​While all local smartphone markets have their own characteristics, the US smartphone market is quite different from other large markets.  It is expected to garner a ~10% share of the overall smartphone market with a population that represents ~4.2% of the global total, while China, with 18.3% of the global population, is expected to be 26.7% of global smartphone share at the end of this year, although both are expected to see negative growth this year.  In 3Q Samsung took the top share in the global smartphone market, although we expect Apple (AAPL) will take that position in 4Q on sales of the iPhone 13 series, but the number 3 brand globally, Xiaomi, doesn’t appear in the US, unless it falls into the ‘other’ category, which in total came to 7% in the US in 3Q.
In the US Apple was the share leader in 3Q at 42%, growing 3% from last year’s 3Q, while Samsung took a 35% share, up 5% from last year.  LG Electronics, who last year had a 13% share in the US market (3Q) is defunct, with much of that share falling to Apple and Samsung.  There were two Chinese brands that registered in the US smartphone market in 3Q, TCL and OnePlus (pvt), with 5% and 3% respectively, while Samsung did not register in China, although Apple had a 13% share in 3Q.  Oppo (pvt) and Vivo (pvt) were the two brands in China with the largest share in 3Q, at a combined 43%, both of whom are owned by the same private company, and Honor (pvt), formerly a Huawei (pvt) sub-brand, came in just above Apple (13%) and Xiaomi (14%) at 15%.
Last year in 3Q, the Chinese market was dominated by Huawei with a 35.6% share, which is now down to 8% because of trade restriction imposed by the US that limit the company’s ability to access Google (GOOG) store applications. So, while the US is a diverse smartphone market in terms of brand source, China is not, with 89.9% of new models released in 3Q coming from Chinese based brands.  With Apple and Motorola the only US based brands in the US market, there is plenty of room for competition for US smartphone dollars, although based on what is currently available from US carriers, there are really few choices other than Apple, Samsung, and Google, with a smattering of Nokia and last year’s LG phones.  

​Last year Apple decided to no longer ship new iPhones with a charger or earphones, citing the desire to reduce carbon emissions and the use of precious materials, under the assumption that consumers already had multiple adaptors and chargers.  Most consumers took the change in stride, although others looked at it as a typical move to reduce costs.  As some consumers have discovered, price increases are not the only way manufacturers can cut costs, with smaller product amounts in larger packaging a common way to keep consumers from noticing a technical price increase, but in the case of the iPhone, the difference was quite noticeable.
The Brazilian Consumer Protection Agency did not take kindly to the change and this year fined Apple $2m for making the change, considering such devices as ‘defective’, and the EU has proposed regulations that would force all smartphones to use the USB-C standard, which Apple does not use.  Taiwan has also taken up the cause with the country’s Consumer Foundation petitioning the government to begin an investigation into the new Apple practice and the government of France has forced Apple to include the earpods in the box with the iPhone 12, citing a law that says all smartphones must include a ‘handsfree kit’ to protect children under 14 from the effects of electromagnetic radiation on developing brains.
While Apple still cites the positive environmental impact of the removal of the charger and earphones, those claims are refuted in a new lawsuit against Apple instituted by a group of law students in China.  In a 2 hour on-line court appearance the students defended their lawsuit (which asks for compensation of $16 + legal fees) noting that 1) the Apple interface is not compatible with USB-C chargers, which are the de facto standard, forcing iPhone 12 users to buy a specific charger for the iPhone; 2) Apple’s contention that separate charger sales are common is untrue as before the iPhone 12 most mainstream smartphones were equipped with chargers 3) Apples claim that environmental factors were the basis for the change is false given that  Apple advertises the MagSafe wireless charger in the iPhone packaging, which uses the most inefficient charging method, putting the value of the charger ahead of environmental issues;, all of which add up to ‘fraudulent behavior’ by Apple.
The case, which was defended by a group of Apple lawyers, is in limbo as supplementary evidence and written materials are being submitted, but the plaintiffs “…hope to awaken consumers' awareness of protecting their legal rights through this case, with the courage of a single spark can start a prairie fire…” While no determination has been made, if these young ladies prevail, Apple could face further legal action pushing back on their charger/earphone decision, which was also followed by Samsung.  Many Chinese brands offer separate smartphone packages with or without chargers and earphones, allowing consumers to choose, and China has been rather aggressive toward big tech recently, so it might behoove Apple to find a solution that does not draw publicity, attracting increased focus by Chinese authorities.  In the long run however, the most important issue for Apple is the ‘forced’ standardization of USB-C adaptors in the EU, which could force Apple to either change adaptors for the region, an expensive proposition, or change across the board.  We expect Apple to spend millions on lobbying to prevent either result, but its hard to get the genie back in the bottle once it is out.

