​As we have noted previously, there have been issues surrounding the production of displays for the iPhone 14 series this year, with questions as to BOE (200725.CH) status with Apple generally, and problems that LG Display (LPL) was having with the production of LTPO (Low-temperature Poly-Oxide) displays, which are used in the iPhone 14 Pro and Pro Max.  Given that Samsung Display (pvt) has been producing LTPO displays for a number of customers, including parent Samsung Electronics (005930.KS) since August 2020, they have considerable experience in that display production process and have supplied a number of smartphone brands with such displays, including last year’s iPhone 13 Pro Max.
According to recent industry estimates, Apple has ordered over 17m iPhone 14 units from its display suppliers through the end of August and is expected to order ~16.5m units this month.  With delivery dates of 9/16 for all models other than the iPhone 14+ (10/7/22) we assume the company expects it has sufficient inventory to meet pre-order deliveries that are similar to last year.  That said, Samsung Display ordered additional module process equipment last month and this month for its production facilities in Vietnam, with confirmed orders from at least three local Korean suppliers, AP Systems (265520.KS), HB Solutions (297890.KS), and Philoptics (161580.KS) totaling over $40m.  We expect that the popularity of the iPhone Pro and Pro Max, and the production limitations at LG Display, will skew SDC’s share of iPhone 14 family display share higher than expected, especially as they participate in the production of displays for all four models, although we expect the highest margins (and their biggest focus) is on the LTPO models, which seem to be getting most of the pre-orders (see “iPhone Sells in China Despite Criticism” above).

​Apple (AAPL) is considering adding memory products sourced from Yangtze Memory Technologies (state), a Hubei Province based company we have mentioned a number of times, particularly in reference to the company’s efforts to replace as much US made equipment in their semiconductor process fabs as possible with Chinese sourced tools (05/10/21),  our note on the investigation of China’s “Big Fund” management company (07/29/22), which has funded much of China’s semiconductor efforts, and Foxconn’s (2354.TT) attempt to purchase a 10% stake in Tsinghua Unigroup (state), which would give it more direct access to UNISOC (pvt) and YMTC (08/10/22).
While the company is not on the US Commerce Department’s ‘entity’ list, there has been some political discussion concerning the company’s ties to Tsinghua University, a state run institution that is said to have a number of laboratories that are researching defense related projects.  YMTC began producing 64 layer 3D NAND in 2019 and has moved to 128 layer using a 20nm node, but unlike SMIC (688981.CH) and Fujian Jinhua IC (state) the company remains off of the DOC list, with support from a number of global semiconductor associations (SEMI.org, SIA, ITIF, etc.), while a number of think tanks and Congressmen have suggested the company’s ties to the Chinese military should warrant its inclusion under the terms of the 2018 Export Reform Control Act.  Last month rumors surfaced that pressure from Commerce Secretary Gina Raimondo pushed congressional committees to examine the company, China’s largest memory producer, to see whether Congress would support its inclusion to the entities list.
Apple is said to be considering the company’s products for use in some iPhones assembled and sold in China, with no intention of their use in products that leave the Mainland, but members of the House Foreign Affairs Committee have suggested that “Apple will effectively be transferring knowledge and knowhow to YMTC that will supercharge its capabilities and help the Chinese Communist Party achieve its national goals.  While we expect that if Apple were to source NAND from YMTC, there would be some technical communication between the two, especially given Apple’s high quality control standards, but with much of iPhone assembly done in China, Chinese technology spies would already have access to much of Apple’s design technology, and could reverse engineer much of what exists in an iPhone, so the panic concerning Apple sourcing YMTC NAND seems a bit overly dramatic. 
From the perspective of broadly not wanting to help the Chinese semiconductor effort in any way, including the purchase of any components, adding YMTC to the entities list would slow the Chinse semiconductor industry’s growth to a degree, but the politics around anti-China sentiment, especially concerning semiconductors, seems to give politicians a platform that is hard to counter without seeming anti-American or anti-worker.  While there is certainly a very legitimate goal in not supporting the expansion of the Chinese military effort, Apple’s purchase of YMTC NAND flash is going to do little to move the needle in China’s ability to produce ICBMs and other military equipment.  If US politicians are so concerned about the development of China’s semiconductor efforts, perhaps a more unified vote (68 for/32 against) and less resistance to the recently passed CHIPs Bill would have shown China they have a cohesive adversary in the semiconductor space rather than a bunch of self-serving politicians.

