While South Korea is not a particularly large market in itself, representing .65% of the total global population, it is home to of the largest CE and display companies, and as such, absolute numbers are less important than growth rates in order to generate useful data.  Aside from 3Q ’20 share, which indicates that the top two brands have a combined share in their home country of 63.5%, down from last year’s ~70%, the total rate of change on a y/y basis was over 35%, against what was a relatively strong shipment quarter in 2019.  Samsung’s gain was obviously a big driver for y/y comparisons, along with Apple and Lenovo (992.HK) to a lesser degree based on units, with LG (066570.KS) the weakest in the top 5, but players in the middle tier saw some unusually strong gains as COVID-19 brought consumer’s attention to slightly less popular brands, with Hansung (pvt), a gaming laptop brand, taking the prize for the largest gain.  All in it was a very competitive year for notebooks in Korea and while perhaps less so to the top known brands, a rising tide lifted all boats, at least through 3Q..

​Contracts with semiconductor companies are extremely lucrative as once a producer qualifies and installs a particular manufacturer’s tool, it becomes an integral part of the process, which is essential to keeping production steady and of high quality.  SK Hynix (000660.KS), the world’s 3rd largest semiconductor producer had installed between 350 and 400 tools made by South Korean supplier Mujin Electronics (pvt) over the last few years to remove microscopic particles and films from wafers before and during processing.  While this relationship was essential to Mujian, it seems that top executives decided to sell a cleaning tool that the company had developed with SK Hynix, to a Chinese competitor, Changxin Memory Technologies (pvt) (aka CMXT), which did not sit well with Hynix or the Korean courts, who have indicted and jailed those executives.
SK Hynix has asked tow of its other suppliers, TES (095610.KS) and KCTech (281820.KS) to develop wafer cleaning tools to replace Mujian as a supplier, however such a process takes time and SK Hynix was forced to continue to purchase from Mujian as it built out its M16 fab last year.  Samsung Electro-Mecanics (009150.KS) also produces such wafer cleaning equipment, however SK Hynix’s biggest competitor in the memory market, Samsung Electronics (005930.KS) is both parent to SEMES and its biggest wafer cleaning customer, so it would rule out that alternative.
Why Mujian management would risk what had been a very lucrative contract and development relationship with SK Hynix is beyond understanding, although we expect it was likely more than just the sale of a tool to a new potential customer.  It would have to be quite obvious that such a competitor would spend virtually any amount of money to obtain a tool it thought was key to a competitor’s process in order to have access to what was proprietary technology.  While we have not read the court records, we expect it was a bit more than a night out on the town for those involved.

​Last November (see our note 11/23/20) we noted that as part of the development of OLED notebook panels, both Samsung Display (pvt) and LG Display (LPL) were working on ways of increasing the brightness of such larger OLED displays by using a double OLED stack. This makes the production of such displays a more complex process, increases the TACT time, and will consume more materials, but will allow for a brighter display without increasing thickness, as would likely be the case using LCD technology.
While we are less sure of the timetable for LG Display’s double stack OLED, Samsung is adding two lines to its A4 fab that will be targeting the production of 18” and 20” OLED notebook displays, which we expect will begin production in early 2023.  In the interim, we believe SDC has converted some of the A2 and A3 lines to notebook size production, although whether those lines utilize a double stack structure is still an open question.
The reason this is significant is that there are expectations that Apple (AAPL) intends to migrate more of its products to OLED.  Since it now bases the entire iPhone line on OLED displays, logic holds that it will work toward its iPad line next, likely starting with the iPad Pro.  We know of no timeline for such a transition, but with both Samsung Display and LG Display Apple’s biggest OLED suppliers, and both working to convert capacity to compete in this nascent market, there has to be some incentive a bit greater than developing a product and hunting down a new OLED notebook customer base.  We expect Apple has ‘incentivized’ both with some sort of long-term OLED conversion plan that has lit the fire under both OLED producers.
 

