While we note that gauging the success of Samsung’s (005930.KS) just announced Galaxy S23 flagship smartphone series in South Korea is a datapoint that might not translate globally, it does give some color as to the potential success of the series going forward, at least on a relative basis.  Samsung announced the new series on February 1, with three models, the Galaxy S23 Ultra, the Galaxy S23+, and the Galaxy S23 in order of price and feature set, with the three South Korean carriers able to take pre-orders for delivery beginning on the 17th, with Samsung announcing this morning that as of the 14th, pre-orders amounted to 1.09m units, above last year’s record of 1.01m units. 
Of the three models, the S23 Ultra garnered ~60% of the pre-orders, the more generic S23 ~23% and the S23+ ~17%, with the fact that the Ultra has a 200 MP main camera (plus 4 others) and a 6.8” display, while the plus has a 6.6” display and a 50 MP camera (plus 3 others), while the S23 has a 6.1” display and also a 50 MP camera (plus 3 others).  With a difference of $200 between the Ultra and the plus, it seems most early buyers are willing to fork up the extra cash for the high-resolution camera, although there are many discounts and promotions being offered that can lower the price, particularly with trade-ins, new carrier accounts or when using carrier credit cards for purchase.
In recent years Samsung has had difficulty maintaining robust flagship smartphone sales, and the elimination of the Galaxy Note series in lieu of folding models was an indication that the company recognized a need to refresh the premium side of its smartphone offerings.  Breathing life into smartphones that have changed relatively little over the last few years was not an easy task, and the economic weakness being experienced on a global scale in 2022 did little to help, but Samsung continues to dominate the foldable smartphone market, and maintains a significant manufacturing lead over other OLED panel producers. 
That said, it will take time for Samsung’s foldable smartphone line to gain enough end user acceptance to generate consumer momentum toward the smartphone market, along with the potential for Apple (AAPL) to join the foldable market in a year or so, but Samsung does have he ability to stretch in terms of form factors, as we have noted in the past, and we expect a third foldable model to appear this year or b next, although it might be considered more of a tablet than a smartphone.  Either way, if it is practical and generates consumer excitement, it will help to offset the mid and low-tier competition Samsung faces from Chinese brands, where Samsung has less of an advantage.
 

​Samsung Electronics has made a number of investments in local South Korean companies over the last 10 years, many of which are investments in developing technology that Samsung uses or has the potential to use in one of its many businesses.  While investment timing is certainly a consideration, making such investments is as much a business decision as it is a financial one, and investment performance  does not take into consideration the positive aspects of products developed and sold as a result of such investments.  That said, it is also nice to have positive returns, so after attention was drawn to Samsung’s long-term investments in Korean companies when they announced an investment in Rainbow Robotics (277810.KS) late last month, we went back to check on how the company’s other investments have done over the years.
All in, Samsung has had mixed results over the mid-term as to investments made since 2020, but earlier investments have proved extremely favorable, with the entire portfolio up 166.7% since 2013, or an 11.5% CAGR.  Samsung has invested ~$409.3m in local South Korean companies, taking a roughly 6.4% stake since 2013.  The average investment is ~$37.3m US).  While Rainbow has soared since the announcement was made, increasing the value of that investment from $46.4m to $145.7m, we expect there will be many bumps in the road for that asset over the next few years.