  Alabama: Shelby (R-AL), Nay                  Tuberville (R-AL), Nay
 Alaska:      Murkowski (R-AK), Yea           Sullivan (R-AK), Yea
 Arizona:    Kelly (D-AZ), Yea                    Sinema (D-AZ), Yea
 Arkansas:  Boozman (R-AR), Nay              Cotton (R-AR), Nay
 California: Feinstein (D-CA), Yea              Padilla (D-CA), Yea
 Colorado:  Bennet (D-CO), Yea                  Hickenlooper (D-CO), Yea
 Connecticut: Blumenthal (D-CT), Yea        Murphy (D-CT), Yea
 Delaware:  Carper (D-DE), Yea                  Coons (D-DE), Yea
 Florida:      Rubio (R-FL), Nay                              Scott (R-FL), Nay
 Georgia:    Ossoff (D-GA), Yea                  Warnock (D-GA), Yea
 Hawaii:      Hirono (D-HI), Yea                  Schatz (D-HI), Yea
 Idaho:        Crapo (R-ID), Yea                    Risch (R-ID), Yea
 Illinois:       Duckworth (D-IL), Yea            Durbin (D-IL), Yea
 Indiana:     Braun (R-IN), Nay                              Young (R-IN), Yea
 Iowa:         Ernst (R-IA), Nay                     Grassley (R-IA), Yea
 Kansas:      Marshall (R-KS), Nay               Moran (R-KS), Nay
 Kentucky:  McConnell (R-KY), Yea           Paul (R-KY), Nay
 Louisiana: Cassidy (R-LA), Nay                Kennedy (R-LA), Nay
 Maine:       Collins (R-ME), Yea                 King (I-ME), Yea
 Maryland: Cardin (D-MD), Yea                 Van Hollen (D-MD), Yea
 Massachusetts: Markey (D-MA), Yea                  Warren (D-MA), Yea
 Michigan:  Peters (D-MI), Yea                              Stabenow (D-MI), Yea
 Minnesota: Klobuchar (D-MN), Yea           Smith (D-MN), Yea
 Mississippi: Hyde-Smith (R-MS), Nay        Wicker (R-MS), Yea
 Missouri:   Blunt (R-MO), Yea                             Hawley (R-MO), Nay
 Montana:  Daines (R-MT), Yea                  Tester (D-MT), Yea
 Nebraska:  Fischer (R-NE), Nay                 Sasse (R-NE), Yea
 Nevada:     Cortez Masto (D-NV), Yea       Rosen (D-NV), Yea
 New Hampshire: Hassan (D-NH), Yea       Shaheen (D-NH), Yea
 New Jersey: Booker (D-NJ), Yea                Menendez (D-NJ), Yea
 New Mexico: Heinrich (D-NM), Yea           Lujan (D-NM), Yea
 New York: Gillibrand (D-NY), Yea            Schumer (D-NY), Yea
 North Carolina: Burr (R-NC), Nay            Tillis (R-NC), Yea
 North Dakota: Cramer (R-ND), Nay                    Hoeven (R-ND), Nay
 Ohio:          Brown (D-OH), Yea                 Portman (R-OH), Yea
 Oklahoma: Inhofe (R-OK), Nay                 Lankford (R-OK), Nay
 Oregon:     Merkley (D-OR), Yea               Wyden (D-OR), Yea
 Pennsylvania: Casey (D-PA), Yea              Toomey (R-PA), Nay
 Rhode Island: Reed (D-RI), Yea                 Whitehouse (D-RI), Yea
 South Carolina: Graham (R-SC), Yea                  Scott (R-SC), Nay
 South Dakota: Rounds (R-SD), Yea           Thune (R-SD), Nay
 Tennessee: Blackburn (R-TN), Nay             Hagerty (R-TN), Nay
 Texas:        Cornyn (R-TX), Yea                 Cruz (R-TX), Nay
 Utah:         Lee (R-UT), Nay                       Romney (R-UT), Yea
 Vermont:   Leahy (D-VT), Yea                             Sanders (I-VT), Nay
 Virginia:    Kaine (D-VA), Yea                             Warner (D-VA), Yea
 Washington: Cantwell (D-WA), Yea                    Murray (D-WA), Yea
 West Virginia: Capito (R-WV), Yea           Manchin (D-WV), Yea
 Wisconsin: Baldwin (D-WI), Yea                Johnson (R-WI), Nay
 Wyoming: Barrasso (R-WY), Nay              Lummis (R-WY), Nay
 