Wireless is a word that is built into our daily language.  Wireless phones, wireless keyboards, and, of course, Wi-Fi, but there are few if any devices that are actually wireless, as most need a power cord or run on batteries that need to be charged via an electrical connection.  That electrical connection keeps the lights on, keeps your TV steaming away, and keeps your printer printing, but what if you did not need to plug those things in and they still were able to do all of the things they do now?  Science Fiction?  Technically wireless power has been a part of science fiction since science fiction was ‘invented’ but the dream of truly wireless power has not become a reality, or has it?
Chinese smartphone brand Xiaomi (1810.HK) is trying to take a step closer to making that dream a reality, announcing its “Mi Air Charge Technology”, a changing system that Xiaomi says will be able to charge devices within a radius of several meters.  Of course, the primary objective is to keep your Xiaomi smartphone charged at all times, even as you are using it, as long as you don’t wander outside of its range, but the company  says that the system will charge multiple devices at the same time, with the goal of making living rooms totally wireless, with speakers, lamps, and smart home appliances all being powered by such a device with no wires.
There are a few points that should be understood before you toss those chargers and batteries in the trash.  First, Xiaomi has given no timeframe for when such a product will be available, although they show a rather large but nice looking device in the release, although they do point to the fact that the charging system will charge other devices (as long as they have the necessary power receiving system embedded, which we assume will have to come from Xiaomi or be licensed from Xiaomi).  We note also that this is certainly not the first wireless ‘air charging system’ that has been shown to the public.  In fact, we saw a prototype of a similar system at a CES about 7 or 8 years ago produced by a Chinese TV brand that was in development but was never released and Energous (WATT) has been promising such a system since 2015, but has yet to deliver, while Motorola (MSI) just demoed an air charging system, however it only has a range of 100cm (39.3”) and is easily blocked by objects.
The Xiaomi system uses a 144 antenna matrix to forms a millimeter wide beam.  The target device has a low power ‘beacon’ system that allows the charger to locate the device, even if it is moving.  The target device also contains a 14 antenna array that captures the millimeter wave and converts it to the power needed by the device for charging.  The energy coming from the ‘pile’ as Xiaomi calls it (perhaps a better term might be found) is quite low and falls way below safety guidelines, again according to the company, so there is no reason to protect your brain with an aluminum foil helmet or expect to get a tan from the radiation.
While there is little additional information concerning the Xiaomi system, it would take a company like Xiaomi to be able to commercialize such a system, as a significant infrastructure would have to be built to make the system viable across a large number of devices.  If anyone is successful in getting the technology to an inflection point, it would have to be so well protected as to keep others from creating a competitive product, so consumers would not be faced with deciding between a Xiaomi powered desk lamp or a ‘Samsung’ powered desk lamp.  If Xiaomi (or someone else) gave away the receiving technology and produced or licensed the broadcast device, they would have some chance of monetizing such an invention, but it seems that this is just another step toward the ultimate goal of truly wireless devices, as no products using this solution are scheduled for this year, and Xiaomi uses the word ‘closer’ often when describing the technology. 

​ Last November we noted that The District Court of Mannheim, Germany issued a ruling in favor of Solas (pvt), an Ireland based patent management company that specializes in OLED IP.  The defendents in the case were LG Display, LG Electronics (066570.KS), and Sony (SNE), who, according to the decision, infringed on a Solas patent for control circuitry that is used in certain LG and Sony TVs.  The court ordered the defendants to ‘cease and desist’ from marketing the infringing products in Germany, recall all infringing products from commercial customers, and must provide Solas with a detailed accounting of infringing product sales going back to 2009.  The court defended Solas’s position as a non-active manufacturer, usually a point of contention in such suits, citing that Solas ‘indirectly financially supports” the research at the University of Stuttgart, for whom they manage the IP in question, but as a relatively lower court ruling, LG and Sony have the right to appeal the decision, which they have stated would be done immediately.
Yesterday the US International Trade Commission opened a ‘337’ investigation based on a complaint by Solas, made on December 28,2020 that alleges IP violations for certain OLED display devices and components.  The respondents in the investigation are Samsung Electronics, Samsung Display, and BOE (200725.CH). The IP noted in the investigation is for TFT backplane technology that was filed by Casio (6952.JP) in 2005 and 2006, which Solas either owns or is acting as representative.  While no action against the parties mentioned takes place for more than 100 days from the date of the filing, this investigation joins the myriad of other claims in various global courts made by Solas, a well-known patent troll with a focus on consumer electronics.

​Panel producer EverDisplay (pvt) (aka EDO aka Hehui Optoelectronics) is expected to begin trading on the Shanghai Stock Exchange on February 1.  The company, which is based in Shanghai, has been focused on small panel OLED production, with a Gen 4.5 rigid OLED fab that was built (phase 1) in late 2014, and a Gen 6 flexible OLED fab (phase 1) that has been in operation since 2019, with a phase 2 expansion project underway.  EDO was the first Chinese OLED panel producer but remains a relatively small producer when compared to Chinese leader BOE (200725.CH) or high volume producer Samsung Display (pvt), although their displays do appear in a number of prominent Chinese smartphone brands.
That said, the company has shown negative net margins and cash flow since inception likely using the capital ($1.54b US) raised to continue the Gen 6 phase 2 expansion, which would double its Gen 6 capacity to 30,000 sheets/month when completed, allowing it to increase production of its OLED notebook panels, which it released last year.  Given the lack of profitability, it will be interesting to see how local investors react to the EDO listing.  More to follow.