​As we have noted, Chinese panel producer BOE has been working toward inclusion in Apple’s (AAPL) list of primary OLED suppliers, which is dominated by Samsung Display (pvt) and LG Display.  BOE has rule the Apple OLED display gauntlet before and failed to meet Apple’s stringent display specifications, which include both performance parameters and production metrics, but has returned again, this time making the grade as a ‘conditional’ supplier.  Apple is expect to give final approval to BOE within the next few weeks, allowing the company to begin producing in volume for the current iPhone 13.
Current expectations are that BOE will supply ~15m displays to Apple this year, which includes ~10m units for last year’s iPhone 12 and an additional 5m units for the iPhone 13 once final approval is given.  While the company hopes to hit the 5m unit mark for the iPhone 13 this year, suppliers are expecting closer to 2m units.  According to Korean press, BOE is currently producing between 1m and 1.5m flexible OLED panels for the iPhone 12 each month.
BOE is still somewhat limited in what it is able to produce for the iPhone 13 as Apple is considering changing the backplane of a third model from LTPS to LTPO, which heretofore has been supplied by Samsung Display.  LG Display will begin producing LTPO displays for Apple next year so that leaves the possibility that BOE, who is not yet able to produce LTPO backplanes, will be limited to one iPhone model in 2022.  While this is certainly a step in the right direction for BOE, it could prove to be a limitation that will keep BOE from achieving equal status with SDC and LGD until 2023.
Much of the numbers here are suppositions, coming from supposed supply chain sources, but there is much underlying conjecture about Apple’s actual orders for the iPhone this year, and obviously for next year.  As we have noted, we have yet to see any indication that Apple has changed order rates for this year, although Apple’s initial order rates are also still speculative, so for BOE much rests on Apple’s decisions on next year’s backplanes and how well this year’s models sell through. In any case, if BOE does get the final nod from Apple, we will hear about how the Chinese OLED industry will soon dominate the world and put all other producers to shame….

