potential association with the Metaverse.  Here are a few examples.  These are just a few of the questions asked of Chinese panel producer BOE (200725.CH) on Q&A platforms and their response, which is duplicated for many of the questions.  In just today’s company Q&A there were dozens of questions about the Metaverse asked of BOE.  These questions were logged two hours before this note was written and are similar to those we see almost every day for a variety of Chinese companies, indicating a strong individual investor interest in the Metaverse, despite its lack of definition.

• “What is the company’s layout for the Meta Universe?”
• “What is your company’s plan and layout in Metaverse, and do you have any plans to establish Metaverse Supplies Company?”
• “Hello, Secretary of the Board of Directors excuse me.  BOE has been categorized as a meta-universe concept stock.  Why does BOE not appear in the meta-universe concept stock in the trading system? Thanks!”
• “Is there a relationship between the US Meta, which BOE has invested in, and the Meta after Facebook’s (FB) renaming?”

The company response to the direct Metaverse questions is below.  It was the same for most of the direct Metaverse questions.
“Hello! VR/AR/MR products are one of the key intelligent terminals leading to Metaverse. Continuous breakthroughs in display technology provide the basis of interaction for these smart terminals. The display solutions provided by the company for VR/AR/MR smart terminals include high-PPI, high-refresh rate FastLCD and ultra-high-resolution, ultra-high-contrast silicon-based OLED and other representative display technologies. The layout in the Mini LED field can further enhance the performance of Fast LCD in terms of high contrast, high refresh rate, and high brightness. With the addition of HDR function, it will better fulfill the requirements of near-eye, ultra-clear and delicate image quality of VR products. At present, the company has mass-produced 3.2”, 2880x2880, 1200ppi, FastLCD products equipped with Mini LED backlight. Joint chip and optical manufacturers have released a 0.7” FHD reference design solution, and launched 5644ppi, ultra-high resolution, 120+Hz high refresh rate Representative products such as silicon-based OLED products. At the same time, many products have reached cooperation with well-known leading customers in the industry. In the future, the company will continue to provide customers with diversified solutions such as FastLCD, Mini/Micro LED, and silicon-based OLED according to customer needs. Thanks! Risk warning: At present, the revenue of the above-mentioned XR-related products accounts for a small proportion of the company's total revenue, and the degree of future growth is uncertain. Investors should pay attention.”
It is obvious that the Metaverse is on the minds of the public and investors, and while the concept was really an outgrowth of the gaming business, despite our reservations about the Metaverse, however defined, we expect that Facebook’s name change, an unambiguous attempt at moving the media focus away from FB’s ethical issues, will keep the topic in the public eye.  If it is in the public eye, there are and going to be investment opportunities, some of which will be real and others faddish or just untrue, so we are working toward identifying some of those opportunities and trying to sort through a myriad of public and private companies that have been or are associating themselves with the Metaverse.
In that regard we believe it is important to try to gain insight into one aspect of the Metaverse, gaming, where the idea has been germinating for years.  Gaming is an obvious platform for the Metaverse, as gamers already understand avatars, in-game purchases, and the concept of a non-realistic environments, along with VR/AR as an enhancement, however while in-game socialization is a part of multi-player games, in-game non-player socialization is also gaining ground.  While the level of non-participant socialization in game worlds is nowhere near the level of socialization on social media platforms, the data suggests that while 75% of social media users indicate that they are on the platforms to socialize often or occasionally, 38% of gamers indicate that they use the gaming platform to socialize without playing the game[1].  Obviously a much smaller number, but one that indicates users willingness to utilize a dedicated-use platform for socialization, leading to more ‘time-on-line’ than would be the case for those only playing the game with ‘intent’ to play games in the future rising from 77% to 86% for those who hangout in game worlds.  If users are willing to socialize in such an environment and companies are able to monetize that time, think of how easy it would be to get them to socialize in world’s created just for that purpose.
The data goes a bit further in that when those who socialize in game worlds were polled about what they were most interested in doing while being a non-playing in-world socializer, the answers were surprisingly normal as shown in Fig. 1, which shows the percentage of those opting for ‘interested or ‘very interested’ in the activities shown.  As noted, if age is broken out (Fig. 2), those in the <18 segment would show higher results in the ‘friends’ category, as these are averages across all age groups.  It would seem that the willingness to socialize as a non-gamer in a gaming world is an easily accepted concept for those under 45 years old, and while that might not be the perfect demographics for targeted advertising relative to income and spending (Fig. 3), it is very close.