​As promised, Samsung Electronics (005930.KS) officially announced the price and delivery schedule for one of the two additional sizes of their QD/OLED TV line, the 77” (Model 77S95C) model.  The sets will begin shipments on February 14 if pre-ordered at the advertised price of $4,500, which is slightly higher than the original price of Samsung’s top tier Mini-LED/QD 75” set that it released in March of last year and considerably higher than our early estimate of $3,000[1]  While this price might seem high when compared to the current price of the 2022 55” and 65” QD/OLED sets, which are now selling for $1,450 and $1,800 respectively, we note that the initial price of the 55” and 65” sets, released 326 days ago were 42% and 40% higher.  If we follow that logic, in 342 days (January 1, 2024) the price of the 77” model should be $2,655, or 41% below the initial.
Of course there re a lot of factors that will affect the price reductions for the 77” model, along with further reductions for the 55” and 65” models, and a potential 49” model that has yet to be announced officially, so we use that number only as a guideline that has considerable room for change.  However, it does serve to wait for the initial enthusiasm from “Gotta be the first” buyers to wane, as on an unofficial basis, it took about 46 days for the price of the 55” model to decline by 12.1% on Amazon (AMZN) and was near it current all-time lowest price in a bit under 230 days (End of October 2022). 
One point to consider is that on a per square inch basis, the 77” model sells for $1.78/in2, roughly between the initial price/in2 of the two earlier models, which means Samsung used the earlier models as an initial pricing reference for the 77” model.  With the 55” and the 65” QD/OLED models now selling for $1.12/in2 and $1.00/in2, our $2,655 estimate ($1.05/in2) does not seem outlandish, so if you can wait until the 2023 holiday season to buy the 77” QD/OLED Samsung TV, you should be able to save a substantial amount relative to today’s pre-order purchase price, or you can hope that Samsung announces a lower priced version of the 77” model (Model 77S90C?) later this year as rumors have suggested might be the case.


[1] Note: Our estimate was based on the current prices of the two existing (55” & 65”) models.  Samsung has priced the 77” set at a premium starting price, although we believe it will decline as noted above.

We are big on CE products that are practical, perform functions efficiently, and are not exorbitantly expensive, all relatively simple goals, although there are many CE products that do not fill even these basic parameters.  While we have yet to put our hands on the specific Samsung (005930.KS) device mentioned below, that was announced at CES 2023, we see the device, if it lives up to its promotion, as one that might fill the bill.  The device is called the Samsung Smartthings Station and will be released in Korea (and likely the US) next month.  This is a relatively simple device that represents the ‘new world’ in smart home devices promised by the new ‘Matter’ connectivity standard, that allows Matter enabled products to interoperate with other devices and controllers, as opposed to forcing the users to use proprietary controlling devices.
In the pre-Matter world, you might have a lighting dimmer system that you controlled with wall dimmers, a handheld controller, or a smartphone app, and at the same time you might have automated curtains that operated with another handheld controller or app.  Then there was your smart TV, with its own remote, unless you are using an external Roku (ROKU) device, for which there was another controller, and the list goes on with doorbells, leak sensors, smart refrigerators, and a variety of other devices, all of which needed some sort of controller or app, mostly proprietary.  There are many ‘hubs’, which act as central control points for a number of devices, but again most are able to work only with devices made by a specific brand, so smart homes tend to be a mass of proprietary systems that did not talk to each other.
Matter is to change that, with a standard that can be adopted by any device, brand, or smart product, giving it almost universal communication ability with other devices, and allowing the user to decide which controller he or she might want to use once they become ‘Matter’ enabled.  So, in theory, users should eventually be able to control all of the smart devices in their homes with a single controller (of their choice), although adoption will take some time and some older legacy existing devices might never become Matter enabled.
Samsung’s device is a simple one, and supports Matter, Thread[1], and Zigbee, and at ~$60 is the least expensive border router currently available that supports Thread and Matter, allowing home devices to be connected in a mesh configuration.  This allows for better communication between devices on the network and in most cases a larger reach for the network.  Samsung’s iOS is also the only OS that currently supports Matter, other than Apple’s (AAPL) iOS, with Google (GOOG) Home and Amazon (AMZN) Alexa, expected to add Matter support to their OS’s later this year.  Samsung is spreading out the Matter coverage across its own product line, with the Samsung Family Fridge line, , Samsung TVs, and Samsung monitors getting the upgrade in March and others to follow later this year.
The device itself is a wireless charger and supports three ‘routines’ with a simple press of the device.  The routines are set by the user and can operate a single function, such as turning on the lights, or a sequence of functions, such as turning on lights while opening curtains and turning on a smart speaker.  But here’s where it gets better…  Scenarios can be programmed into the device that are actuated by placing your phone on the charger, such as one might do before going to bed.  This can be set to trigger a routine that could close curtains, turn off lights, and turn down the heat, all of which would be reversed automatically when the phone is picked up from the charger the next morning, and we note that as long as the devices are Matter enabled, it does not matter which brand they are produced by, they would all operate under the Samsung device.
Not to be outdone by Apple, Samsung also includes the ability to find Matter devices within the home network range, so misplaced smartphones can be triggered to ring wherever they might be, and items equipped with smart tags, will contact the system and sends an e-mail or text to the user whenever they leave or enter the network area, so if a dog with a tagged collar gets out, the user will be immediately notified.  Of course this means that anyone trying to sneak out of the house or sneaking back in will generate the same notification if they have their smartphone with them, so errant spouses and sneaky teenagers beware…
All in, at least on the surface, Samsung has taken a set of simple but useful functions and put them in what is a relatively low-priced package that has at least some intrinsic value on its own (wireless charger).  Our only concern would be how difficult the device is to pair (attach to other devices) and program, which have been stumbling blocks for earlier smart devices, although Matter itself is said to make those functions a bit more intuitive.  More philosophically, Samsung, who abandon the smart home hardware business roughly three years ago, seems to have thought this re-entrance through, even stating that the company would rather embed its smart home technology in its products rather than creating branded hardware, a bit of a change for a company known for its CE hardware, although the SmartThings Station is just that, a branded product.  That said, with Matter leveling the playing field, consumers will have infinitely more choices about sensors, controllers, and applications, and the first Matter offering from Samsung seems to show that they are working toward making their smart home products practical rather than forcing consumers toward expensive proprietary hardware.


