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.

​One of the more visible responders to the COVID-19 pandemic has been Apple (AAPL), who has made public much of its communication with employees about its plans for remote worker mandates and store closings.   In early March of 2020 Apple closed its stores in China due to the rapid spread of COVID-19, which were to remain closed until March 27.  While they reopened those stores in March, they closed 450 stores in 21 other countries at the same time as the virus spread globally, with the expectation that those stores would reopen before the end of the month.  The stores in various countries have faced local closings on occasion as infection rates forced restrictions however the company had reopened all of its 516 stores globally by June of this year, being the first time in just under a year and a half that all of its stores were open.  It seems that Apple has decided to once again close a few stores in the US and Canada to prevent the spread of the Omicron variant, after mandating the use of masks for all stores in the Apple system last week.
Apple has faced similar challenges concerning its office workers as far back as February 2020, when it reduced guidance due to a slower than expected return of Chinese workers to factories in the Apple supply chain and reduced demand overall in China., and in a March 13, 2020 statement indicated that “In all of our offices, we are moving to flexible work arrangements worldwide outside of Greater China. That means team members should work remotely if their job allows, and those whose work requires them to be on site should follow guidance to maximize interpersonal space,” with management indicated that all hourly workers will continue to be paid on a business-as-usual basis, and expanding sick leave, mandatory quarantining, or childcare policies going forward. 
In August the company notified employees that any return to offices for Apple staff employees, which had been tentatively scheduled for September and then pushed to October, would be postponed until January 2022 due to the Delta variant, with employees given a month notice before being required to return, although only for an initial 3 days/week.  However yesterday, Tim Cook e-mailed staff, indefinitely delaying that return date and giving all employees, including retail workers, $1,000 that can be used for “work-at-home needs”.   Aside from their donations and direct help during the COVID-19 pandemic, Apple has been quite willing to take whatever action necessary to protect its workers from the COVID-19 pandemic, not something we can say about some in the CE universe.  Altruism is a very rare commodity in the CE space and should be recognized when it occurs.

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.

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

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

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


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

Apple (AAPL) has been a staunch defender of its limitations on who is allowed to fix Apple products.  With reasons ranging from “we don’t want consumers to hurt themselves” to “We only want the best components to be used in Apple products”, the company only allows its products to be repaired through its authorized repair centers, which have access to both tools and the components needed for such repairs, all supplied by Apple.  While this is certainly a way in which Apple can maintain quality for repairs under warranty or service agreements, when devices no longer have such coverage, it gets almost impossible to make repairs, with Apple keeping service manuals, some specialized tools, and necessary software away from non-Apple repairers.  In fact, if one were to try to replace a broken screen on some iPhones, the phone will no longer allow the ID verification system to work, leaving the phone open to identity theft.
Apple is certainly not alone in their despotic control over product repair as a company such as Deere (DE), allows farmers to replace the most common parts on their tractors but does not allow them access to the electronics that are the heart of such machinery, unless the repair and parts are supplied by the company.   iFixit (pvt), a company known for its device teardowns, has been lobbying for years to force consumer electronics companies to allow outside repair and to force them to make replacement parts available to both users and ‘un-authorized’ repair centers, countered by the almost endless resources of those who want to keep what is a profitable repair business under company control., but it seems that the tide is turning as the Biden administration has taken up the cause, working toward what would be a ‘repair bill of rights’ for consumers.
Reading the tea leaves, it seems Apple is taking the initiative and beginning to loosen the strings on product repair, likely looking to present a more customer friendly face before congressional committees call for industry representatives to be grilled on the senate floor as to why consumers should not be allowed to fix their own devices.  We doubt it will make much difference to the average consumer, who doesn’t have the slightest idea what is inside an iPhone, and it will open up consumers to a vast group of mini-mall repair shops that will now have the tools to better understand that they can also charge outrageous prices to fix minor issues, but for the very, very few that are willing to pry open an iPhone and pull away gobs of adhesive, they will have the satisfaction that they were allowed to try to fix their phones, even if they can’t get it back together again.
That said, it might also help the environment in that the life cycle of Apple products could be extended by repairs, which could become a bit less expensive as more repair possibilities are open to consumers.  Rather than throwing an older iPhone in the trash and buying a new one, you might be able to get a new battery or have another issue repaired, keeping a few toxic materials from leaching back into the soil,a small bonus.
Here’s what Apple announced today:
Apple today announced Self Service Repair, which will allow customers who are comfortable with completing their own repairs access to Apple genuine parts and tools. Available first for the iPhone 12 and iPhone 13 lineups, and soon to be followed by Mac computers featuring M1 chips, Self Service Repair will be available early next year in the US and expand to additional countries throughout 2022. Customers join more than 5,000 Apple Authorized Service Providers (AASPs) and 2,800 Independent Repair Providers who have access to these parts, tools, and manuals.
The initial phase of the program will focus on the most commonly serviced modules, such as the iPhone display, battery, and camera. The ability for additional repairs will be available later next year.
“Creating greater access to Apple genuine parts gives our customers even more choice if a repair is needed,” said Jeff Williams, Apple’s chief operating officer. “In the past three years, Apple has nearly doubled the number of service locations with access to Apple genuine parts, tools, and training, and now we’re providing an option for those who wish to complete their own repairs.”
Apple builds durable products designed to endure the rigors of everyday use. When an Apple product requires repair, it can be serviced by trained technicians using Apple genuine parts at thousands of locations, including Apple (in-store or by mail), AASPs, Independent Repair Providers, and now product owners who are capable of performing repairs themselves.
To ensure a customer can safely perform a repair, it’s important they first review the Repair Manual. Then a customer will place an order for the Apple genuine parts and tools using the Apple Self Service Repair Online Store. Following the repair, customers who return their used part for recycling will receive credit toward their purchase.
The new store will offer more than 200 individual parts and tools, enabling customers to complete the most common repairs on iPhone 12 and iPhone 13.
Self Service Repair is intended for individual technicians with the knowledge and experience to repair electronic devices. For the vast majority of customers, visiting a professional repair provider with certified technicians who use genuine Apple parts is the safest and most reliable way to get a repair.
 