[1] According to NewZoo data it is nearly twice as common for under 18 year old’s to do this as compared to over 35’s.

​Game developers have been dealing with some of the unusual peculiarities of life in the non-physical world for years and have created ways around some of the obstacles that the Metaverse will face as it becomes a global phenomenon.  Gamers usually collect and purchase items in games, either to enhance their abilities or to gain status.  Such items are particular to each game and therefore gamer spending is limited to their willingness to spend for that specific game, but what if items were able to be transferred from one game to another or one Metaverse world to another?  This would make the demand for an item considerably greater, increasing its value, but a methodology for attaching a multitude of currencies to an item and guaranteeing its singular ownership is a daunting task.
While still a relatively new concept, NFTs (Non-fungible Tokens) provide such a ‘currency’ that has no bounds as to being in the physical universe.  A gamer can purchase an item using NFTs in the same way an art investor can use them to purchase the ownership rights to an e-mail or on-line image.  As the NFTs are merely block chain entries they are not physical, other than as a digital representation, a purchase made using NFTs in the physical world should have a similar value in the virtual world.  This would allow the purchase of non-physical assets in the Metaverse, giving such non-corporeal items value.  While there certainly is and will be the ability of a Metaverse participant to buy physical assets, which would be the primary goal for most companies involved, NFTs area way for companies to ‘sell’ non-physical assets in the Metaverse, the value of which will be determined solely by supply and demand. 
If a user decides he or she likes the look of a particular digital item seen while in a Metaverse world, it can be (will be) purchased using NFTs and brought back to the user’s personal Metaverse world, say a digital picture or a swimming pool filled with mermaids, and becomes the ‘property’ of the purchaser.  In the gaming world, game companies could charge a small fee for bringing in an item that is not part of that game’s element list, and monetize a digital element from another game.  Based on the items ability to influence the outcome of the game, the fee would vary.
NFTs are still in a ‘fuzzy’ area when it comes to legality, not that the idea of using them is being questioned, but the rights of the ownership of the IP related to the item itself, which remain with the item’s ‘inventor’.  This could limit the use of a digital item purchased using NFTs to non-commercial purposes unless specifically agreed to by the IP holder, although it gets even murkier with the sale of Metaverse land that corresponds to land in the physical world (see our note of 11/24/21 “Now It’s Getting Weird”).  There will be legal battles concerning ‘digital rights’ that will confound the courts for years to come, but in most cases companies adopting the Metaverse as a platform will be selling physical assets under typical consumer laws. 
There are many companies that generate digital content that is available for sale and many companies that provide digital creation tools and environments where users can create their own digital (and saleable) content, but while there is an endless variety to digital content, virtual land seems to be an attractive way for purely digital product companies to monetize Metaverse ‘assets’, and the public’s willingness to put down real currency for chunks of virtual land in locations across the globe still has the feeling of the 1925 Florida Swampland scams of Charles Ponzi. 
That said, companies that offer marketplaces where such Metaverse land is sold, get a commission based on the value of the plot and have become adept at bringing in internet celebrities that help to create excitement for a virtual region and bring up land prices in that area generating higher commissions and giving the same celebrities a profitable transaction.  Again, with no physical assets, the purchase of Metaverse ‘land’ is a purely emotional one and only allows the owner to ‘build’ its own content on that virtual plot, with no connection to the physical location in the real world.  While the specter of “The emperor has no clothes” looms in the background, virtual land investing (if you can call it that) has made money for some (usually those receiving commissions or fees), although we look at such as having potential for giving the Metaverse a negative connotation, should the ‘boom towns’ of the virtual world one day wind up as ghost towns.  More to come.

