​Only days after the actual release, the Apple Mac Studio is being torn down.  The device, which sells for between $2,000 and $4,000, is certainly not made to be upgraded by users, although from the early teardown, it might give Apple a reason to invalidate the warranty, as Apple notes, “Mac Studio is not user accessible.  If you think you might need more storage capacity in the future, consider configuring to a higher capacity”, meaning buy the higher storage unit at the onset.  In reality we would expect that there will be an upgrade package developed for the Mac Studio, but again it will not be user installable, which keeps the Apple repair program folks happy.  What we will say to Apple’s benefit is that the structure of the Apple Mac Studio and the ancillary components are of unusual quality, par above most of the typical Windows-based computers we have seen or used.  Aside from the M1 Ultra chip, which is a SoC of the highest order (another note), while you might not be able to upgrade or fix it yourself, the Mac Studio is among the highest quality we have seen.

​Mediatek (2454.TT) the 2nd largest company in Taiwan (market cap) and the largest producer of 4G and 5G chipsets (units) is preparing to list its Bluetooth chip subsidiary Dafa/Airoha (pvt) and is making the applications for listing on the TSE Emerging Market board, which is a prerequisite for listing on the TSE.  The company is expected to apply for full listing on the TSE after the necessary 6 months on the Emerging Market board, with its performance setting the tone for pricing on the TSE.  The listing is targeted toward attracting engineers and workers in the semiconductor space to Dafa, as competition from other semiconductor companies in Taiwan for talent has become quite fierce.  As bonuses are roughly evenly divided across all divisions at Mediatek, regardless of performance, the idea of an independent public company takes ‘sharing’ out of the bonus mix and opens the potential for higher rewards for performance.
Dafa provides Bluetooth devices to Sony (SNE), Apple (AAPL), Xiaomi (1810.HK) and JBL (pvt[1]) among others and a 10% stake in the company was sold to a group of VCs for NT$650/share, which was the largest semiconductor deal in the Taiwan VC world over the last few years.  Given 145m shares, the valuation for that transaction would be ~$3.3b US.  The Emerging Market listing is expected in May or June.


[1] JBL is owned by Harman International, who is owned by Samsung.

​Apple (AAPL) announced the latest iteration of the iPhone SE, the company’s answer to a low-priced iPhone version.  The last iPhone SE was released in 2020, which shortens the lag between SE models to two years, down from the earlier 4 year interval, so perhaps Apple has decided to release a new SE version again in 2024.  Physically there is little difference between the old and new models, with only a small difference in weight, and both have the same 4.7” LCD display, however the chipset has been upgraded from the A13 (7nm+) to the current A15 (5nm) which will allow for improved image processing and higher frame-rate video.  Also added is support for 5G sub6 bands and what Apple calls “the toughest glass in a smartphone”, likely Corning’s (GLW) Gorilla Glass DX, but details on the battery, which was a bit of an issue for the 2020 iPhone SE have been less detailed, although Apple indicates that the new SE should give  up to 10 hours of streaming video playback and 50 hours of audio playback, up from the previous model.  The price of the base version (64GB Unlocked) is $429, just a bit over the $399 original price of the 2020 model.
While the iPhone SE has only two cameras (12 MP & 7MP), we wonder if there is data on how often the average user intentionally picks a more sophisticated camera on the flagship iPhone models before snapping a picture.  We assume that there are some iPhone users that might need the three or four different cameras on the more expensive models for semi-commercial photography, but if shots posted on social media are any indication, most photos are taken with whatever camera is the default.  That brings us to both the need for the multiple camera trend and the idea that all the bells and whistles that are added to flagship phones seem a bit unnecessary.  Since industry leading smartphone brands tend to offer a wide variety of mid-priced phones, which are usually their best sellers, does the SE’s popularity indicate an industry feature overkill?
As the average smartphone buyer leans toward smartphone status over smartphone utility, we understand the need for flagship smartphones, especially when viewed from the brand’s margin expectations, but it seems that the popularity of the SE or the Samsung A12, Samsung’s best-selling phone which sells for $180 (32GB, unlocked), would indicate that perhaps more time should be spent reducing the price of smartphone generally instead of loading them with features that are rarely used.  We know it is antithetical to the smartphone brand mindset to think that less is more, but the SE points in that direction once again.