​We have mentioned Vietnamese conglomerate VinGroup (VIC.HOSE) a number of times in reference to the smartphone business, not as much in reference to Vietnam becoming an assembler of smartphones for major brands like Samsung and others, but as a competitor that is trying to build a smartphone brand business based on establishing a presence in its home country.  While a small retail seller of dried fruits when it began 27 years ago, the company has grown to over 43,000 employees and has dozens of subsidiaries ranging from real estate and shopping malls to farming to amusement parks, along with the largest capitalization of any native company in Vietnam (and 2nd only to two banks as to assets).
Back in 2018 VinGroup formed VinSmart (pvt), a subsidiary devoted to the smartphone market and released 4 models by the end of 2018, which ranged in price from $107 to $285, came in only two colors (black and white) and were relatively simple devices with one or two cameras, but were based on Qualcomm (QCOM) chipsets and tested by Qualcomm for quality.  Since the company had a vast retail empire they were able to offer both an unusually long warranty (18 months) with over 500 customer centers across the country and initially offered the phones at what they called a “3 No” price policy, which meant that the product would be sold at cost + selling cost, without depreciation, interest, or any financial costs.
At the onset the company used Chinese ODMs and assembled some of the products but began setting up R&D centers in the US, Korea, Japan, China, Israel, and Singapore to work with local product developers.  The company began to develop and produce its own phones this year, releasing the $177 Live 4 model and had expected to launch two more lower-priced models in 1H, but the releases were delayed by COVID-19, however the company’s factory in Hanoi can currently produce 26m smartphones/year with a target, after expansion, of 125m.
VinGroup has recently announced its intention to issue ~$303m of domestic bonds to finance both its automobile and smartphone businesses, and while the bulk of the capital will allegedly go toward the automotive business, VinGroup, or one of its subsidiaries is considered to be a front-runner in the potential purchase of LG Electronics’ (066570.KS) mobile phone business, which has been losing money for years.  Vingroup has worked directly with LG as far back as 2012, with the development and production of LG’s Nexus series of smartphones.  That said, Google (GOOG), Facebook (FB) and Volkswagen (VOW.GR) have all been mentioned as possible suitors for the LG mobile division.
Given the almost limitless capital available to Google and Facebook, we expect VinGroup will have trouble being the high bidder, however if LG wants to keep a portion of the business or participate in new product development in some way, VinGroup would be a more logical suitor than Google, whose ‘Pixel’ smartphone competes directly with LG, or Facebook, who has little or no experience in the smartphone business.  Usually money talks, but partial participation by LG could cast a different tone over such negotiations, if and when they begin, as LG has yet to open an official bidding process.