​The iPhone is popular in China, although in most quarters, its share lags behind a number of Chinese smartphone brands.  The partial demise of what was China’s formerly best-selling brand Huawei (pvt) a result of US trade sanctions, has given Apple a bit of room to gain former Huawei customers as iPhone buyers, although other Chinese brands have also gained share for the same reason.  The lower price of the iPhone 13 have even more incentive to Chinese buyers when it was released last year but there is a certain status associated with the US brand in China and that is also a contributor to the iPhone’s success and share on the Mainland over the last two years.
That success seems to have continued with the recent release of the iPhone 14 line, which is available for pre-order in China.  According to numbers from JD.com (9618.HK), who hosts the Apple store, just 24 hours after the iPhone 14 line became available for pre-order, 2m orders had been placed, despite the fact that no price reductions relative to last year’s models were given.  In fact it was noted that some configurations were seeing mark-ups over standard pricing.  Significant was the fact that the two iPhone 14 models that the iPhone Pro Max and the iPhone Pro, the two of the four models that contain the new A16 Bionic chip and are the most expensive models, received the most orders, 1m and .8m respectively, while the iPhone Plus and the iPhone 14 models received only 10% combined.
This all comes as the iPhone 14 line received a lukewarm reception from critics, with little innovation, both from the technology and the design, from many reviewers, with which we agree.  It would seem that relative to Huawei’s most recent offerings, which do not offer 5G, the iPhone offers both more valued features and the cache of status to Chinese buyers, especially in the premium smartphone segment.  Complaints about the fact that Apple’s China site was slow or unable to process payments during the onset of the pre-order period seemed to create a bit of a stir, but the with that number of orders going through, roughly matching the popular iPhone 13’s first 24 hours last year, the site issues did not seem much of a deterrent.

The long-awaited Apple (AAPL) event’ took place yesterday, and while it was full of adjectives about the nuances the company brought to this year’s iPhone, if we had to characterize the overall iPhone 14 line this year, we would have to say that the changes were utilitarian rather than revolutionary.  That said, we summarize what we see as the noteworthy changes, if any, below by looking at the differences between last year’s iPhone 13 family and the new iPhone 14 family.
iPhone 14 – The iPhone 14, which is expected to be released on 9/16/22, will sell for $799, the same initial price of the iPhone 13 (128GB).  The size of the new model is the same as the previous one, other than being 0.1mm thinner and it weighs 2 grams less, so there is little to shout about here.  The 6.1” OLED display is the same as is the Apple A15 Bionic chipset, other than a 5 core Apple graphics processing unit as opposed to last year’s 4 core.  The cameras are basically the same, as are most of the other features, with the addition of the satellite SMS emergency messaging system that we noted earlier this week, although (hold on to your seats) the case color purple has been added, although it replaces last year’s pink and green offerings.
The iPhone 14+ is a new member of the iPhone family so there is no comparison, so we compare it to the new iPhone 14.  The iPhone 14+ is 19.4% larger than the iPhone 14 and is 25 grams (18%) heavier (like adding the weight of a mouse) and has a larger (6.7”) screen that has a higher resolution with a similar pixel density.  The iPhone 14+ will sell for $899 and will be available October 7.
The iPhone 14 Pro, which will sell for $999 and is essentially the same size and weight of last year’s  iPhone 13 Pro, and while they both have a 6.1”OLED display, this year’s model has a brighter screen that is based on LTPO (Low-temperature poly oxide) which reduces power consumption.  But the main difference is the Apple A16 Bionic chipset (4nm node) that replaces the A15 Bionic (5nm node) from last year.  The iPhone 14 and the iPhone 14+ both use last year’s A15 Bionic chipset. While it is early for benchmark tests, it should be a bit faster than last year’s model and comparable Qualcomm (QCOM) Snapdragon chipsets but by how much and whether it will be noticeable by users is a question that will take some time to answer.  One of the cameras in the iPhone 14 Pro has also been upgraded from 12MP to 48MP with the Pro becoming available 9/16/22.  The iPhone 14 Pro Max will sell for $1,099 and is the top of the iPhone line, with a 6.7” OLED LTPO display and the same upgraded chipset and camera as in the previous model, so the real difference between the Pro and the Pro Max is the larger screen size, for which they charge $100 more.
Aside from the satellite SOS capabilities that we mentioned in an earlier note, there is one improvement of note in this year’s models.  There is an obsession among smartphone fans concerning the area in which cameras are located, typically called a notch.  The notch began back in 2017 with the Sharp (6753.JP)  Aquos S2 and Apple picked up the idea with the iPhone X that same year.  Over the last few years notches became larger as more cameras and sensors were added and then the tide turned away, with fans seeing the larger notch taking up valuable screen real estate.  Apple changed the notch in the iPhone 14 Pro & Pro Max to a ‘pill’ shape, obviously smaller than a full notch, and rather than waste the space created what they call the “Dynamic Island”, a notification window that sits over the cut out.  Apple seems to have spent a great deal of time and effort designing the notification window shapes and formats for various message types, but it does allow the user to avoid having to move between applications to check status, as the “DI” can remain open without affecting other applications.  It’s a handy feature that puts the notch to good use and seems far better than the screen bar notifications that are typical with Android phones.
That said, there was little else to get excited about, at least from a hardware standpoint, so the release seems to be pretty much as we expected, with little change to the phones themselves.  Its hard to get excited about something that is essentially the same as last year’s model, but we are sure Apple fans will find things to crow about and the endless stream of slick advertisements showing hip folk doing cool things with their iPhones will surely attract attention, but short of the ‘Dynamic Island’, which is a nice feature, and a better camera set-up, there is little to move customers to upgrade from the iPhone 13 series in our view.