An audiologist must have a doctoral degree, complete 9 months of clinical experience and be well-versed in a wide variety of medical, clinical, and social topics in order to pass the certification exam necessary to hang out a shingle.  That said, many audiologists not only diagnose hearing problems but also provide corrective ‘appliances’ commonly known as hearing aids.  These little items, which are only covered by expensive insurance policies, can range from a few hundred dollars to a few thousand dollars, and given that they are essentially mobile devices, they need battery changes regularly, with many batteries costing over $25.  Some audiologists replace batteries for only the cost of the battery, while others charge rates almost as high as an office visit.
As with any consumer product there are those that take advantage of consumers, and in the case of hearing aids, the market is oriented toward an older crowd, many of whom have fixed incomes or limited financial resources.  Experiences with elderly family members being charged outrageous fees for ‘fittings’, ‘adjustments’, and repairs are quite common, all of which are added to the initial price of the devices.  Long gone are the days of hearing aids that sat in your breast pocket and were connected to a device that was the size of a pack of Lucky’s, but rather than prices going down as electronics miniaturization made modern hearing aids smaller than wireless earbuds, prices remained high because you could not buy hearing aids from anyone other than an audiologist or associated vendor.
In October, the FDA issued a proposal to allow millions of US citizens access to low-cost hearing aid technology by creating definitions for a category of OTC hearing aids, repealing the ‘conditions of sale’ that had previously limited access, and amending the existing labeling requirements for these devices, essentially granting public access to such non-prescription hearing aids.  The ruling, which has yet to be finalized, would not remove the classification of prescription hearing aids but would add a category that would allow access without an examination by an audiologist or require a prescription.  The FDA is asking for public comments by 1/18/22.
Over 30m people in the US are affected by some sort of hearing loss yet only 20% of that population seek ‘intervention’.  When queried the typical hesitancy comes from high cost, the stigma associated with being seen as old or debilitated, and the cost relative to the benefits received, and while there will still be the “I hear what I want to hear”, and the “…Yes dear..” crowd that will still reject the idea, the cost of such devices will likely become a competitive battleground, benefitting consumers.  The FDA will have to maintain a careful eye over OTC products, which will still be under their purview, but we expect a wide variety of prices and options to become available once the rule is approved and in this case the FDA rules preempt any state regulations that differ from or add to the new FDA rules. 
While audiologists might lobby to have the potential rules eliminated, it is certainly time to eliminate the high cost of hearing aids for those unwilling or unable to spend thousands to regain their ability to engage socially or just hear the birds chirping in the AM.  Once the field of OTC hearing aids is opened, R&D in new product development and new technology will become financially viable given the potential market and remotely controllable hearing aids, based on a smartphone app, would be relatively simple to operate and allow the user to gain as much control over the timbre and tone of what they hear, as they would like.  They can still turn it off when the grandkids start screaming or when the wife starts nagging, but at least they can listen to “When the Swallows Come Back to Capistrano” or “Pennsylvania 6-5000” on the old Victrola.

In a not surprising move, Samsung Electronics (005930.KS) Vice Chairman Lee Jae-yong, has decided to streamline Samsung’s operational structure, reducing the primary divisions from three to two and installing two division heads.  As can be seen below, the Consumer Electronics division, which was comprised of Samsung’s TV business and its appliance business (excluding Harman) and the IT/Mobile division, which was composed of Samsung’s smartphone and network products businesses. 
Those businesses have all been combined into the Set Division, which will be run by the former head of the TV division.  The DS (Device Solutions) division (Semiconductors and display) will remain intact but will now be run by Kyung Kye-hyun, who was the head of the company’s flash product business and former head of Samsung Electro-Mechanics (009150.KS), and the Set division will be run by Han Jong-hee who was instrumental in developing Samsung’s TV business, which has been the global leader for 16 years.  While no mention of whether Harman (pvt), which was acquired by Samsung in March of 2017 for $8b, will be included in the Set division, we make the assumption that it will.  Harman has been broken out in Samsung’s results since the acquisition.
In 3Q, the new Set division would have represented ~52.5% of sales while the Device Solutions division would have represented ~47.4% of sales, however in terms of operating profit, the new Set division would have accounted for ~27% of operating profit, while the Device Solutions division would have accounted for ~73% of operating profit. In the same quarter, the consumer electronics portion of the new Set division would have generated ~5% of the company’s operating profit, while the IM division would have generated ~21% of the company’s operating profit.  While both of the new divisions are fairly close in sales, the Device solutions business has been considerably more profitable for Samsung, which likely kept the division intact. 
The mandate for the Set division is likely to increase share in the mobile space by reinstating Samsung’s dominance in the premium market (foldables), to build the company’s networking business, which has been gaining ground on the back of Huawei’s (pvt) trade issues, and to capitalize on Samsung’s dominance in the TV space as TV panel prices decline and Samsung continues to broaden its TV technology offerings.  While divisional shifts such as these are common in the CE space, the change in leadership is usually the more important factor with considerable pressure on the new CEOs.  Each will have their problems to deal with as the COVID-19 pandemic continues to reshuffle the cards, but the ultimate responsibility will come down to Vice Chairman Lee, who was responsible for making the changes and picking the new CEOs.