​Corning (GLW) reported 4Q results above expectations and gave 1Q guidance that was also above expectations.  While the 4Q call focused considerable time on Life Science and Environmental segments, we focus more on display and specialty materials, both of which faced very ‘unprecedented’ challenges this year.  Display Sales in 4Q were 841m (core), up 1.7% q/q and 5.8% y/y, while Specialty Materials (primarily Gorilla Glass) saw 4Q sales decline 13.5% q/q but increase 20.8% y/y with full year display sales down 0.6%, while specialty materials sales were up 18.2%. 
Large panel display industry sales growth was up ~15.6% for 2020, with much of that growth coming from higher panel prices in the 2nd half of the year, however glass pricing tracks quite differently, making a comparison a poor assessment of performance.  As glass prices do not have the volatility of panel prices, the leverage that panel prices have for display producers is far less for display glass.  That said, Corning’s display margins increased from 20.2% in 1Q to 25.8% in 4Q and display net income increased 42.8% over the same period, giving a better indication as to how the overall improvement in the display market affected Corning’s display sales and profitability.
While the display industry’s growth has been a driver for Corning’s glass business during much of the last decade, the company’s Specialty Material’s business, which is primarily Gorilla Glass™ and similar products, has become a new source of growth, while display maintains more ‘steady’ growth prospects.  In fact given that smartphone shipments are expected to be down for the 2020 year when all data is compiled, growth in the Specialty Materials business, which has strong ties to mobile devices, is quite telling, which indicates that these materials have seen increasing content on mobile devices, a point emphasized by management.
As strengthened glass becomes a more common product and specifications continue to be improved, the competitive nature of the smartphone business will continue that trend.  Last year the specialty materials division introduced Victus™, a further improved Gorilla Glass, and what is called ‘Ceramic Shield’ by Apple (AAPL), a glass composite with ceramic nano-crystals, that improve strength without reducing clarity.  Again, given the competition seen in the smartphone space, such new products, unless they are exclusive to a customer, get picked-up relatively quickly by major smartphone brands, while lesser brands tend to use earlier GG versions to reduce BOM. 
While the use of strengthened glass as an external automotive product is limited to premium vehicles, its use in digital dashboards, which are gaining traction, is a key to some of the promises made to automotive customers about interior vehicle safety, while still being able to be molded to whatever shape such a display might require.  Based on the Specialty Materials division’s ability to continually improve and expand applications for its products, there is far less reliance on absolute mobile device growth and more on expanding content on a per device basis, which allows for segment growth despite weakness in end markets, although we still expect that the specialty materials segment is still primarily dependent on mobile devices. 
On a more general basis, after the early part of 202, glass availability continued to tighten and a power outage at a competitor (see our note 12/15/20) pushed the glass market into shortage, While there was little glass price impact given the occurrence happening during the last few days of the year, it does set the tone for glass pricing in 1Q and potentially 1H, which is now expected to be flat in 1Q on a q/q basis, for the first time in what is usually a relatively weak glass pricing quarter.  Corning will certainly benefit from this very positive pricing trend, but its sustainability is a function of the 2021 demand cycle, which is by no means a sure bet, as we expect South Korean panel producers to resume their program of reducing or ending large panel production as soon as they see a break in panel pricing which would reduce demand, at least on a perceived basis.
All in, while we have focused on just two segments of Corning’s business (~52% in 4Q),  as these two are most directly related to consumer electronics, we would have expected display results to be about as reported for the year, while our expectations for Specialty Materials would have been less.  As noted above, Corning’s ability to expand device content in the Specialty Materials space has been unusually aggressive during a time when demand and device pricing remain under pressure.  This is a hard act to follow, so even a small bit of mobile device (smartphone) growth this year would help to keep that momentum intact, otherwise that aggressive content and application development cycle will be the sole driver and not every year can Corning be developing a new product with a major customer.  Certainly not to disparage the effort, but the bar is now set pretty high.

Last November we noted that Universal Display (OLED) had filed applications for two new trademarks.  UDC has many trademarks, some of which are obvious, such as “PHOLED” (Phosphorescent OLED), or “UDC Ventures” for the VC subsidiary the company formed last May, but we singled out two trademarks, “Plasmon PHOLED” and “PlasmonLED” as a bit more unusual.  A few months back, UDC researchers published a paper, “Plasmonic enhancement of stability and brightness in organic light-emitting devices” which indicated how a build-up of quasi-particles and charges over time cause an OLED display to age or ‘burn-in’, a well-known issue for OLED displays and one that is a source of considerable negative marketing from other display technologies.
The UDC team created what they called a Nanopatch antenna, not because it has anything to do with broadcasting or receiving signals of any king, but because the particles they added to the OLED stack act like an antenna, pulling out those ‘light particles’ that normally would build up and cause the OLED materials to ‘age’ inconsistently, causing the dread ‘burn-in’.  By attracting these plasmons with a combination of a typical phosphorescent emitter, what we believe is a TADF host material, and the silver nanoparticles, UDC researchers were able to both double the stability of the stack at the same brightness and increased the light output by 16%, a number to remember.
This would be considered very exciting news if you were an organic material scientist, but what relevance does it have to the world of consumer electronics?  Yesterday Samsung Display (pvt), the OLED display producer for parent Samsung Electronics (005930.KS) and a variety of other customers, announced that it will be (actually already has) introducing a new low-power OLED display  that uses a new material to reduce power consumption by (wait for it….) 16%.  While SDC gives very little information about the product specifically, they do note that it can emit ‘brighter light with less energy, which can improve the usage time of smartphones…’  It seems they do not want to give away much more information on the new display and materials, which has already been used in the display of the Samsung Galaxy S21 Ultra, which has been announced but not released until 1/29/21.
While we cannot be sure that the new UDC stack materials are the basis for this new SDC display, however as SDC’s only OLED phosphorescent OLED emitter material supplier, we would expect SDC would be fully aware of the strides that UDC has made toward Plasmon harvesting, and from UDC’s perspective, updating emitter stack materials resets the emitter volume price reductions that occur as SDC’s cumulative emitter usage increases.  We could be wrong and SDC could be doing something completely different from UDC’s application, but it seems to pass the duck test so far.  If it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck…