Samsung Electronics (005930.KS) finally released its latest iteration of foldable smartphones, the Galaxy Z Fold 3 and the Galaxy Z Flip 3.  Given that there has been an endless number of ‘leaks’ associated with these two devices, there is little to say that hasn’t been said, so as Sgt. Joe Friday used to say “Just the facts, ma’am”

​OK so you forgot to come up with a gift for your 6 year old while you were at the conference in Tokyo, but did you really buy that $400 Inflatable Water Park with Slide and Water Gun out of the SkyMall (pvt) catalog while you were dozing off in the middle of the Pacific?  Since its sitting at your front door, it looks like you did, but you can make sure the wife knows that you got it at a steep discount from its original price of $600, so it was really quite a bargain and its going to be tons of fun for the kids until it gets punctured and put in a box in the garage to be dealt with next year or until the kids are teenagers and the garage gets converted into a band rehearsal ‘studio’. 
But that is all going to change according to a project involving Royole (pvt), a Chinese display manufacturer who is credited with releasing the first foldable smartphone, the Flex Pai.  In a partnership with Airbus China (AIR.FP) put together in 2018, the companies have been working on replacing the typical airline magazines like SkyMall and those particular to a specific airline (many of which have been terminated as a result of COVID-19), with something a little more sophisticated and potentially practical, an OLED magazine.
The device, which is just entering actual test mode on one plane, is an iPad-like OLED display device that is flexible enough to be called a ‘magazine’ but still able to be used to order food (accepts credit cards), read ‘digital’ magazines and newspapers, stream TV and movies, and even give access to the internet.  Of course, there is hardware that must be installed on the plane and internet access would be governed by the plane’s Wi-Fi capabilities, but the idea is to replace both paper magazines and the back-of-the-seat entertainment systems that are currently on most airline flights.
While the product is not quite ready for release, it helps airlines from having to clean magazines after each flight (really?) and maintaining the oddball seat display systems that are currently available, bringing it down to cleaning just an iPad like device.  We expect there will be a system for checking passengers as they leave the plane in case they ‘accidentally’ place the device in their carry-on luggage, but despite our long-standing criticism of Royole, at least the concept is valid and could one day be an alternative to paper.
The question will be whether it is priced correctly, both to other carriers and to advertisers.  While flyers tend to be a captive audience, ad and content pricing also needs to reflect a reasonable rate that leads to a sale, such as an in-flight movie or similar content, and the system needs to have access to content that does not limit the passenger’s choices to make secondary purchases.  These are not simple tasks, especially while flying at 40,000 feet, but at least the device itself is beginning to take shape.  Airlines themselves will likely be a bit cautious about spending for such new projects after the ravages of COVID-19, but if there is no more alcohol on flights, what else is there to do but read, watch movies, or buy stuff.  Isn’t that what OLED was invented for?

​Foldable devices are here, at least according to Samsung Display, Samsung Electronics, a number of other smartphone brands, and potentially ‘a large consumer electronics company’ sometime in 2023, but while all sorts of metrics are tossed about concerning the durability of foldables, who sits and opens and closes a potential foldable 200,000 times to test such statistics? Is there a factory worker sitting at a desk, smoking Lucky’s and opening and closing a device each second?  That can’t be because it would take such a tester 6.94 days working 8 hours a day to hit the 200,000 mark, but we know who can.

Samsung, LG, Apple, and BOE also know because they have purchased equipment for just that purpose from a South Korean company Flexigo (pvt), that has developed two tools known as ‘Foldy’ and ‘Rolly’ that replace that cigarette smoking worker, and that same company just announced another tool for testing sliding foldable displays, with the name (you guessed it…) ‘slidy’.  The company, which is backed by the venture arm of Korean tool vendor Wonik (240810.KS), is expected to generate $8m - $9m in sales next year, $85m in 2024, and $170m in 2026 when the company expects to go public.  “Twisty’ and ‘Stretchy’, two new tools expected next year will help to meet those lofty goals.
These tools are of extreme value to foldable brands and can not only test potential devices before consumers get their hands on them, but are instrumental in establishing standards for foldables, as many such longer-lasting tests of consumer devices are done through extrapolation, rather than full testing.  In fact when the original Samsung Galaxy Fold was tested, the results showed that the device worked normally through 265,741 folds, but the flexible PCB and the associated chips were the components first to develop problems, not the display or the TFT layer, and while the device was successfully folded over 260,000 times, brightness abnormalities began to show at 160,000 folds, despite the fact that there were no defects in the display itself.
Surveys on smartphone usage vary considerably, with age group rankings ranging from 18x/day for the ‘silent’ generation to 63x/day for millennials, to 79x/day for Gen X, but an Asurion (pvt) survey (they provide smartphone damage insurance) showed that the average American checked their phone (11/2019) 96 times/day, up 20% from the same survey done two years before, and while that seems like a staggering amount, the math says a foldable with a lifetime of 200,000 folds should last 5.7 years, which is more than twice the average life of a smartphone (2.5 yrs.), unless ‘foldy’ says otherwise..

​Samsung and South Korean carriers continue to exclude 28GHz 5G (mmWave) both from upcoming foldable smartphones and from a residential customer standpoint, leaving that bandwidth for B2B services, despite Apple’s adoption in the iPhone 12 and potentially in the iPhone 13.  While this is the case in South Korea, where mmWave 5G roll-out has been slow and has received only lukewarm support from the government, with the carriers citing the increased cost burden of mmWave roll-outs on consumers, Apple’s support of the faster technology has given US carriers, particularly Verizon (VZ) an incentive to add such infrastructure,, despite its higher cost.  Given the competitive nature of carriers in the US, the ‘need for speed’ is a subscriber selling point, although average 5G speeds in the US don’t always reflect mmWave’s higher throughput.
It is surprising that Samsung continues to hold off implementing mmWave 5G however, due to the fact that the application processor that is expected in the Galaxy Z Fold 3 and Z Flip 3 (Qualcomm (QCOM) Snapdragon 888) are equipped with 28GHz functionality, but it seems in order to cut costs Samsung has removed the 28GHz antenna structures, eliminating mmWave capabilities, despite the AP’s ability to utilize those frequencies..  While the IPhone does not dictate policy to South Korean carriers, the fact that Apple continues to see value in the mmWave bands would be expected to make some difference, however there are less than 100 mmWave sites in South Korea, with most in industrial parks or at public attractions, and it seems they are unwilling to add much to that infrastructure at least this year based on their comments.  Samsung, of course, did not answer the question as to whether the new phones would be mmWave capable, but said, ”It is difficult to confirm the pre-launch products such as the Galaxy Z Fold 3 with regard to whether they are equipped with millimeter waves.”.  The perfect non-answer.
Speaking of Samsung, the President of Samsung’s Mobile Division confirmed in a blog that there will be no new Galaxy Note series, and while this supposedly answers the question that has been rumored for some time, we take this as a ‘today’ statement, which could be modified if necessary.  It was stated that a major function of the Note series, the S-Pen, would be pushed deeper into the Samsung Galaxy line, and that the Galaxy Z Fold would be among those, which has been rumored for some time as we have previously noted.  That we believe…

There has been much said this year about foldable smartphones, particularly recently as Samsung is expected to announce at least two new foldables at an event next month, and at lower prices than the previous models (see our note from yesterday.  While Samsung is certainly the leader with the largest number of foldable devices, there are expected to be a number of new players entering the foldable smartphone market this year, although dates are still tentative for most and we expect at least one to fall into 2022.
While the supply chain for foldables is similar to that of flexible or rigid display smartphones, it is still developing, with OLED display suppliers vying for representation, hinge suppliers developing new systems to help reduce folding stress, and cover material suppliers looking for better display protection without sacrificing bendability.  Samsung Display is the leader in foldable display production, supplying parent Samsung Electronics with all of its foldable displays, but China’s BOE (200725.CH) and Chinastar (pvt) continue to challenge SDC’s domination of the foldable display space. 
That said, each new model opens a new round of competition between the players and there is no guarantee that the same display supplier will maintain its place as new models appear.  Further, the challenges facing other component suppliers, particularly cover materials, also continues, with a growing desire to move from polyimide film to glass.  Glass for foldables needs to be extremely thin, below 60um (0.00236”, 0.001mm, or the thickness of very thin magazine paper) in order to bend without breaking, and must be shatter-resistant at the least, as polyimide film has lower bend radius limitations but is not 100% optically clear and can crease if bent too many times. 
Chinese foldable smartphone brands have been using polyimide as had Samsung until recently when it switched from polyimide, supplied by Sumitomo Chemical (4005.JP) to UTG (Ultra-thin glass) produced by Schott (AFX.GR) and thinned by Dowoo Insys (pvt) a small firm in Korea.  Samsung has also been working with long-time cover glass supplier Corning (GLW) to develop UTG and is expected to use Corning’s UTG on the upcoming Galaxy Z Fold3 to be announced next month.  What complicates this situation is that the new Galaxy Z Fold 3 is expected to have pen capabilities which both increases the thickness of the display and increases the need to protect the display from pen pressure.  With Corning’s UTG at 50um and Schott’s at 30um the thinner UTG represents a way for Samsung to keep display thickness under control but provides less protection from the stylus pressure, which is likely to give Corning the edge for the Galaxy Fold3, while Schott will continue to provide UTG for the Galaxy Flip 3.  That said, Corning is said to be working with its own Korean glass processor, eCONY (pvt) in terms of cutting while Samsung is said to be looking for a local processor to thin Corning’s UTG further.
As Chinese brands roll out additional or first-time foldables later this year, they are expected to also make the shift to UTG, but it is unclear who they will choose as a cover glass supplier.  Corning is the exclusive supplier of large panel substrate glass to BOE so they have a solid relationship already existing, giving them a strong negotiating position, but the necessity for a thicker UTG is not an issue for most other foldable brand, so there will be a model by model battle for each of the new devices between current suppliers.  The table below shows existing and new models expected for this year.

Samsung Electronics (005930.KS) has tentatively set the price of its upcoming Galaxy Z Fold 3 and its Galaxy Z Flip 3 and as expected they are lower than previous models.  That said, they are lower than we had expected, coming at $1,736 and $1,090 in South Korea.  This compares against $2,092 and $1,439 for the previous models released last year and represents a decrease of 17% and 24.2% respectively.  Looking at US prices, which are typically lower than those in South Korea, we note that Samsung has already reduced the price of last year’s Galaxy Fold 2 and Galaxy Flip from their original prices so there are two possible price points for where new prices could be calculated.

​We note that these estimates make the assumption that Samsung would be consistent with the relative price on a global basis, which is a broad assumption, so we point out that these estimates are only to show one set of possibilities in terms of US pricing.  While it would be exciting to see Samsung price a foldable phone below $1,000, we keep our expectations low, and while it would likely give Samsung a stronger chance of meeting its goal of selling between 6m and 7m foldable smartphones this year, the price would have to incorporate both lower production costs and the higher component prices we have seen over the last few months. 
We believe Samsung affiliate Samsung Display (pvt) has been able to increase yield for its foldable products but we would expect with the rising cost of components, Samsung will face some difficulty in trying to fill the gap left by the poor selling Galaxy Note line, but by offering at least some discount to last year’s models they can stimulate expanded consumer interest in the foldable line, which we expect will eventually replace the Note.  Whether they are able to maintain margins similar to the Note line under the above scenario is questionable, which is why we are expecting US pricing to be a bit higher than the above when announced in the US.

Since September 18 of last year, when the Samsung Galaxy Z Fold 2 was released, there has been rampant speculation about when the next model would appear and what it might look like.  Endless numbers of articles about what might and might not be featured in the new device and dozens of ‘renderings’ have speculated about what such a device might look like, but despite the ‘leaks’, influencer whispers, and supposed conversations with suppliers, there has been no comment from Samsung as to when the Fold 3 might be announced or what it might contain.  Of course, Samsung enjoys the speculation, as it drives consumer interest in the potential product, and probably allows a few hints to be dropped here and there to keep interest alive, but only yesterday was something actually revealed about the next generation foldable that can be considered fact.
The FCC requires certification for every device sold in the US that produce radio waves, and while that sounds a bit limited it does include both devices that intentionally produce radio frequency energy (smartphones, IoT, power adapters, etc.) and those that produce same ‘unintentionally’, such as digital cameras.  This makes certification for a device such as a foldable smartphone a given, and the FCC is required to publish a notification for every device that it certifies, which just recently included the US variants of the upcoming Galaxy Z Fold 3.  While this does not guarantee that the release of such a device is imminent, it is a good indicator that Samsung is preparing the device for release and it gives some clarity to what the device might feature.
The FCC documentation shows that the Galaxy Z Fold 3 supports eleven 5G bands, 15 4G bands, Wi-Fi 6, Bluetooth, NFC, and both Qi and 15W fast charging, but of most importance the certification does confirm that the device supports the S-Pen, which would make it the first foldable to do so and more directly comparable to the Galaxy Note flagship series..  This gives rise to further speculation about whether the Galaxy Note smartphone series will be abandon by Samsung going forward, but still does not clarify Samsung’s stance in the near-term on the Note.  As Note sales have been relatively weak over the last few years and foldables contain larger than normal premiums, logic says that the Note’s days are numbered, but as to when that model might be terminated, we can only guess, although the S-Pen support for the Fold 3 is another pin in the Note Voodoo doll.

​We do note that making a foldable device applicable to a pen is not a simple task and while the touch component is bendable, the pressure of the pen on the foldable screen could damage the display.  While the FCC only confirms the inclusion of the S-Pen support and not details on how the device implements that support, much has been said about Samsung’s adoption of UTG (Ultra-thin Glass) for this device.   
This would offer protection to the display and lessen the impact of the pressure of the pen, however the pen itself is not expected to be stored in the body of the device, as it is in the Galaxy Note series, as the device is more sensitive to dirt and moisture than a static display might be and we note that some of the early problems that Samsung had with foldables had to do with dust and dirt getting into the phone and causing problems with the hinge and eventually the display.  While we have yet to receive an invitation from Samsung, we do expect the Fold 3 to be announced at the Samsung Unpacked event on August 3 given yesterday’s FCC certification, at which point we will see if the other highly speculated features, such as the under-display camera made their way into the new device.

Did you ever dream of becoming a consumer electronics product designer?  Probably not, but you can become one in your spare time for a mere $959, and stun the world with a flexible display application that will make millions, or at least that is what flexible OLED display producer Royole (pvt) is hoping with its just released RoKit, a ‘developer friendly toolkit that the company is hawking along with its foldable Flex-Pai 2 Folding Smartphone ($1,082, down from $1,344), the RoWrite Notepad ($99), and of course, the flexible OLED Tee-Shirt or top hat, that allows you to stream content, making you a walking billboard.

The RoKit comes in a 14” x 10” Aluminum carrying case (with handle), which means you would be able to bring the development kit to work and continue your development project during your lunch break, and it contains a fully flexible 3rd generation 7.8” foldable OLED display with touch support, a 7.8” sensor module, an Android 10 development motherboard with Qualcomm (QCOM) Snapdragon SDA660 CPU, an HDMI adapter board, Wi-Fi antenna, microphone board, optical sensing board, and power converter, along with associated cables, so you can prototype your device quickly and show it to friends and colleagues anywhere. 

There are some caveats however, as the bending radius for your RoKit is 15mm (~0.6”), so don’t go overboard on folding your device and follow the advice given in the 7 page user manual, which shows how to connect the boards and ways in which you can fold the display without breaking it.  Once you’ve got it all together, you are on your way to developing the latest and greatest flexible/foldable device, which you can submit to Royole’s ‘Flexible Future’ innovation design competition, which has produced award-winning designs such as the ‘smart helmet with interactive display’ or the ‘rotating screen application’

​Understandably Royole wants folks to develop applications using their flexible/foldable displays, and while rarely do display producers offer ‘developer kits in a case’ to the public, they believe that offering such will encourage the CE development community to come up with applications that will increase demand for Royole’s particular display offerings.  While the company was the first to offer a foldable display to the public (really a developer kit of sorts), there has been little indication that its products have been selling well and in February the Shanghai Stock Exchange terminated Royole’s IPO application after review.  A detailed review of the prospectus by an outside company revealed many questions about customers and product returns, and while that report cannot be directly tied to the IPO termination, there were likely too many unanswered questions in the prospectus for the exchange to approve the deal, so its back to new product development for Royole and anyone with a RoKit.

Foldable OLED displays are relatively new in terms of the display business, with the first foldable display being announced by Royole (pvt) in January of 2018 and Samsung (005930.KS) following with the announcement of its Galaxy Fold in February 2019.  Since then a number of other models from Samsung, Huawei (pvt) and Motorola (MSI) have appeared, and a number of brands are expected to release foldables during the 2nd half of this year.  As the pricing for foldable displays, whether they are used in smartphones, tablets, or notebooks, must absorb both the cost of development and lower yields, the devices that have been developed are expensive and in our view are still not mainstream products.  There are also a limited number of foldable display producers, with Samsung Display dominating the market and just recently opening its foldable display production to outside customers, which will showcase their expertise and volume availability in the foldable space.
That said, predictions as to the growth of the foldable market are quite difficult at this early stage in the in the foldable development cycle, so we take any such estimates as transitory at best.  While we admire those willing to make the attempt, we temper those expectations and expect that the rapidly moving parts of the foldable space will changes those estimates regularly.  In fact that has been the case recently as DSCC has updated their OLED Foldable unit volume forecast through 2025, decreasing estimates to reflect issues with trade restrictions that limit Huawei’s ability to maintain its leadership position in the smartphone space.  With Huawei’s contribution to the foldable space lower and the adoption of foldables by Apple (AAPL) not expected to appear until 2023 at the earliest, we see the reductions as logical, and expect some further modifications as the trade situation with Huawei remains fluid and consumer acceptance of foldable devices becomes more widespread.  The chart below shows the original estimates through 2025 made in December of 2020 and the updated estimates.  The numbers in red indicate the difference between old and new estimates and the dotted line indicates the new estimate rate of change on a y/y basis.

Foldable smartphones are a novelty, but as we noted yesterday, Samsung Display (pvt) and parent Samsung Electronics, wants them to be more.  Samsung has already stated that they expect to sell between 6m and 7m foldable units this year, up from last year’s 2.5m units, which was considerably below Samsung’s 2020 target of 4.5m units, and expectations are that at least one or two new models will be released in August, likely the Galaxy Fold 3 and/or the Galaxy Flip 3.  That said, with the Galaxy Fold 2 (released last September) originally selling for $2,000 (subsequently lowered to $1,800), and the Z Flip at $1,380, they remain among the highest priced smartphones available. 
Recent rumors seem to see that changing, and while the new Samsung Galaxy Foldable models were expected to have a number of new features, they have been expected to be priced the same as the previous models.  However recent ‘unidentified sources’ have indicated that the new models will be cheaper, despite the added features, with up to a 20% decrease in price from previous models.  While that would bring the price of the Z Fold 3 down to $1,600 and the Z Flip to $1,104, actual pricing will vary by country, along with a number of incentives for those that pre-order, when that option becomes available.
Even with the possible price reductions foldable smartphones are still expensive, although they do carry significant ‘look-at-me’ value, but in our note yesterday we indicated how Samsung Display was opening up its foldable production to other smartphone brands, which will certainly help to lower the production costs for foldable products, at least Samsung’s foldable products.  Because Samsung Display is becoming so dependent on its small panel OLED business, they must walk a fine line concerning margins so as not to imping on profitability, and we expect, while yields for foldables are likely lower than for flexible OLED displays, margins are comparable or higher, even with the lower yields.
If Samsung is going to eliminate the Galaxy Note line this year or next, which sold about 10m units/year at a rough average price of $1,000, they need to reach the top of their expected range for foldables to make up the difference this year, which is not an impossibility, but what we would consider a reach.  From Samsung Display’s perspective, selling foldables to outside customers is gravy since Samsung Electronics foldable demand will make up for the overall loss of Galaxy Note displays, and by next year, if Samsung and others are successful in maintaining foldable momentum, they will have built a new business around foldables that would continue to grow. 
That said, all is not without risk, as expectations grow for foldable price reductions.  If Samsung does not meet those expectations this year, we could see another unit volume shortfall, which could tarnish the foldable market and slow adoption.  As SDC has no choice but to forge ahead, we expect to see more foldable smartphone adaptations later this year and as we mentioned yesterday a number of initial models from brands just entering the foldable market.  That said, we do expect it to take at least another two years for foldable smartphones to reach parity with high-end flagship smartphones, as all brands are looking for the segment to boost margins, and SDC needs the same to balance its flexible OLED business, so what will push down foldable prices?  Chinese competition, which to date has been modest, more from a delivery standpoint than a quality one, but that will continue to improve over time with BOE (200725.CH), Visionox (002387.CH) and Tianma (000050.CH) all vying to develop viable foldables.  Samsung Display has the lead but China is certainly a viable contender.