[1] Thread is a Wi-Fi mesh network protocol that extends and enhances IoT devices that can extend wireless networks of varying types including Wi-Fi, Ethernet, LTE, 5G an others, using low power and low latency connections between all devices, essentially a self-healing network. 

​More on Matter:
“Will it Matter?” – 07/21/22
“Apple Makes it Easy to Fix an iPhone, Mostly” – 09/20/22
“Will It Matter?” – 10/06/22
“More On Matter” – 10/13/22
“It’s a Complicated Matter” – 11/14/22
“What’s the Matter Now?” – 11/30/22
 

Samsung had some trouble pricing its inityial release of its quantum dot/OLED TV last year, originally listing the 55” and 65” models at $$2,400 and $3,500 respectively, prior to their April release, however the final pricing at release was lower for both, at $2,200 and $3,000, indicating the companywas still trying to best realize the most attractive price points, both from a profit perspective and from the consumer’s perspective.  As the QD/OLED concept was new for consumers it was up to Samsung to establish a point where these new sets could be placed in their TV line-up, but at the time Samsung Display (pvt), Samsung’s display affiliate, was having problems producing the  displays, with yields below 50%, and with Samsung Electronics targeting between 45m and 50m sets to be shipped for the year, such low yields meant that Samsung would have little reason to market sets that had such a small impact on the overall TV line.
Samsung Display, knowing without the support of its parent, having only Sony (SNE) as a 2nd customer for the TV panels, pushed its manufacturing lines to solve the yield problems, which began to see improvement around mid-year.  With yields improving, Samsung could justify the QD/OLED product line, and while it was still a small part of the entire Samsung TV line, the volumes were increasing at SDC and the potential for the QD/OLED line was finally acknowledged.
The problem however was that the combination of Samsung’s lack of marketing, weak overall TV set sales, and worsening TV panel pricing, left the QD/OLED sets in a netherworld, unrecognized by consumers, despite very favorable technical reviews.  Samsung seemed to recognize that they had a choice between a massive advertising campaign and setting a more attractive price point, and given the fact that even with the improving yields SDC had relatively limited display production capacity compared to other TV set modalities, the latter was chosen and the price of the sets was reduced.
While the price on Samsung’s website for both sets did change, the price on Amazon (AMZN), particularly those from 3rd party sellers, was much more telling and makes obvious the price point at which the sets became attractiuve to consumers, as shown in Figure 5.  While some of that volume can be attributed to improving yield at SDC, it seems that by October the price points (~$1,500 for the 55” sets & ~$1,890 for the 65” sets) had been reached and sales improved significantly,  We note also that during the earlier part of the year, Sony’s share was increasing and in September both Samsung and Sony had equal shipment share, but while Samsung continued to search for a more compatable price point, Sony did little to change the price of their QD/OLED sets, and share declined rapidly, hitting a low of 11.3% in November. 
We expect Sony’s purchase targets from SDC were set early in the year and the improvememnt in SDC’s yield did little to change that, with Samsung Electronics getting the bulk of the increasing shipments, but the chart makes it convincing that such a steep increase in QD/OLED shipments was directly influenced by the price, especially as it leveled off when the increases occurred.  3rd party pricing on Amazon does not always reflect list or discounted pricing om brand sites, but it seems a better indicator than Samsung’s own ‘brand’ pricing, which did decline from the initial $2,200 & $3,000 to $1,500 and $2,000 during the holidays last year (up slightly since), so even with the vaguries of 3rd party pricing on Amazon, it seems obvious that Samsung found the price point it needed for the QD/OLED sets to compete with other TV set brands.
The question remains however, wher=ther the relatively small number of QD/OLED displays that can be produced by SDC will be enough for parent Samsung to truly support the technology as a viable part of its TV product line.  Samsung has indicated that it will also be producing a 77” QD/OLED model this year, which is a size format that can be shared with 49”/50” displays cut from a single sheet, so we would expect to se additional QD/OLED panel sizes later this year, but most important would be the OK from both SDC and Samsung Electronics concerning the expansion of caapcity for the QD/OLED process, and that is a hard decision to be making during the weakest part of the yearly CE cycle.  Hopefully that decision has already been made and suppliers contacted if such capacity could be put on this year, but until SDC makes such a commitment, QD/OLED will remain a small part of Samsung’s TV set line.

​As the world’s largest smartphone brand, Samsung presents consumers with a large variety of smartphones at as many price points as possible, but while the aim is to capture every possible smartphone buyer, be it a potential $116 M04 series buyer or a $1,150 Z Fold series buyer, presenting such a wide variety of models and price points can become an expensive proposition from both a production cost perspective and a marketing perspective.  The chart below shows the number of models that Samsung has offered each year since 2016 compared to normalized (2016) global smartphone shipments and those of Samsung alone.  It can be seen that while global and Samsung’s own smartphone shipments declined between 2018 and 2022 (we assume a flat 4Q ’22), the number of models offered by Samsung increased until 2021 when offerings began to be reduced, now falling below the 2016 starting point and nearing the low point seen in 2017.
Given the prospects for a weak 1Q ’23 and relatively flat global smartphone shipments this year, we expect that Samsung will reduce the number of models it offers again this year, particularly for those lines where volumes have been decreasing.  We expect there will be a new foldable model released this year, likely a double folding smartphone, but we also expect the flagship ‘S’ line to be narrowed to two, rather than three models, as rumors that Samsung has abandon 2023 development of the Galaxy S+ line to concentrate on the better selling ‘regular S’ and the Galaxy S Ultra, which has replaced the former Galaxy Note line, also cannibalized by the Galaxy Fold series.  Samsung’s Mid-priced Galaxy A series and the lower priced Galaxy M series have some price overlaps, so we would expect to see at least two model eliminations in those series, after the A40 and M40 series were eliminated last year.
All in, Samsung needs to continue to focus on best selling models in each series to keep its own component inventory levels low, along with those of its OED/OEM partners, especially given the increases seen in component costs last year.  All things to all people is a great philosophy but it doesn’t take into account the inventory, marketing, and stocking costs associated with smaller volume models, and against a backdrop of relatively weak overall smartphone volume growth, the necessity to focus on higher margin and higher volume models becomes even more important.   We expect 2023 will see an overall continuing reduction in the number of smartphone models Samsung offers, with an emphasis on the top and bottom models in each smartphone price tier.

​Yesterday we highlighted much of Samsung’s (005930.KS) TV line and potential new models to be released for the 2023 year.  However actual sets and pricing are not released until mid to late 2Q, so we went back to check on TV set pricing for Samsung’s Mini-LED and quantum dot TV sets now that the holidays are over, and it seems that Samsung agrees that the holiday discount period has ended.  Not only have prices increased, but Samsung is no longer offering a number of its 2021 Mini-LED/QD sets to consumers.  Many of these sets are still available from retailers or 3rd party sellers on Amazon (AMZN), but the 2021 8K Mini-LED/QD sets (900A/800A) and the 2021 4K Mini-LED/QD sets are no longer offered, other than a single 55” 4K Mini-LED/QD model that saw a 40% increase in price over the last 43 days since our previous check.  Samsung is still offering all of the quantum dot only TVs from 2021, as shown in the table below.
Samsung’s lines from last year are all still available but saw price increases between 0% and 120% from our last check, which was the day before Thanksgiving (2 days ahead of Black Friday).  Two models in the 2021 line (of those that were still available) were equal to or at their lowest price, while only 3 were at their lowest price from the 2022 line, and we not that the 98” versions in all lines do not seem to be offered since last October.  This could be relatively country local but given that the US is a strong ultra-large market, it seems unlikely.  One a composite basis, the 2021 Samsung Mini-LED/QD and QD only lines saw a 4.6% increase in price since pre-Thanksgiving and are down 26.1% from their original price, although we only include those that are still available.  The 2022 line, which remains fully available, saw a 17.4% composite price increase since 11/23/22 and is currently down 23.1% from initial pricing.  Samsung’s QD/OLED TV line, which currently consists of 55” and 65” models, saw a price increase of 5.9% since 11/23/22 and is currently down 34.5% from its initial pricing.
As we would expect, almost all of the 2021 and 2022 Mini-LED/QD and QD only line reached lows around Black Friday 2022 as TV set brands sacrificed margin to move inventory which had been piling up as inflation worries dragged down consumer spending.  While the price bounce back since Black Friday looks severe in some instances, for example Samsung’s 55” 4K Mini-LED/QD 95B series set jumped froma low of $1,000 on Black Friday to its current price of $2,200, that same set was selling for $2,200 in August of last year and began a downward spiral in September 2022 that led to the $1,000 holiday price.  This was the extreme, although the upper tier 4K Mini-LED/QD models, especially the smaller sized TVs, saw the biggest holiday discounts and very oversized snap-back pricing currently.  Samsung seems a bit lees inclined to offer more sustained discounts, as we expect inventory levels are more in line with demand and seasonality, but while internal TV set targets have been set for 2023, public acknowledgement of those tyargets has been withheld so far this year.  We expect most brands will struggle to maintain positive y/y unit volumes in the TV space and will be a bit more rational about plans for 2023 after the 2H debacle last year.

As the largest TV set manufacturer, Samsung Electronics (005930.KS) tends to set the tone for the space each year, usually with announcements at the Consumer Electronics Show in Las Vegas, which begins tomorrow.  That said, many company pre-emp their booths at the show by pre-announcing a bit about what they are going to announce at the show, and Samsung has done so.  While much of the details will have to wait until the show is underway, Samsung did make available a few details as to how its TV line will look heading into 2023. 
We note that predictions for the TV space in 2023 are just beginning to be forecasted and a few targets are being bandied about, but after the tumultuous year the CE space faced in 2022, we and others seem a bit more cautious about making predictions this early in the year.  Excluding our own forecasts, which we have yet to make, the general tone for the TV set industry is looking flat to down slightly, and has the potential to fall below 200m units for the first time since 2017, but TV set brands are a confident lot, especially this early in the year, and are making plans to build up their consumer TV offerings as they do each year.
Samsung Electronics does have some problems in the TV set space, particularly when it comes to OLED TV, where fellow South Korean competitor LG Electronics (066570.KS) and its display LG Display (LPL) dominate the OLED TV space.  As Samsung Display (pvt) decided many years ago (2013 to be exact) that it was not economically feasible to produce OLED TVs using the same production methodology it used to produce OLED smartphone displays, it abandon the production of OLED TVs, eventually backing the use of quantum dots to enhance the company’s existing LCD TV technology.  Samsung Electronics championed QDs and adopted it across a wide swath of its LCD TV line over the years and has since added Mini-LED backlighting to its higher end models, but lacked a TV set that could compete directly with LG’s OLED TV set line, which has been gaining traction as LGD slowly added capacity.
This changed in 2020 when Samsung Display began developing production capabilities for an OLED TV of its own, but not using the same technology as used by LG.  LG Display’s OLED technology, known as WOLED, is based on a layer of yellow/green phosphorescent emitter material combined with a blue fluorescent emitter material.  These materials are coated on a TFT (Thin-film Transistor) backplane and covered with a color filter, essentially a sheet of red, green, and blue phosphor dots.  The white light created by the emitting material passes through the color filter, with each red, green, blue or ‘blank’ phosphor dot filtering out the remaining colors to produce red, green, blue, and white dots for each TV pixel, which each being controlled by the TFT structure below the emitting material.  One big drawback of this process is that using a color filter is a subtractive process, as, for example, the red phosphor in the color filter blocks the blue and green light that make up white light, which means the brightness of each pixel is severely reduced.  LG compensates by adding a transparent dot as part of each pixel, letting the unchanged white light through and adding to the pixel’s brightness, but while this helps the set’s overall brightness, it reduces the overall color intensity.
Samsung Display found that using a similar emitting structure, blue fluorescent and green phosphorescent emitters coated on a similar TFT backplane, instead of using a color filter, they could use quantum dots to convert what is blueish/green light to red, green and blue sub-pixels without much of the brightness and color loss.  Quantum dots, rather than filtering out colors, ‘shift’ the frequency of the light, so the red quantum dot took the blue/green light and shifted it to red, while the green and blue quantum dots shifted the light to those primary colors, with no need for a white sub-pixel.  The result is a TV with a more vibrant color palette, with the potential for a brighter set.
There has been a problem however, which is that LG Display has been producing WOLED TV displays for 10 years, while Samsung Display is still in what would be called relatively small scale production and that is a problem for Samsung Electronics, who needs more QD/OLED volume than SDC can produce if it is to have a significant place in the Samsung TV lineup.  Given that 2022 was really the first year of production for SDC’s QD/OLED display line, decisions as to building out new capacity needed to be based on consumer acceptance of the product, and while said displays and TVs received positive reviews, it was a terrible year for the TV set business and capacity increases were low priority.  Parent Samsung Electronics even went as far to bargain with rival LG Display over the purchase of millions of WOLED TV panels to fill out the 2022/2023 Samsung TV line, but negotiations did not resolve outstanding price issues and no agreement was made in 2022.
As Samsung Electronics begins to reveal its TV set plans for 2023, they have indicated that they will be expanding their QD/OLED TV set offerings by adding a 77” model to the existing 55” and 65” models[1] that were offered in 2022.  This was an inevitability, as premium size (>65”) TV sets continue to gain in popularity and tend to carry a higher premium than smaller sets, but indicates two things.  First, a bit more confidence in the technology by Samsung Electronics, who, at times, seemed less than enthusiastic about QD/OLED, and second, that Samsung Display has brought its yields up enough to be able to allocate some production time to 77” panels, which will likely have lower yields, and can still meet 55” and 65” QD/OLED goals, both of which are important to the decision to increase QD/OLED capacity in 2023.
In the first table below we show Samsung’s 2022 and potential 2023 TV line-up based on size.  77” models are expected to be added to the QD/OLED line and potentially the Micro-LED TV line, while there is some speculation that Samsung will add a number of ultra-large sizes to the Micro-LED line, although we expect there is currently little need for those sizes given their very high cost and the marginal sales of the ultra-large Micro-LED line overall.  One point that should be noted is that Samsung is now moving from Micro-LED TV modules based on PCB boards to TFT and Micro-LED placement on glass substrates. 
This new modality is considerably closer to the more typical TFT processes used in OLED and LCD TVs, and can reduce the cost of smaller sets, eventually putting them in a range more amenable to consumers.  We note also that Samsung has been reducing the size of each Micro-LED structure, enabling the higher resolutions needed for smaller consumer sets.  The 146” set that was shown in 2020 had a chip that was 125um x 225um which was reduced to 75um x 125um in 2021 for the 110” demo.  The 89” model is expected to have a chip size of 34um x 85um, which is a 69% area reduction in pixel size, although we note as Micro-LEDs get smaller it becomes more difficult to move them from die to substrate, so there is a trade-off as pixel size is reduced.
While the 2023 Samsung TV line does not have any major technology changes, at least at this pre-show point, it does show some progress on Samsung’s push toward Micro-LED, which remains a few years off for consumer TV products, and sets a decision point for QD/OLED.  QD/OLED capacity as it stands, is too small to be a true TV set price tier placeholder, so a decision as to whether to add capacity must be made soon.  Samsung continues to support quantum dot technology, which it has spread across almost all of its TV line, and can even be used as a simplified color conversion techniques for Micro-LED, but Samsung needs to compete with LG’s WOLED TV line, with the most likely candidate being QD/OLED, which would mean a more serious commitment to the technology at a time when capacity expansion projects are being postponed or eliminated.  Samsung has made such commitments during difficult times in the past, but the alternative would be to buy OLED TV panels from LG Display which leaves little product differentiation.  We expect Samsung to begin adding additional QD/OLED capacity before mid-year.


[1] SDC also produces a 34” QD/OLED display for monitors.

As we mentioned in our12-05-22 note, Samsung Electronics (005930.KS) has been conspicuously absent from the AR/VR world and seems to be looking toward the necessity for an application that would drive consumers into the space before making a major step into the AR/VR hardware business.  That said, Samsung has been developing and to a lesser degree marketing, Micro-LED technology, which is the use of very small LEDs as display emitting sources.  While Micro-LED technology is thought to be the ultimate replacement for LCD and even OLED display technology years down the road, it is currently a work in progress, and still faces some major issues that limit its use and maintain a high cost.  While that development will continue, Samsung Display (pvt) is taking its expertise in OLED display technology and moving toward another display venue.
SDC is beginning to take steps toward the mass production of Micro-OLED displays.  Micro-OLED displays use existing OLED technology, that of phosphorescent and fluorescent emitter materials, but with unusually small pixels that are densely packed in a small space..  There are theoretically two ways in which Micro-OLEDs can be used, the first being with an OLED emitter (or combination of emitters) that produces a single color and is then passed through a color filter that breaks the light into red, green, and blue components, similar to the way and OLED TV works.  The second is a using three OLED emitters (RGB) that are individually controllable and therefore do not need a color filter, similar to the way a smartphone OLED display works.  What makes these displays different from typical OLED displays is that they are built on silicon substrates, where larger OLED displays tend to be built on glass or flexible polymer plastics.
The OLED/Color filter path for Micro-OLED is being championed by Sony (SNE), who produces such displays for camera electronic viewer, HUDs, and AR/VR devices.  The display shown below measures 0.64” (Diagonal) and has 3,145,728 pixels squeezed into a display that is 0.512” x 0.384”, representing ~4,000 pixels/inch, with each pixel being spaced 0.0064mm apart (on center).  While this might sound like overkill, in a VR application the display is almost touching your eye, so if the pixels were not so closely spaced, the user would see gaps between the pixels, creating what is called the ‘screen-door’ effect

The problem is however, that using a color filter to create colors means that much of the light energy is eliminated, either reflected away from the user or absorbed, reducing the overall brightness of each color and the overall display, so Samsung Display, the global leader in RGB OLED displays for smartphones, is looking toward creating RGB Micro-OL:ED displays that contain a red, green, and blue sub-pixel within each pixel, and therefore does not need a color filter.  As can be expected however, these sub-pixels must all fit within the space of a pixel, which makes their deposition even more difficult and precise than that of the OLED/Color filter process.  It seems that while Samsung Electronics is still trying to find a key that will unlock consumer interest in AR/VR, Samsung Display, an affiliate, is thought to be taking the Micro-OLED concept a bit further.  

​Samsung Display is said to be developing a Micro-LED pilot line at its A2 display fab in Asan, Korea.  According to local sources, the company has ordered panel logistics systems from SFA (036540.KS) and glass encapsulation tools from AP Systems (054620.KS) for the pilot line that is expected to go into limited production toward the middle of 2023.  If successful, SDC will allocate funding for the construction of a small mass production line in 2024 that would be built to handle 6,400 sheets/month at the onset.  While we do not yet know the details of the intended product line, we expect the ultimate objective is to produce an RGB Micro-OLED display that will be used in commercial AR/VR applications, likely by Samsung itself, or sold to other customers, and with Apple (AAPL) expected to release an AR/VR device in 2023 or 2024, SDC is looking to develop a high volume mass production line that will feed the Apple AR/VR supply chain, especially given that Sony is expected to be the supplier for the initial Apple AR/VR product.
We note that creating OLED Micro-displays using the OLED/CF process is difficult, but the process of placing three separate OLED emitters in each pixel makes the RGB Micro-OLED process even more difficult, and SDC will face a number of challenges for which it must find solutions that can be scaled to mass production if these displays are ever to be within the cost demands of high volume consumer devices.  There are only a few manufacturers that can produce OLED Micro-displays, a number of which are large enough to be recognized by investors, such as China’s BOE (200725.CH), E-Magin (EMAN) and Sony, however others are far less recognizable, especially those based in China, such as SeeYa (pvt) in Hefei, Sidtek (pvt) in Wuhu City, Olightek (pvt) in Kunming, and Microoled (pvt) in Grenoble, all of whom have at least some product in the market. 
That said, this is still an evolving product segment and is driven on the technology side by higher resolution, higher brightness near-eye display improvements, leading to headsets and devices that are less bulky and cause less fatigue and stress.  But while the near-eye display industry continues to develop, and the two biggest CE players have not yet participated, the need for application driven demand is the industry’s major growth stumbling block.  Gaming is certainly a driver for the VR space and continues to evolve, but the metaphor of the ‘metaverse’, Meta’s (FB) hope for the future, is not enough to drive the high volumes needed for major CE companies to enter the market.  Meta has been on a costly quest to convince the world that the metaverse is other than a way to sell you something and collect user information but lacks a real application driver to attract consumers.  We expect the technology side of AR/VR displays to develop more rapidly in 2023 and 2024 but the application space will be the true driver for pushing AR/VR more quickly into the CE space.  Without application drivers, we expect the overall development of AR/VR to progress relatively slowly, likely falling behind expectations.

​As the 2nd largest CE company globally, Samsung Electronics has considerable influence over the direction of consumer products and CE technology, yet when in AR/VR circles, little is said about Samsung’s efforts, with much attention given to Meta (FB), who dominates the VR hardware space, and Apple, whose intentions for an Xr device in 2023 or 2024 seem to be well-known to all.  Yet Samsung has been working in the shadows toward developing an AR/VR business plan, although from a slightly different angle than one would expect.
Rather than rush to market with a consumer oriented AR or VR device, Samsung is taking the path of building an AR/VR ecosystem, and working to entice software developers to work with the company, rather than flooding the market with devices and hoping that they become dominant enough to become profitable.  This strategy is a bit different from Samsung’s foldable strategy, which was a race to become the first to commercialize such a technology, given a relatively open field and a well-understood smartphone market.  AR/VR, especially VR, is a new market and one that has considerable issues as to its growth path.  With Meta the dominant player, Samsung would be a catch-up company, having to spend vast sums to advertise that it has the ‘best’ device in the market, and no assurance that the market would accept that notion.
Instead, Samsung seems to be developing an ecosystem around the potential AR/VR markets, starting with a developer system assumedly next year, and aligning the direction of its affiliates and suppliers toward being able to provide as much of the potential ecosystem it would need for a high volume AR/VR production plan.  But Samsung’s focus is more toward creating the content that is necessary to develop the XR market into the high volume markets that Samsung handles well, and that means it needs to coordinate content development rather than flood the market and hope that existing content attracts consumers.  It is not to say that the company does not have hardware under development, with prototypes and models working through R&D, but having released a product in 2018 that saw little volume seems to have shifted Samsung’s attention away from hardware and toward software in this instance.
This is a challenge for Samsung, known for its hardware expertise, and the company faces the relatively meager adoption of its Exynos OS as a blow to its potential for building its software business, but the company does have a massive developer following given its top rankings in many DE categories, which gives them a platform from which to work.  We doubt Samsung is expecting its own developers to generate such content but will incentivize  the communities built around its products to build content for whatever AR/VR platform it releases.  This will be similar to Apple’s AR/VR approach, where Apple knows that despite the ‘coolness’ that an Apple AR/VR device might have, if there is little to do with it, it will see strong initial sales and weak long-term growth.
Both Samsung and Apple seem to be focused more on AR than VR, with the understanding that Meta has been seeding the market for VR to gain share, while losing a considerable amount of money.  W expect that neither company wants to enter into that scenario and are willing to let Meta rule the consumer market, while picking niches in both AR and VR that can carry higher ASP’s.  That is where we expect both to concentrate in the first two year’s of entry into the XR market, and both have the capabilities to ‘encourage’ developers to create applications and content for their platforms, rather than pin hopes on the blossoming of the Metaverse.  It is going to be a long battle for XR supremacy, but if we had to bet we would expect both companies to pursue similar paths toward such product development.