​The Chinese trade press has been extolling the virtues of BOE’s (200725.CH) tacit acceptance into the Apple supply chain and the company’s dominance of the LCD panel space, as it has in the past, and while BOE does get closer to becoming a major supplier to Apple, the gist of some of the ‘glorious’ press is that BOE has also broken into the Samsung Electronics supply chain and is poised to ‘dominate the industry’ as it seeks to replace South Korean (and other) OLED panel producers that have been suppliers to Samsung in the past, particularly affiliate Samsung Display (pvt).
Various statements as to BOE supplying displays for the Samsung Galaxy M series, a low-end smartphone sold in the Mid-east and Asia carries some truth as far as our checks go, but as to whether they are the exclusive supplier (not likely), eliminating  Samsung Display as a supplier from this line, we cannot confirm.  Stories about BOE becoming a potential supplier to Samsung’s “A series” line, among the most popular of Samsung’s phones in terms of units, are also unconfirmed, but we expect much of the talk about BOE’s potential for supplanting Samsung’s typical OLED display suppliers, Samsung Display and LG Display (LPL), is likely coming from the potential approval of BOE into Apple’s iPhone supplier list, which is expected to receive final approval next month.
BOE has been supplying some displays to the iPhone supply chain, but has yet to become a primary supplier, although we do expect that to happen in 2022.  That said, the question remains as to what percentage of the display demand from the iPhone 13 and future series BOE will garner, something we have spoken about a number of times in the past.  Apple not only has display specs that are demanding, both from a technical standpoint and a capacity standpoint, but is very wary of jumping into new technology unless they are fully satisfied that suppliers can meet consistent quality standards.  This tends to categorize suppliers, even existing ones, as to what model’s displays they will produce, sometimes limiting a model to only one supplier if the capacity or quality is still a question.  BOE will have to prove to Apple that it can meet the same specs and volumes that both Samsung Display and LG Display produce in order to become a volume supplier in the same vein as the others, a task that will likely take a number of years.
As to BOE supplying OLED displays to Samsung Electronics, we see that as a somewhat different animal, given that Samsung Electronics has a vested interest in Samsung Display.  That does not mean, at least over the last few years, that Samsung would not use other display producers, and certainly has in the LCD space where a number of LCD suppliers, including BOE, have replaced Samsung Display in the large panel space, where SDC has reduced its production to almost nil.  Where the questions arise however is in the OLED space, where SDC is the leading supplier of flexible and rigid OLED displays for smartphones, and Samsung is their primary customer. 
Samsung Electronics does have to compete with other smartphone brands, especially Chinese brands, well known for producing smartphones that rival feature sets on flagship phones from Samsung.  This competition continues to push Samsung Electronics to find ways to cut costs, especially on low and mid-priced phones, where they face the most competition from Chinese brands.  Given that the display is the most costly single component of most smartphones, logic holds that reducing the cost of OLED displays is the focus of Samsung’s attention and while they are the parent of SDC, SDC is not usually the lowest cost producer.
This is both a function of production costs in Korea vs. those in China, and the fact that most Chinese panel producers are supported financially by the Chinese government through capital project and operating subsidies.  SDC also has the burden of maintaining profitability, especially in the OLED space given it waning LCD capacity, which is not the case for Chinese OLED producers, who have yet to turn profitable in the OLED display space on a yearly basis.  This leaves parent Samsung Electronics to push SDC for lower OLED panel prices, and what better incentive than to give some of its business to Chinese competitors, to make sure SDC understands that it must remain competitive with other OLED panel suppliers.
 We don’t doubt that Samsung Electronics will continue to use Chinese OLED display producers as leverage, encouraging them to continue to develop new products, and would increase usage of same if SDC does not respond in terms of price.  But in the long run, if Samsung Electronics is still going to maintain a smartphone business that is based on premium products, be they the traditional Galaxy S line or new foldables, they will be using SDC in as many instances as possible, and while Chinese OLED producers will make inroads, they will have a far more difficult time replacing SDC with Samsung than they might with Apple, where the brand has no vested interest.  JOHO.