Expanded Access to Apple Repairs
In the past three years, Apple has nearly doubled the number of service locations with access to Apple genuine parts, tools, and training, including more than 2,800 Independent Repair Providers. The rapidly expanding Independent Repair Provider program originally launched in the US in 2019 and has since grown to more than 200 countries, enabling independent repair shops to access the same training, parts, and tools as other Apple Authorized Service Providers.
In addition, Apple continues to offer convenient repair options for customers through its global network of over 5,000 AASPs that help millions of people with both in- and out-of-warranty service for all Apple products.
 
By designing products for durability, longevity, and increased repairability, customers enjoy a long-lasting product that holds its value for years. Apple also offers years of software updates to introduce new features and functionality.
​

Apple (AAPL), while a produce of a variety of CE products, is an iconic brand and a company that is a master of marketing.  Apple pays extraordinary attention to product design characteristics, which has always made marketing its products easier than those generic CE products that fall in line with the current swath of smartphones of PCs.  Apple does considerable R&D as to technology and component development in house or in conjunction with suppliers and while not always leading the pack in terms of new technology, the company’s overall product quality is among the best.  That gives Apple the ability to charge a bit more for its products than competitors and has helped the company maintain superior margins, but there is a point at which Apple’s brand marketing can take things a bit too far.
The example is a relatively new item that is part of Apple’s ‘Accessory’ catalog, a polishing cloth “Made of soft, non-abrasive material…”, “…cleans any Apple display, including nano-texture glass, safely and effectively.”  This is a simple way to keep your Apple product displays clean without scratching the surface, likely made of a microfiber material based on a synthetic polyester blend.   The problem with this Apple product is the price, which is $19.00 plus sales tax, and while you get free shipping if you order today, the earliest available delivery date is between January 12 and January 26, 2022, which implies it remains popular, although logistical concerns could also be a factor.
But there are alternatives.  Smaller brands are willing to sell you a 6 pack of 6” x 7” microfiber, individually packed, cleaning cloths, “…perfect for delicate surfaces like LCD TV screens, smartphones and other touch screens…”, for a mere $8.95 (Amazon (AMZN)), or you can get a similar single sheet (7” x 6”) for $1.39..  Not to miss an opportunity, when Samsung Electronics (005930.KS) found out about the product and its price, Samsung Germany sponsored an ‘event’ where they gave out 1,000 ‘glossy cloths’ for free to those that applied through the Samsung mobile app, and while social media questioned Apple’s excessive ‘logo’ pricing, they also questioned Samsung’s tactics.  Some cited Samsung’s Facebook (FB) attack on Apple last year when they released the iPhone 12 without a charger, stating “Galaxy provides the most basic components such as a charger” only to see the post removed before Samsung released the Galaxy S21 without a charger.
 