As we noted in our 9/29/21 note (“Walking the Tightrope”), Samsung Display and its largest ‘unrelated’ customer Apple (AAPL) do not always agree.  In that note we detailed a conflict between the two over how a potential Apple OLED product would be structured, with Apple wanting what is called a ‘dual stack’ or ‘tandem stack’ configuration developed, while Samsung Display thought a single stack OLED display would suffice.  At the time it was indicated that SDC had walked away from the development of a 10.86” dual stack OLED display reportedly for a new iPad, leaving Apple to find other suppliers who were willing to follow Apple’s guidelines.  It seems that SDC has changed its mind about the idea of a tandem stack structure and is now working toward the development of such a design to woo Apple back to the fold.
SDC’s reluctance comes from the fact that developing a dual stack OLED structure is not as easy as placing two stacks on top of each other, but has some inherent issues that make it more complex and more costly to produce, including a number of changes that would have to be made to existing production lines.  What might have spurred SDC into returning to such development is the fact that local competitor LG Display (LPL) has production capabilities for a dual stack OLED architecture and that China’s BOE (200725.CH), newly qualified as an OLED supplier to Apple, has been making modifications to its B12 – P3 line that would allow it to produce such tandem OLED displays.
Without taking a deep dive into the details, the problem facing tandem stack OLED structures is that the material connecting the two OLED stacks, called a charge generation layer, which allows both ‘stacks’ to be triggered at the same time, must be of a very precise thickness and material composition.  A thin CGL will cause the two stacks to be out of sync, which could cause a cancellation effect, while a CGL that is too thick causes an electrical field that can spread the light from the structure in the wrong direction.  As the whole purpose of the tandem stack structure is to create a brighter display (or a normal display that has a longer lifetime), either alternative works against the process.  While it was SDC’s original contention that the development of such a display would not be feasible at a reasonable cost, it seems that business over science is the winner here, and that SDC’s scientists and engineers have been told to make it work.
SDC is expected to be using a new material stack (‘T’) for this project, different from the updated material set (M12) as described in our 2/25/22 note, with that material set going into production next year and an updated (‘T2’) set in 2024, but such development timelines are certainly subject to change and Apple’s acceptance of the new materials could extend that timeframe, although we expect SDC to pitch the T1 or T2 stack to parent Samsung Electronics (005930.KS) for use in its tablet line in the hope that such a deal would justify the cost of modifications and give SDC additional production experience before any Apple product release.  All in, while it was surprising to hear that SDC had cancelled the development project earlier, the fact that there are two potential competitors who are willing to go the distance for Apple, makes it far less surprising that SDC has changed its mind.

Apple (AAPL) is scheduled to have an ‘event’ in March.  Expectations for such events tends to overshoot, but thus far we have heard that Apple is expected to release any of the following, a new iPhone SE (3rd generation), an updated iPad Air (5th Generation), both of which should be 5G equipped, and at least one new iMac, which will be released around June.  Apple will update iOS and flavors for macOS (Monterey 12.3), Watch OS (8.5) and tvOS (15.4), including the Air Tag changes we noted on 2/11/2022, and some new HomePod code that is oriented toward smart speakers.  There have been rumors that Apple has completed another round of validation for its AR/VR headset, so there might be a hint or two about that device, although we don’t expect it this year and hints of a foldable device such as a foldable iPhone, again a 2023 or later product.
The iPhone SE, was an inexpensive and small version of an iPhone that was last released in April of 2020 that sold for $399.  The 2020 SE was based on the design of the iPhone 8, which was released in September 2017, so even the current version (2nd Gen.) is due for an upgrade.  The SE is a popular device and is among the 18 iPhones that encompass 99.5% of iPhone traffic across the internet, with the iPhone 7 (released 9/16/16) still generating the most traffic out of all iPhones currently available.  We believe the SE sold ~8.7m units in 2020 and likely less last year so a new version should stimulate sales and help Apple compete in the $300 - $500 low-end phone arena that is dominated by Chinese brands, particularly in India where the iPhone SE still sells but is looking a bit old in comparison to some of the more recent Chinese brand models from Xiaomi (1810.HK), One Plus (pvt), and Vivo (pvt).
While we are on the subject, Apple filed a patent application this week that takes the laptop to another level and could one day represent a version of what is now a laptop device.  In this potential application, the basis for the device is a keyboard, however inside the keyboard are a number of ‘compartments’ that contain everything from an I/O port (224) and components, a processor (236), memory (238), and a variety of other, smaller components that reside in additional cavities under the keyboard (234).  The unit is powered through the ‘all-in-one’ I/O port and can be connected to a display device through the same port, so by detaching the I/O connector one could take their entire computer from home to work just by taking the keyboard.
The idea is really taken from the relatively early days of personal computers, as the Commodore (defunct) 64 introduced in early 1982 and the Amiga (Commodore) 500, were both self-contained ‘keyboard computers’ that were mildly successful but were never able to compete against more powerful static business computers or the laptops that eventually replaced them.    Given that an iPhone 13 Pro is 4.78 cubic inches with much of that the display, fitting all the components needed for a relatively powerful computer inside a keyboard such as indicated below, seems a task that could easily be completed.  Of course, the ancillary monitor (home and work) would be hard-wired (or not) and power would have to be supplied in both use cases, but a single port would make that relatively simple and a wireless monitor would simplify that connection even further, so transporting the keyboard and a power adapter would be all that is needed to become fully portable.
Of course, this is just a patent and may never be developed into a product from Apple, but it does represent an alternative to ‘virtual’ keyboards on tablets or the need to carry a keyboard along with a tablet if you are used to a ‘physical’ device.  Pricing would have to be somewhere between a tablet and a laptop, probably in the $500 range, and of course the design would have to be a selling point, but anything that makes it easy for a hybrid worker to haul their computer from work to home and back could have merit as a product.