​According to the local press in Ho Chi Minh City, a number of major CE companies located in or around areas affected by the recent COVID-19 outbreak in Vietnam, are expecting to resume full production by the end of November.  A number of these companies are located in Saigon Hi-Tech Park, about 10 miles from the center of Ho Chi Minh City, and is the home of the Vietnam operations of Intel (INTC), Jabil (JBL) and Air Liquide (AI.FP), and about 10 miles from Samsung Electronics (005930.KS) Vietnam plant.
 Locals indicate that many of the large plants in the Saigon Hi-Tech park are operating at ~70% capacity due to travel restrictions, but are expected to see full production within the next few weeks.  Samsung’s factory, which shuttered ~19% of its lines as workers at its main complex were reduced by more than half, and was providing local sleeping arrangements for workers to entice them to remain at the factory.  Samsung generated more than $56b in export sales last year and had been on a pace to exceed that this year, with the possibility still existing if they can resume full production quickly.
Ho Chi Minh City itself began to reopen on a conditional basis this month and has been seeing strong demand from consumers who have been under extended social distancing and quarantining.  However, with factories still operating at reduced rates, shortages have been seen in retail consumer electronics, even after a number of retailers had been building larger than usual inventories in anticipation of the increased demand.  Local CE retailers indicate that shortages continue with laptops and tablets, and even smartphones more recently, where Chinese smartphone brands are in shorter supply than those from Samsung and Apple (AAPL), due to power issues in parts of China.  In all cases however, supply does not meet demand.
One of the large retailers gave the example that they sell ~15,000 Samsung devices every day, but Samsung has been able to supply only 30,000 to 40,000 per week during the lockdown, and other retailers indicate that all iPhone models are in short supply, with iPhone 11 (released 9/2019!) deliveries delayed until next year and iPhone 13 (9//21) deliveries at ~50% of the order rate currently.  Smartphones priced below $265 are out of stock at most retailers and laptops in a similar price range, which are typically used for on-line learning, were sold out quickly when they appeared, as Ho Chi Minh City students will be studying on-line for at least the remainder of the year.
With Ho Chi Minh City representing ~80% of Vietnam’s COVID-19 cases as of last month, and fears that due to the exclusion of rapid test results in government figures, the number of cases during the outbreak peak were underreported, the city was on lockdown for roughly three months.  As of the beginning of October restaurants were able to serve take-out meals again and essential businesses were able to reopen.  Residents having at least one dose of vaccine within 14 days or having recovered from COVID-19 within the last 6 months were allowed to leave their houses, and while inner city checkpoints were being removed, security personnel are continuing to patrol the city and travelers must submit a request to the Transportation Department to enter.  All restrictions on construction projects, office parks, and export zones are also allowed to reopen, although indoor activities are limited to 10 people if unvaccinated and 70 if vaccinated and public transport will operate at 50% capacity, however bars, spas, and cinemas remain suspended.  Most travel guide services tell those entering the city to “remain cooperative if approached and questioned by law enforcement officers and make allowances for business disruptions” which seems to give a good indication as to how things are progressing in the city.

​Yesterday we indicated that rumors were circulating that Apple (AAPL) was expected to cut orders for the iPhone 13 family by between 10% and 12% due to expected delays in components, particularly semiconductors.  We believe much of the speculation is based on delivery delays that have extended into November, feeding speculation that overall orders for this year will be reduced.  The good news is that thus far we have not heard of any suppliers that have received order reductions from Apple, and while rarely would that data be readily available, especially this early in the cycle, with the US press so focused on supply chain issues, that kind of chatter has a way of leaking out.
Many CE supply chain participants have indicated that they are a bit more cautious about 4Q than they were in 3Q, with some citing component issues, but logic holds that anyone watching panel prices has some indication that demand for TVs has been weak, and that demand for IT products has leveled off at the least.  Coupled with logistics issues and sporadic COVID-19 outbreaks in manufacturing hub cities, the prudent CEO/CFO would add a note of caution in anticipation of any of such factors increasing.  We focus attention on a daily basis to signs of changes in various points in the CE supply chain, and hopefully can spot deviations from current norms as they might happen, but we note that companies have been trying to be a bit more careful about leaks, product related or otherwise, and most suppliers would not risk losing Apple as a customer by slipping some order information to a blogger.  Assembling data from as many sources as possible seems to be a more realistic approach to us.