According to local Korean media, Samsung Electronics and Microsoft (MSFT) have been working on a joint development AR (Augmented Reality) project since the summer that is expected to run for two years, resulting in a commercial product in 2024.  The development project is based on Microsoft’s HoloLens™, an AR headset that Microsoft released in 2016 to developers.  The headset uses Microsoft’s Kinect™ tracking technology, originally developed for the Xbox.   The HoloLens 2 is the current version.
Samsung is said to be using the resources of Samsung Display (pvt), Samsung SDI (006400.KS), and Samsung Electro-Mechanics for the project and is likely contributing its expertise in waveguides, which are used in AR to move the light from small projectors to the user’s eye.  Given that the projected image is small and quite close to the user’s eye, the waveguide can help to expand the FOV (Field of View) to a more natural 40®+, from what was just above 12® in early AR devices.  Samsung has made a number of investments in California based DigiLens (pvt), a producer of such waveguides, along with a number of other prominent strategic investors such as Sony (SNE), Universal Display (OLED), and Dolby (DLB).
While Samsung’s involvement in the project is likely related to hardware and the waveguide module, Samsung itself has not had success with its own VR device, Gear VR, which was released in 2015 in cooperation with Oculus (FB) and was paired with a number of Samsung Galaxy smartphones.  Unfortunately the device was not well received, despite about 5m being sold, and Samsung terminated user accounts and support in 2020 although Oculus continues to support the application.  Estimates are that Microsoft has sold ~200,000 Hololens 2 systems this year, which sell for between $3,500 and $5,200 depending on the configuration.
While talk of the Metaverse has resulted in a renewed interest in AR/VR, the HoloLens is not designed for what might be considered casual use.  The target market for such a device is oriented toward industrial use.  As a mixed reality device, it allows the user to see both the item being worked on and an overlay of almost any kind of detail possible, ranging from schematics to replacement parts that the user can manipulate as if it were part of the physical item being worked on.  The typical use would be similar to Fig. 2, where the maintenance person is able to look at and manipulate an image of the device being repaired to better understand how a part might be replaced.  For anyone who has watched a household appliance repairman call to get a page from a manual sent to his phone in order to figure out a problem, the ability to not have to stop a repair to page through books and lists is an absolute time-saver.

The Metaverse.  It’s a major topic of conversation across all sorts of social media, but even more so among companies that expect to be associated with the Metaverse in a direct or indirect way.  As we have noted previously, the Metaverse is something relatively new and as such means different things to different people, so along with the rest of the investment and scientific community, we have been trying to find a definition(s) that explains what the Metaverse actually is, in simple terms.  
One description that seems to make sense is a reference to websites, which, when viewed on a display, might look three dimensional, but are two dimensional, meaning they have no depth, other than what is created artificially.  The Metaverse is a 3 dimensional representation of a website, using AR/VR to add depth and extend the two dimensional edges of that image.  For example, if you have a website (commercial or otherwise) that looks like a living room, it is limited to the perspective that the developer has set.  You are able to click on an object and see that object details or from another angle, but everything is still 2 dimensional.  If the developer did not provide a view of the object from the back, you don’t get to see the back.
By adding AR/VR to your living room site, you are now in that living room and can turn 360®, walk next to or around an object, or see things that might have been out of view of your 2D perspective.  Items can be tagged, just as they might be in a 2D website, but those tags might be hidden until you look at the item, at which point the information appears in front of you.  You can move around the space in almost any way and not be restricted to any perspective, allowing you to fly, hover, or pretty much do anything the software has designed in. 
While none of this is much different from what you might see in a VR game, where you can travel over what are vast distances and objects, the heart of the upcoming Metaverse takes this concept out of the limited world of a game and into ‘shared’ worlds that are open to anyone who wishes to enter, essentially a 3 dimensional website that is open to the public.  Such metaverses are going to be created initially by those who have the tools and a reason for their creation, and those reasons are quite diverse. 
Take Google (GOOG) for example, a company that has considerable assets in geo-location.  In the Metaverse, meaning once you put on an AR/VR headset, and you ask for “restaurants near me”, the Google Metaverse built around their vast location data will allow you to fly to those locations, and walk up to the first restaurant on the list.  If the restaurant does not have its own Metaverse, you might just see a menu or hours of operation on the restaurant’s window, but if they have their own Metaverse site, you could walk in the door and wander through the restaurant to see if it looks interesting.  Depending on the restaurant’s site complexity, you might be able to see the kitchen and speak with the chef, or look at individual items being served, but just like current websites, it will depend on the individual company involved.
Building out such a geo-location Metaverse, even for a company the size of Google, is a massive task, but ‘near me’ searches carry significant intent and immediacy, which are extremely valuable assets for Google, and make the effort to further engage Google users by opening up Metaverse worlds, a no brainer.  Google Lens already allows for smartphone camera images to be used to locate or identify items or locations, so the step toward creating an AR/VR Metaverse with similar options makes sense for companies like Yelp (YELP), Foursquare (pvt), and TripAdvisor (TRIP).  But while smaller companies will create their own company specific metaverses, we expect Google has much bigger plans.
Google indexes websites.  Its index was estimated to hold 35 trillion web sites last year, which is a paltry 4% of the information that exists on the internet as its crawlers have access to only those links that are publicly available.  The “Dark Web”, which includes information that must be directly queried from a database, password protected information, and many subscription based content, is not part of Google’s index, but that does not mean Google’s index is not valuable, in fact it is likely Google’s most valuable asset. 
Google’s index and the website information it contains is a resource that Google has been collecting for years and is the basis for information it sells to others, but what if Google began to index the real world?  Google already has images of billions of locations that come up when searched, so why not build an index of the physical world, capturing 3D imagery of every spot on the globe?  Such an index would be the primary resource for the Metaverse, with a Metaverse search for a quiet spot in Bali not putting the picture below in front of you, but dropping you right on that beach, where you could wander until bedtime.
While indexing even a small portion of the physical world would require vast resources, the monetary benefits are also vast.  Not only would access to the Metaverse require hardware of some sort, but the connection to social media, potential for local commerce, and collectable data associated with an individual’s actions in the Metaverse, make the development of such free Metaverse universes a vast resource for the data collectors of the world, and the attractiveness of the created Metaverses would keep users on-line even longer than they are now.  You might be forced to be on-line using your smartphone during the day, and limited to typical websites, but when you get home, you can travel the world, explore a particular topic, and delve into a completely artificial world, and be right in the middle of the action, rather than looking through a 2 dimensional camera lens, and you can do it with friends, alone, or with a group of like-minded folk.  What could be more addicting?
Geo-location is just a part of what attracts companies to the Metaverse, and given that the definition of the Metaverse is so broad and undefined, it will be the tech buzz word most likely used to describe almost anything for the next few years.  You can certainly associated AR/VR to the Metaverse, but the data speeds needed for moving through the Metaverse will give those associated with 5G something to talk about.  AI will be used to anticipate a user’s likes and dislikes in a particular Metaverse, and display manufacturers are already being hounded by investors as to whether their products will be applicable to the Metaverse.  Data storage will certainly be a Metaverse topic as will Metaverse software development tools, so there will be few areas in the technology and consumer electronics world that would not have a reason to talk about the exciting prospects for the Metaverse.  Much will be hype as it will take years to develop the sort of global Metaverse that is envisioned by many, but underlying it all is still the need to keep you the user on-line as long as possible, and that does not always have the best possible results.  It’s a very difficult balancing act.

5G device growth (i.e. – the number of new devices with 5G capability) slowed in November, similar to last year, albeit at a slower pace than in 2020.  Device growth had been averaging 7.4% through September and has seen declines in October and November, which is beginning to look like a seasonal slowdown as new 5G devices have already been released for the holidays.  Device growth, while slower in November remains considerably above the trend line (Fig. 3).  5G smartphone growth also slowed a bit in November but the spike seen in September is another indicator that the 5G space has matured enough to see seasonality.  As the data for 5G growth is meaningless for 2019, 2020 is the only data points on which we rely for growth in December. 
Based on last year’s data, we would expect December 5G device growth to be in the range of 5.0% to 5.5%. and while overall 5G growth will slow a bit more in 2022 as penetration rates increase, we expect a weak January and stronger 5G device growth in February and March, a result of Mobile World Congress (2/28/22).  While overall device growth will slow in 2022, we expect penetration to continue to rise as 5G networks in a number of countries will begin in earnest in 2022, and continued expansion in the US and China will take place.  C Band (3.7 – 3.989GHz) auctions and assignments continue in this the most popular mid-band 5G spectrum with only a few European countries still in the planning stage, and about half of South American countries having already assigned the band.  The buildout of 5G systems in these countries is up to both the government or private carriers so the use of such spectrum is not a given, but such spectrum assignments pave the way for 5G usage when the towers are built.

York, a former municipality and now part of Toronto, has a problem and the York Regional Auto/Cargo Theft unit is advising residents that they have identified a new method used by thieves to track and steal high-end vehicles in the region.  Since September 5 incidents have been investigated where thieves have placed small tracking devices on high-end vehicles so they can later locate and steal them.  Apple’s (AAPL) Air Tags™ seem to be the technology of choice for this application, with the devices being placed in out-of-sight places while vehicles are parked in public places like malls or open parking lots.  Thieves then track the cars to the victim’s residence, where they steal them from the driveway, typically using a screwdriver to gain access and then attaching a device to the onboard diagnostics port under the dashboard, allowing the thieves to use the key they have brought along.  With just a little programming, they can drive the car away without pulling the ignition or doing any damage. 
Air Tags seem to be the tracker of choice, and while the York police showed pictures of the device, they did not single out Apple, however iPhone users should get a warning if an unknown Air Tag is found to be moving with them, along with instructions for locating it and disabling same and iOS 15.2 is expected to offer an option to scan for unknown Air Tags that are nearby at the users request.  Android users will have to wait until Apple is able to provide an Air Tag app for Android phones, which is under development, but such an application would have to be downloaded to the user’s phone.  While typical tips for preventing your car from being stolen, such as parking your car in the garage or using a steering wheel lock, seem to be obvious, but locks for the data port are available as are dummy ports and transfer systems that move the port inside of the glove box, but the best way to get your car recovered if it has been stolen is with a remote kill switch.  Perhaps Apple will add that accessory to the Air Tag line.

​TCL (000100.CH) has indicated that it has authorized the construction of a new 15b RMB ($2.35b US) Gen 6 LCD fab in Wuhan.  The new fab will be financed (see below) by the company (11b RMB to start) and the Wuhan government and we note that Samsung Display became an 11.03% shareholder in Chinastar when it sold its Suzhou fab to the company.  TCL owns ~93% of the holding company, with the Chinese government holding the rest.  The fab will be built in 2 phases, the first with a capacity of 30,000 sheets/month and a second phase of 15,000 sheets/month and will be based on IGZO rather than LTPS.   Chinastar (pvt), the display production entity owned by TCL, has only one Gen 6 LCD fab (T3), which it has indicated is running at full capacity, with most of the company’s additional LCD capacity being dedicated to large panel production on Gen 8.5 or Gen 10.5/11 fabs. 
While Chinastar also has a Gen 6 OLED fab (T4), with the shift toward IT products seen in the LCD space over the last few months, it would seem that TCL felt it would need to bolster its ability to capitalize on that change.  The project is expected to take 18 months to complete (phase 1) and will be focused on small and medium sized ‘value-added’ panels, including phones, laptops, automobile displays and VR panels, along with touch panels and Mini-LED backlighting, and while the focus seems to be on IGZO , LTPO was also mentioned in the details.  Full phase one production capacity is expected to take a total of 24 months (6 months from initial production, and phase 2 is expected to be at full production 36 months from the start of the project.
As we have noted previously, panel producers have increased their focus and dependence on IT products over the last few quarters, much of which was a result of the instability in large panel LCD display prices, which had been on a significant downtrend until late 2Q 2020, at which point they ran from near lows to peak prices reinforcing those large panel capacity projects that Chinese panel producers had been so fond off.  However the rise in large panel prices and the lack of further fiscal stimulation measures began to take its toll on large panel price in July, which encouraged panel producers to shift capacity to IT products, which have remained relatively stable in price..  While this has helped mitigate the effects of the large panel price reductions seen over the last 6 months, it also has encouraged panel producers to add IT panel capacity, such as the Chinastar project mentioned herein. 
While this certainly seems like the right path for panel producers in the short-term, it adds to the higher risk profile for panel producers that we have been espousing recently.  IT panel prices have begun to decline, albeit not at the rate seen with TV panels, but even relatively small IT panel price declines will quickly reduce panel producer margins, and the anticipation of additional IT capacity will do little to help.  Again, many panel producers look only at their ability to compete with others and not at the industry as a whole, which is a sure sign that what has been hoped to be a more stable and mature LCD display industry will remain as cyclical as it has been in the past.