​Apple is a fan of LTPO (Low-temperature Poly-Oxide) backplane technology, a process that uses materials from both LTPS (Low-temperature poly-silicon), a common backplane technology, and LTPO.  By combining these materials and processes, panel producers can change the characteristics of OLED displays, allowing them to function at a 120Hz refresh rate.  With the screen be ‘repainted’ twice as often as usual, the chance that an image might blur as it moves across the screen is lessened, however at the same time the double refresh rate creates addition power consumption.  In order to compensate for this, LTPO can provide a lower overall power drain, and helps to keep the higher refresh rate displays from draining the battery.
That said, there are few panel producers who have the ability to produce displays with LTPO backplanes, and that limits those who wish to take advantage of 120Hz refresh rates to a small number of display producers, primarily Samsung Display (pvt), who is the leader in the space.  LG Display (LPL) also produces LTPO displays but in a more limited capacity, leaving Apple little choice but to use South Korean suppliers for its LTPO needs, with both the iPhone 13 Pro and the iPhone 13 Pro Max using the technology.  As we have noted previously, China’s BOE (200725.CH) has passed muster as a primary display producer for the iPhone, but is limited to producing LTPS displays (iPhone 13 currently) until it is able to get qualified for LTPO display production by Apple, which has yet to happen.
In the interim, China’s Visionox (002387.CH) has announced that they have launched China’s first LTPO OLED display and expects to see the display in new phones ‘soon’, putting them both in competition to garner attention from Apple and to compete with BOE, SDC, and LPL.  As BOE discovered, it can take quite a while to get through Apple’s intense qualification process, which not only considers the quality of the technology but also the ability to produce a stuffiest quantity for inclusion as a full supplier, and that means a yield that can be difficult to reach.  Visionox, while they will certainly push to develop customers on the Mainland, will have to begin the qualification process with Apple now that they have a commercial product, which can be both difficult and could require at least some capacity to be dedicated to such a project.  With that goal in mind we expect Visionox will make such an attempt although they have relatively small OLED production capacity (line in Hebei, Hefei & Kunshan) when compared to BOE and South Korean producers, so it could be some time before they would have the dedicated capacity needed to be a primary LTPO supplier to Apple.  As BOE faced a number of qualification disappointments that were regaled in the trade press, it might be best for Visionox to work with Chinese smartphone brands for a time rather than take the big step toward Apple.

While Samsung (005930.KS) and Apple (AAPL) continue their tug-of-war for top billing in the global smartphone market, Samsung is still king in its home country of South Korea, with the Samsung Galaxy Z Flip 3, the Galaxy A32, and the Galaxy S21 5G holding spots 1, 3, and 4 in the top 5 most popular models in Korea in 4Q ’21 (Apple holds spot 2 and 5).  However each successive series of Samsung’s flagship phones, the Galaxy S, have not been selling as well as previous year’s models, and Samsung has been looking for a way to stem that decline.  At least based on pre-order rates, Samsung might have found the right configuration to build back its flagship customer base, at least in Korea, something Samsung wants to push out to its global customers.
Indications, again based on pre-order rates, are that the recently announced Galaxy S22 line is seeing over 1m pre-orders over the last 7 days, an average rate of 145,700 units/day (day 1 saw ~300k), better than the 127,200 units/day seen with the S21 last year.  A bit telling is that ~60% of the pre-orders were for the Galaxy S22 Ultra, the most expensive of the three S22 models and the only one that supports Samsung’s S-Pen, a feature that drove many Samsung users to the Galaxy Note series which Samsung has tacitly ended. With those Note users wishing to upgrade older models, the logical choice among the S series is the Ultra, which we believe accounts for what we believe s a higher than normal share for this model.
Further, the Galaxy Fold 3 and Galaxy Flip 3 (combined) saw close to 1m pre-orders in the pre-release stage last year, and while they did not hit the 1m mark, sold considerably better than previous models.  The Fold 3 also supports the S-Pen but does not have a storage slot as does the S22 Ultra, a feature also seen in the Note line.  It remains to be seen if the Galaxy S22 series does as well globally but smartphone brands take strong (pre-release) orders as a very positive sign no matter where they come from.  The phones are available for pre-order in the US with an expected delivery date of March 3, with Samsung offering further encouragement by giving ‘pre-orderers’ 4 free months of YouTube (GOOG) premium, 3 free months of Spotify (SPOT) Premium, 6 free months of Sirius XM (LMSXA) streaming, 6 free months of OneDrive (MSFT), and a $100 Google Play credit.  If you are really nice, they will come to your house and clean your garage (just kidding on that one but it’s worth a try).  Samsung also mentioned that the new Galaxy S8 tablet series pre-orders are running at 2x the pre-orders for the Galaxy S7 tablet.  All three Galaxy S8 tablets support the S-Pen.

In the broad display market, China’s BOE (200725.CH) is the leader in LCD panel production, however in the OLED display space BOE has been playing catch-up with Samsung Display (pvt) and LG Display (LPL), particularly when it comes to producing iPhone displays for Apple.   As we have noted previously, BOE has been included in Apple’s iPhone display supplier list this year after a number of futile attempts at qualification in 2020 and 2021.  While SDC produces the most sophisticated (LTPO) displays, LG Display has been gaining favor with Apple and has seen increasing OLED display volumes last year and again this year, while BOE is just beginning to bring production volumes to scale.
That said, BOE has put out expectations of producing ~40m OLED units overall, with ~30m for the iPhone this year and some optimistic prognosticators have stated that BOE’s share could be as high as 20% (40m+) with Apple this year, although we see more reasonable estimates in the 14% to 16% range.  However it seems that BOE has already hit a stumbling block in that a shortage of display driver silicon, an item absolutely necessary for display production, could limit BOE’s small panel OLED production this month and next.  BOE’s display driver supplier, LX Semiconductor (108320.KS), formerly known as Silicon Works, that is part of LX Holdings (pvt), owned by LG Group (pvt), the holding company of LG Electronics (066570.KS) and LG Display (among others), has been unable to meet its production goals and has had to allocate silicon capacity.  Not surprisingly LG Display’s driver needs come before BOE’s and BOE is expected to fall short of its production goals for 1Q by ~3m units.
Whether the shortage will reduce the overall 1Q and possibly 2Q total unit volume for the iPhone is still a question, with driver inventory level at Samsung and LGD unknown, but it will put BOE in a difficult position, albeit not completely its fault, in its first year as a primary OLED display provider for the iPhone.  Much has been said about BOE’s potential to displace SDC and LGD in the iPhone display market in Chinese trade press once the final qualification process was completed last year, but BOE is still far from catching Samsung or LG Display, as SDC is producing iPhone displays using LTPO, a more versatile backplane that allows for a number of features in the top-tier of the iPhone line and LGD is expanding its production of both LTPS and LTPO production to accommodate Apple’s capacity demands, so while BOE is certainly a competitor, and a potential source of negotiating power for Apple, they still have a way to go before they will be on par with SDC and LGD, and this setback will do little to help that situation.