​With the amount of uncertainty facing the CE space, the press has almost infinite grist for speculation.  Cuts in Apple’s orders for the iPhone 13 family are the latest, likely an outgrowth of the delays seen in receiving various iPhone models after ordering and the effects of power limitations across the Chinese supply chain.   Taking into consideration those factors, along with well-known distribution and logistics issues, such speculation draws eyeballs.
There are delivery delays with the iPhone 13 and currently there is no in-store pickup available in the US, with today’s delivery wait times (ordered today) being 12 to 15 days for the iPhone 13 and the iPhone Mini, and 30 to 38 days for the iPhone 13 Pro & Pro Max models (NY delivery).  These delivery dates have been increasing since the initial announcement, although they can vary based on location, color and memory configuration.  While Apple might have reduced its orders from assemblers a bit for the 2021 year (rumors are for between 10% and 12% reductions), those units are more likely pushed into 2022 rather than cancelled as it is still too early in the iPhone 13 family sell cycle for Apple to be cutting 2022 projections.  Should the limiting factors above begin to abate in early 2022, the iPhone 13 family could see a bit of a boost, but that is still a lot of ‘ifs’ so for the time being, we are going to assume that any potential order pushouts will reduce 2022 orders by a like amount, leaving the full year total for 2022 unchanged.

Along with the iPhone 13 on September 14, Apple (AAPL) also announced the latest version of the iPad Mini, the iPad Mini 6, an 8.3” tablet designed to be a handheld device a bit larger than a premium smartphone but less than a full size tablet.  Apple made a number of improvements in the Mini 6, particularly with the chipsets, but along with those improvements came the inevitable bugs that are a part of almost any hardware upgrade, and it doesn’t take long for users/bloggers to dig them out once the device has been delivered (September 24).
The most prominent of the bugs is called ‘jelly scrolling’, aka ‘scan out skewing’.  This phenomena occurs when a user is scrolling the screen in portrait mode, with one side of the display refreshing more slowly than the other, making images and text jiggle.  It doesn’t happen as noticeably when the device is scrolled in portrait mode.  This issue is actually one that occurs in many devices but is almost invisible, however due to a change Apple made in the internal design of the IPad Mini 6, it has become an issue.  In a typical device, such as a smartphone or a monitor, the controller board is oriented in the same direction as the way the display is typically scrolled, meaning as you scroll down, the screen is being refreshed line-by-line vertically.  This ‘hides’ much of the action of the repainting of the screen as you move the text or image.  In the iPad Mini 6 however, Apple changed the orientation of the controller board, which causes the screen to be refreshed horizontally.  When you scroll up or down in portrait mode the controller is repainting the screen horizontally, rather than following your scroll, and the text or image jiggles as you scroll.
Apple has responded to complaints by saying that this is a ‘normal’ function of how screens refresh, and to a degree they are right, as the iPad Pro also has the controller board mounted the same way, but the faster refresh rate of the higher cost iPad Pro makes the jelly scroll unnoticeable.  Some have speculated that Apple might have used a less expensive, lower spec display, which might be exaggerating the issue, but that remains unconfirmed.   Since a fix would seemingly require a redesign of the iPad Mini 6 internals, we expect there is little users or Apple can do about the problem, or than to use the Mini 6 in landscape mode whenever possible.
Within the last few days however, a new issue has popped up concerning the Mini 6. There have been reports that screen discoloration and distortion can occur when the user uses extra touch pressure, such as when you press and hold.  When the user reporting the issue received a replacement, the same problem occurred, although Apple was willing to make that replacement for this problem, while not for the jelly scrolling issue.  As this issue does not seem to be widespread, at least currently, we doubt Apple will make any changes to its display suppliers, but such potential defects do have an effect on Apple’s supply chain once they determine from where the problem occurs.  If it is a touch issue or a display issue it could have an effect on Apple’s supplier choices going forward, but with only a few days of dealing with the problems, we expect Apple is trying to determine whether the new problem has a single component root and if so is it limited to a small number of units or the entire line.
https://youtu.be/WWKb_khoFzw - Jelly Scrolling - First 20 seconds (Ctl-Click)