​Apple (AAPL) has lost a bid to stay a key order in the case of Epic Games (pvt) vs. Apple that was made in September by Federal Judge Yvonne Gonzalez Rogers.  The stay would have prevented the implementation of the court ordered injunction, as noted below, which puts Apple in the position of no longer being able to prohibit application developers from including links to external or alternative payment options, both in the application and through the app registration process.  Apple had asked the court for additional time to rewrite the policies it uses currently, which prohibit payment linking to sources other than the iOS App Store.
The judge’s current stay ruling stated that “Apple has failed to satisfy its burden, and the request as framed is DENIED. In short, Apple’s motion is based on a selective reading of this Court’s findings and ignores all of the findings which supported the injunction, namely incipient antitrust conduct including super-competitive commission rates resulting in extraordinarily high operating margins and which have not been correlated to the value of its intellectual property.” 
This allows the injunction to go into effect immediately, prohibiting Apple from restricting app developers from offering external payment methods to users, although Apple is still allowed to restrict in-app payments.  The judge gave Apple 30 days in which to implement the changes, which will be in effect during the appeal process.  Apple recently updated App Store rules to allow developers to contact users directly about payments, a result of pressure from other lawsuits, which allows methods that bypass Apple’s 15% to 30% commission, but Epic Games (the Plaintiff in the case) is pushing for the in-app rules to be eliminated, and Google (GOOG) has recently indicated it is cutting app store fees for most developers, in a bid to quell further pressure..  

​On October 29, BOE (200725.CH), China’s largest panel producer, held a quiet ceremony marking the final certification needed to become a full scale OLED supplier to Apple for the iPhone 13 line.  As we have noted on numerous occasions, this has not been an easy path for BOE, as the company was unable to qualify for full production at least twice that we know of, and was most recently put on a limited production schedule until final certification could be affirmed.  While BOE has been producing small panel OLED for Apple, an estimated 5.5m units in 1H, the final certification proves out the company’s ability to reach both quality and production goals set by Apple, with an additional 6.5m units produced between July and the end of October, and a current run rate of between 1.5m and 1.9m units/month.  According to Chinese press, by the end of the year this run rate would represent ~10% of Apple’s iPhone shipment target of 160m units, with BOE showing a total of ~50m OLED units (all customers) this year.
In 2022 BOE should be increasing capacity at its Gen 6 Chongqing OLED fab as phase 2 capacity begins production.  While the local press says that production will start in January, and BOE will increase shipments to 80m units next year, we expect mass production, based on a more conservative ramp to see an incremental 27m units from Chongqing in 2022, but we note that is at 100% yield, which we expect is far different than what is seen currently and what will be the case as the new Chongqing lines ramp up.  While we expect BOE will certainly be a bigger contributor to Apple’s OLED supply chain in 2022, we hesitate to make predictions as to absolute share as much will depend on BOE’s ability to ramp production to a viable yield, and BOE’s ability to produce the particular OLED display variations that Apple will request in 2022. 
As we expect most, if not all of the LTPO OLED displays for the top iPhone models will be produced by Samsung Display (pvt), and LG Display (LPL) will produce much of the intermediate model, BOE’s share will be limited somewhat, depending on Apple’s application of LTPO across the iPhone line.  This is certainly a big win for BOE, after a long and difficult path to success, but we expect the Chinese press will take the win to mean that BOE’s ‘glorious success’ will ‘mark the end of South Korean OLED domination’, a bit of a stretch in 2022.  It does mean more competition for both SDC and LGD, but we assume they have been expecting that for some time