Remember Satphones, those bulky devices that show up as global communication devices that allow soldiers, CIA operatives, and zombie apocalypse holdouts to communicate with others, regardless of their location?  They seem to be in resurgence as Chinese smartphone brand releases its new Mate 50 line that has the capability to connect to China’s Beidou Satellite System for emergency SMS, although the phone does not have 5G service due to trade limitations placed on the company by the US.  The satellite network will allow for simple messaging, GPS, and emergency notifications but will be limited as to data speeds (2G rates most likely).
While ~86% of the global population has cellular coverage and less than 25% have 5G coverage, and while estimates vary, actual cell coverage is limited to between 10% and 15% of the world’s land mass, which means there are a lot of places where your cell phone is just a piece of expensive hardware that does little or nothing.  But the addition of satellite communication capabilities opens the communications grid to an almost infinite number of locations that have been inaccessible to mobile communications..  There are satphones that can be bought by us regular folk, and they are not as expensive as one might think (between $700 and $1,700 typically), but must include a voice/data plan, which can become expensive depending on use and at relatively slow data speeds.  You can buy a base station that allows a computer or cell phone to link to a satellite network, but those cost between $3,000 and $18,000.
While the Huawei satellite hook-up is actually of relatively little use for other than messaging, it predates Apple’s (AAPL) iPhone 14 announcement (tomorrow) that is rumored to include some form of satellite communication capabilities.  There was supposed to be a similar system for the iPhone 13 but Apple and whoever the satellite carrier was to be were unable to reach an agreement before last year’s release.  There is no information yet about the extent of Apple’s involvement with satellite networks, but if the iPhone 14 even hints at such a capability, there will be a renewed interest in the world of satphones and satellite communication networks , and while the cost might be high, it certainly would be a plus if you could whip out your iPhone on K2 and send a few pictures to the folks back home, that is if the phone is not completely frozen (The operating temperature of an iPhone 13 is 32⁰ to 95⁰, in theory). 
The real benefit however would come from the potential for new silicon development, particularly a combination of existing positioning services and other satellite functions.  Mediatek (2454.TT) has completed the first 5G non-terrestrial network connection test, paving the way for such potential silicon, and while plans for new satellite networks offer the potential to accommodate the distance restrictions that mmWave 5G and 6G face due to absorption by buildings, trees, and other objects as a satellite link would eliminate those restrictions and the potential density of base stations needed.  