SellCell (pvt) is a company that buys and sells used electronics equipment, primarily smartphones, and as such they would seem to have a bit of a bias toward ‘encouraging’ potential customers to replace their existing phones by selling them through the company, rather than back to the carrier.  They offer better deals than most carriers, who can be very selective about which brands and models they will accept as trade-in, but we note that the survey[1] that they have conducted concerning the iPhone 13 could reflect some of that bias as the full survey is not available.  We note that some of the responses can be compared to a pre-launch survey which was a bit smaller[2].
A number of the responses were surprising, particularly the fact that 64.1% found the iPhone 13 models “Not at all exciting” or “Not very exciting”.  When it came to the features that attracted buyers to upgrade the 120Hz refresh rate was the most popular at 34.1%, considerably more than the 22% in the pre-release survey.  Longer battery life came in 2nd at 25.3%, again much higher than the 8.3% in the pre-release poll.  Under-display touch ID was the 2nd most popular feature in the pre-release survey, but did not even register in the final, but most telling was that 43.7% of respondents said they intend to upgrade to the iPhone 13 in the pre-release survey, while only 23.2% said the same after the new models were released. 
While both surveys were large enough that the data was likely reflective of the true intent of the respondents, the questions leaned a bit to the negative, so we point out again that the company doing the survey has a vested interest in getting folks to upgrade their phones.  That said we were a bit surprised at the lack of enthusiasm expressed for the new models, although our initial reaction was a resounding, ‘more of the same’.  There were a few oddities also, with the survey revealing that 18.3% of Apple users are triskaidekaphobic, meaning they have a fear of the number 13 (check to see if your elevator has a ‘13th floor’ stop…) and that 74% of those polled would prefer a different name than the iPhone 13.  The survey results are shown in figs. 5 – 9 below.
All in, Fig. 9 was the most surprising, as it indicated that the brand that iPhone users would most likely convert to was Google (GOOG), a relatively small name in the smartphone market, especially compared to Samsung (005930.KS) who came in lower than Google.  The Google Pixel series has been compared to the iPhone at times and has a limited number of models, also similar to the iPhone’s offerings, but sell for considerably less than Apple prices.  The Pixel does have a longer battery life than the iPhone 13, which was an important feature for the Apple crowd, but would likely perform much less ‘robustly’ when compared to the iPhone A15 Bionic processor.


[1] Included more than 5,000 iPhone users 18 or older, based in the US.

[2] Included more than 3,000 iPhone users 18 or older, based in the US.

​On 9/29 we noted that Samsung Display seemed to have cancelled an on-going project it had been working on for Apple (AAPL).  The project was to develop a 10.86” OLED iPad display for release in 2022 but a conflict over specifications for the panel were cited by the media as the cause for the cancellation.  Samsung’s typical OLED structure is a single RGB stack, however Apple is convinced that such an arrangement would not produce a bright enough display.  They proposed a double stack structure that is essentially two sets of OLED materials on top of each other, with Apple’s contention that the single stack structure would not be bright enough, a relatively common complaint about OLED displays, and that it would extend the display’s lifetime given the use profile for tablets.
SDC seems to have been convinced that such a product, and the changes it would have to make to its production line, would not be profitable for SDC based on its cost estimates and the expectations for potential panel sales to Apple.  We also noted that 2nd OLED supplier LG Display), would now have the opportunity to explore such development without the pressure that SDC would typically bring, particularly as LG Display has already developed a simplified dual stack structure that would be the basis for the Apple panel development.  It seems that such a project is underway at LG Display, with a target of developing a 12.9” dual stack OLED display using LTPO (Low-temperature polycrystalline oxide), but the likelihood of a 2022 product seems remote considering the early development stage, the complexity of the display, and the capacity available to LG Display. 
Perhaps if LGD is able to meet Apple’s exacting specifications, and calculates that they can profitably produce such a display for Apple for an extended period of time, we might see such a device in 2023 or 2024, but at the same time Apple is also exploring Mini-LED technology, which would likely be a bright and less expensive solution, albeit one that might not meet all of Apple’s criteria for color quality without quantum dots, so in reality the pressure never goes away.  Get cookin’.