​In our note of 01/26/2022, we mentioned that the Netherlands Authority for Consumers and Markets published an order requiring Apple (AAPL) to “adjust the unreasonable conditions in its App Store that apply to dating-app providers”, essentially forcing Apple to adjust the App Store policy to allow developers to offer alternative payment systems that give choices to subscribers, rather than forcing them to use the App Store system.  The ACM went further in that it required Apple to adjust the system within 60 days or it would be fined €5m per week, up to a maximum of €50m.  Apple did make some attempts to comply with the ruling while noting that they were being obligated to make such changes, although they have implemented nothing more than a form that allowed developers to express interest in using an alternative payment system, which does not seem to have assuaged the wrath of the ACM, especially as Apple only provides for a choice between in-house or external payment systems and not both as the law directs. 
Since then, the Dutch ATC has fined Apple 5m€ four times as of this week, as they consider Apple’s changes to be deficient, which still levies a 27% ‘tax’ payments on payments made outside of the App Store.  Apple claimed in mid-January that it had complied with the ACM’s wishes, although what they did was very limited, focused only on dating apps, and did not actually make any changes, only indicating that it would eventually.  Apple seems to have taken the tact that it is better to fight than give in in the Netherlands and is going to appeal the court decision that the ACM ruling is based on, alleging that any changes to the current system would pose a security risk to users, communities, economies, businesses, and families, a hard case to prove.  In the interim the ACM can continue to levy fines until the 50m€ cap is reached.

Apple (AAPL) is expected to revolutionize the world of AR (Augmented Reality) later this year with the release of its first AR/VR headset, just as Google (GOOG) had intended roughly 9 years ago as noted in a piece published by Verizon (VZ) titled “How Google Glass Will Change Our Lives” or CNN’s (T) 2014 “Google Glass Signals a Wearables Revolution”, but while speculation toward such a device is never-ending, we look to some of the more obscure points that might make such a device more than just a shiny new toy for Apple aficionados.  One problem that plagues AR/VR users, and one that is not display related, is audio in the AR/VR world, an often overlooked item in the evaluation of the current state of headsets and AR/VR.
Typically AR/VR audio is delivered to a headset through a Bluetooth connection between the transmitting system, which could be a PC in a non-standalone device, or directly through headphones or buds that are part of the headset itself, such as with standalone devices.  As Bluetooth has a maximum bandwidth of ~1Mbps, and a lossless audio signal requires at least 1.4Mbps, compression techniques are used to ‘squeeze’ the audio into a Bluetooth stream, and those are under the best of conditions, which vary with source distance and obstacles.  It’s not to say that there are not some good codecs that can preserve much of the quality of an audio stream, but the ideal is always lossless transmission and in the case of immersive headsets, not only are the eyes sensitive to receiving misinformation, so is the body’s audio system.
In a sophisticated VR headset, perhaps one with eye tracking capabilities, the field of view is constantly being shifted as the user looks in different directions.  If those transitions are not made succinctly, the brain becomes fatigued or confused.  That same issue is also present for audio signals, where the sound source must change as the viewer moves his point of focus, and any inability to match those movements leads to the same problems noted for video with low latency in the audio signal critical in extending the number of users that can use such devices comfortably.  Wireless headphones stream data from a smartphone or similar device by cutting the audio data into packets and storing those packets in ‘buffers’ until the transmission stream is available.  Once transmitted to the earphones, the packets are again stored in buffers and then processed and reconstructed into audio signals for the headphones. 
While this process encompasses a few hundred milliseconds of time, the overall latency can be as much as 250 milliseconds, before any error correcting systems or additional compensation is added, but this should not be a problem for most audio as ‘time’ is not an issue for audio on its own.  However, when tying audio and video together, such as in a VR headset, that latency can become an issue.  Apple has recently been granted a patent that works toward solving this problem by adding an optical transmission system to a headset or buds, which does not need the packetization and buffering that a Bluetooth/codec system must use, transmitting raw data that can be immediately sent to the audio device.
There are issues that might cause the optical system to be unable to provide a complete connection from the source (say a smartphone) to the headset or buds, so an RF system would also be present with a sensing system that would evaluate the speed of the optical system and revert back to RF if necessary, but the overall result would be a ‘closer to lossless’ system that would be able to respond more naturally to the user’s movements in a VR system, and could provide lossless audio when used alone.  Whether Apple adopts such a system in its AR/VR device or even for its Air Pods remains to be seen, as with all IP, but such a system would go toward reducing or eliminating one of the issues that limit the AR/VR user base currently and towards Apple’s goal of providing lossless audio.