​Foxconn (2354.TT) Apple’s (AAPL) primary assembler and the largest global OEM purchased a 10% stake in China’s Tsinghua Unigroup (state) through an $800m investment by one of its subsidiaries, Foxconn Industrial Internet (601138.CH), giving the company more direct access to fabless mobile processor producer UNISOC (pvt) and memory producer YMTC (pvt), both part of Unigroup.  While Unigroup defaulted on $3.6b in bonds last year and was sorely underfunded, investments by a number of Chinese funds stemmed the negative financial tide, although plans for fab expansion projects were put on hold.
The tension level between the Chinese and Taiwanese governments has escalated in recent weeks as we have noted previously, and has placed the US government in the middle of the conflict, focusing considerable attention on the region, Foxconn’s home base.  With such tension, the Taiwan Ministry of Economic Affairs is said to be doing a detailed review of the purchase, specifically evaluating national security issues, while the US government is exerting additional pressure on the Taiwan government given that senior management at UNJISOC previously worked for China’s largest semiconductor foundry SMIC (688981.CH), which has been placed on the US entities list.
The official review has yet to start but unsourced feedback has indicated that there is a very small chance that the deal will be approved by the Taiwan government on security concerns alone, although Foxconn has stated that they have reported all the necessary information about the investment to the local Taiwan authorities and are updating the overall investment situation to the necessary government officials.  With so much pressure both inside and outside of Taiwan, it would seem that there is little chance that the deal will survive intact, with Foxconn already facing fines for making the investment without government approval. Now the recent China/Taiwan tensions have placed the deal in an even greater spotlight, giving more scrutiny to the shareholders of the entity that FII invested in, which became the owner of Tsinghua Unigroup after its restructuring. Some of the owners of this entity are said to be Chinese state-owned companies that could have ties to the Chinese military or are affiliated with companies on the US entities list.  Foxconn has put itself in the middle of a global political battle in order to strengthen its supply chain and while it seemed like a good idea earlier in the year, we expect the company had no idea how public the transaction was to become.  Wrong place, wrong time.
 
 

​After the tension producing visit to Taiwan by House Speaker Nancy Pelosi, Apple (AAPL) has cautioned its suppliers in Taiwan who are shipping components or product to China to make sure the labeling complies with what are long-standing Chinese policy that requires said items to be sourced labeled as “Chinese Taipei” or Taiwan, China”, a tacit reference to the Chinese government’s belief that Taiwan is part of China, succinctly summarized in a document circulated by the Chinese Embassy in the US entitled, “Taiwan – an Inalienable Part of China”, which details a short history of the 1912 Chinese revolution and the Chinese civil war in the 1940’s, but is very specific in stating that “The lingering civil war which was imposed on the Chinese people in late 1940s and more importantly the intervention by foreign forces against the reunification of China led to a temporary state of separation between the two sides of the Taiwan Straits after the People's Republic of China was founded. But the status of Taiwan as part of China's territory has never changed, nor has the Government of the People's Republic China ever given up its jurisdiction over Taiwan.”
The document goes further in that when diplomatic relations were established between the Chinese government and the US in 1949 said agreement included “The United States of America recognizes the Government of the People’s Republic of China as the sole legal government of China.  Within this context, the people of the United States will maintain cultural, commercial, and other unofficial relations with the people of Taiwan.  The government of the United States acknowledges the Chinese position that there is but one China and Taiwan is part of China.”  However the document goes further stating that the Chinese government does not object to the US maintaining non-governmental economic and cultural relations with Taiwan, but “What we do oppose is US conducting official exchanges with the Taiwan authorities”, drawing a rather vague line between official and non-official meetings with the Taiwan government.
With all of that said, Apple is not taking a chance that its Taiwan supply chain inadvertently angers Chinese Import/Export authorities by using labeling that implies that Taiwan is not part of China, such as “Made in Taiwan” rather than “Taiwan, China” or even “Chinese Taipei”, as the Pelosi visit has raised tensions between the US and China relative to Taiwan.  In light of the upcoming release of the iPhone 14 line, it would seem Apple does not want to find that components and materials are being more carefully examined, slowing shipments, or even held for official review and has asked its suppliers in Taiwan to make sure the labeling complies with Chinese rules.  While assembler Pegatron (4938.TT) states that all operations in China are running normally, there have been rumors that some components from Taiwan had been held by authorities for more detailed inspection.

Fun with Data – iPad Procurement
​

Chinese panel producer BOE (200725.CH) has been on a roller coaster ride with Apple (AAPL), with Apple rejecting the company’s displays for entry into the iPhone supply chain a number of times in 2020 and 2021, but the company persevered and was accepted into the exclusive fold typically dominated by Samsung Display (pvt) and LG Display (LPL).  Just when things seemed to be going well, stories began to circulate earlier this year that BOE had changed driver circuitry on a display it was supplying to Apple without permission, and they were suspended from iPhone production for a period of time.  Since then there have been various projections as to how much participation BOE will have in the iPhone 14 series, which should begin this month.
Much has been made in the Chinese trade press as to how BOE is now challenging South Korean dominance in Apple’s display supply chain, with considerable and mostly well-deserved nationalistic pride, but while the press champions BOE’s success with the iPhone, they miss the fact that BOE was the primary supplier of LCD displays to Apple’s iPad line in 2021 and is expected to remain so this year, despite reductions in Apple’s display procurement for the product., which is expected to decline by 25.8%.  In fact, if estimates for LCD iPad display procurement are correct, BOE will see only a small drop in y/y units shipped (-2.7%), while LG Display will see a 17.0% reduction in units and Sharp (6753.JP) will see a 59.2% y/y unit reduction this year.  MacBook shipments are expected to see a 1.9% increase this year, and while BOE will not have the dominant share, it will be the only supplier to see an increase in units (+87.5%), with both LG Display (-5.1%) and Sharp (-9.6%) seeing decreases, which points to the fact that BOE, while still facing some challenges in the OLED space, is seeing considerable success with Apple in the LCD display space.
While OLED displays, particularly flexible OLED displays tend to be the focus for number crunching and press releases, there is still a vast LCD display world that gets little recognition unless it has ‘quantum dot’ or ‘mini-LED’ attached, but that world is still a very large one with ~891.2m large panel LCD units shipped last year, generating over $85b in revenue and one that Chinese display producers dominate.  While the Chinese press glorifies any statistics that show Chinese supremacy in the display space, credit is due to BOE, Chinastar (pvt) and other Chinese LCD display producers, who hold the top share in the large pane LCD space.  One can question whether that will be as valuable a position 5 years from now, but currently they certainly have accomplished their goal of becoming the leading source of large panel LCD displays.

In our note of 7/15/22 we indicated a dispute between Samsung Electronics and China’s BOE (200725.CH) over what amounts to advertising royalties which have caused Samsung to reduce orders for LCD panels from BOE and has spiked interest from other Chinese panel producers who would like to fill the gap left by the Samsung/BOE disagreement.  As we also noted BOE’s Chinese rival Chinastar (pvt), owned by TCL (000100.CH) has already been to South Korea to sweet talk Samsung executives and local suppliers and is now expected to travel to Cupertino to schmooze with Apple (AAPL) folks to gain some traction as a panel supplier for MacBooks and iPads.
Chinastar has been reviewing plans to expand its OLED production capacity, potentially with lines dedicated to Apple, and would be expected to put additional pricing pressure on LG Display (LPL), the current panel supplier to the MacBook line.  China star is already a supplier of TV panels to Samsung, along with AUO (2409.TT), Sharp (6753.JP), BOE, and LGD, and Samsung is a shareholder in TCL, so the visit to Korea was one with some weight and a visit to Apple by TCL’s chairman would certainly create some anxiety at BOE and LGD.  As Apple is quite particular about their displays, the recent brouhaha over BOE’s changes to Apple’s qualified display design without prior approval has set BOE back a bit in terms of company reliability and once there is even the smallest amount of blood in the water[1] the sharks will gather.  We would assume Chinastar will gain share at Samsung and Samsung will use Chinastar to further its pricing leverage with its other suppliers, particularly BOE, and any success at Apple will help Chinastar gain share against BOE, although we expect it will take considerable time for Chinastar to build out dedicated Apple capacity.


[1] Fact – Sharks can sense between 1 part in 25m and 1 part in 10 billion depending on the chemical, which would be the equivalent of one drop of blood in a small swimming pool.

​TCL is a very price competitive brand, particularly when it comes to TVs and even more so when it comes to QD/Mini-LED TVs, as it was the first brand to release such combined technology and is a generation ahead of rivals, including Samsung Electronics and LG Electronics (066570.KS).  TCL recently released a 98” QD/Mini-LED TV to compete with a 98” offering from Samsung and noted that it had received 5,000 pre-orders for the sets in the 1st hour it was listed, which sell for ~$8,900 against Samsung’s recently discounted price of $13,000.  TCL has now stated that it has already sold more than 4,000 of the units, mostly during the 6/18 holiday, roughly 5x the number it sold last year.  Samsung has not disclosed its sales figures for its 98” QD/Mini-LED models.  Displays for the TCL 98” QD/Mini-LED model are produced by Chinastar, a subsidiary of TCL.
While it is hard to verify such specific sales figures, especially those from China, we expect TCL has had some success with its ultra-large QD/Mini-LED lines given both pricing and local familiarity, but the ultra-large TV market is a rarified one with expectations for less than 100,000 98” units sold this year, including other technologies, although the sales value is certainly enviable even for 4,000 units, which would be the sales equivalent of selling 54,769 TCL 55” QD/Mini-LED TVs based on current prices, and while the TCL98” TVs mentioned were sold in China for ~$8,900 you can steal last year’s model from Best Buy (BBY) at the currently discounted price of $8,500, although you would have to wait until August 3 to have it delivered, especially as it would be hard to fit in a standard vehicle as the box is 5 feet high and 8 feet long.

Smartphone prices vary on a country by country basis, with logistics and currency playing a significant roll in setting those prices, and with the rapid depreciation of the yen against the dollar this has become quite apparent as Apple (AAPL) raised iPhone prices in Japan as of July 1 in order to protect profitability as profits are converted back to dollars.  Not only are current models now more expensive, but older models have also seen price increases and less expensive models like the iPhone SE are becoming scarce, particularly the iPhone SE (2nd Generation) Apple’s low-priced offering released in April 2020.  That phone (used) used to sell for ¥20,000 ($146.34 US) but is now selling for ¥30,000 ($219.51 US), a 50% increase according to retailers in Tokyo.
Other iPhone models have also seen increases, such as the iPhone 13 (128GB), which was released in September 2021, and has gone from ¥98,800 ($722.91 US) to ¥117,800 ($861.92 US), a 19.2% increase, and the iPhone SE (3rd Generation), which was released in March of this year, has increased in price from ¥57,800 ($422.92 US) to ¥62,800 ($459.50 US), an 8.6% increase since its release., and the iPhone 11[1] (released 9/2019), the iPhone 12 (released 10/2020), and the iPhone 13 (released 9/21) have increased in price by 15.4%, 8.5%, and 7.8% respectively.  A recent survey added that ownership of used phones (purchased used or refurbished) in Japan in April of this year was 11.6%, almost 2 times the rate over the last 20 years.
While certainly disconcerting from the Japanese consumer’s standpoint, however iPhone prices in Japan are still below those of the equivalent phones in other countries as shown in the table below, which shows both the pre and post price increase in Japan compared to the US, Germany, and China representing the North American, European, and Chinese markets[2], although the US price does not reflect retail sales tax as they vary from state to state.  As the price rises in Japan it pushes the iPhone purchaser’s income threshold higher but still represents a bargain for those in most other countries and ‘pre-increase’, the Apple direct sales sites in 34 countries averaged $925.23 for the iPhone 13 (128GB), while the Japanese site price was $723.02, the lowest of all.  Some Japanese retailers have noted that since Japan’s COVID tourist restrictions have been eased the number of iPhones sold, both new and used, has increased, with some purchasing more than one, leading to speculation that they are being resold in other countries.
 


[1] 256GB for all iPhone 11,12,13

[2] Table conversion rates are 139¥, 1€, and 6.7 yuan to the dollar.
 
 
 

With 4 of the top 5 selling smartphones in Japan being iPhones (52% share in April 2022), the Japanese smartphone consumer is very sensitive to Apple smartphone price changes and fears that further price increases in existing or upcoming iPhone models will price them out of the Japanese market, despite their low cost relative to the global averages, so it will be up to Apple as to whether it will continue to increase prices if the yen depreciates further against the dollar.  That said, Apple has US investors to consider and a larger vested interest in the US Federal Reserve’s policy moves than it does in the Bank of Japan’s and the US smartphone market alone is over 5 times the size of the Japanese market, so the decision to raise prices based on the spread between the yen and the dollar was actually an easy one and will continue to be so if the trend continues.