​Samsung Electronics (005930.KS) reported preliminary 1Q results of 77t Won in sales ($62.62b US) and 14.1t won in operating profit ($11.47b US), both exceeding consensus estimates of 75t won and 13t won respectively.  This represents an increase in sales of 0.6% q/q and 17.8% y/y and an operating profit increase of 1.7% q/q and 50.3% y/y.  The 1Q sales figure is the highest in the company’s history.  While Samsung does not give details when it states preliminary results it is expected that expectations for lower memory shipments were overly pessimistic and lost smartphone sales in Ukraine and Russia were offset by better results in other regions.  Full details will be released later this month.

Estimating production goals is like herding cats; when you think you’ve got them rounded up, you notice that some of the ones you counted are now missing, so we give credit to those who make such attempts, especially knowing that they are moving targets that have the potential to change a number of times during the year.  OMDIA has made such predictions for the top three TV set brands, with the caveat that purchased panels and goals do not always translate into actual TV set sales, and in the hope that they remain unadulterated for at least a few months, we review them here.
Samsung Electronics (005930.KS) is the most aggressive in its panel purchase expectations for this year, up 16.1% over last year’s purchase estimate and up 31.6% over last year’s estimated TV shipments, while TCL’s panel purchase plans are up 12.7% over last year’s plan and up 48.6% over last year’s TV shipments.  LG Electronics is only expecting to increase TV panel purchases this year by 3.9%, which would be an increase of 25.5% over last year’s TV set shipments.

As to the sources for these panels, most TV brands use multiple sources to secure TV panels, both for price and to ensure that disruptions at a particular supplier will not impact the entire TV set production process.  That said there are some changes this year, particularly Samsung Electronics’ TV panel purchases from Samsung Display, which are expected to decrease from 7.1m units last year to ~4m units this year as SDC winds down it final large panel production fab.  Much of that difference will be made up by LG Display who will see their large panel LCD shipments increase from .9m last year to ~4.2m this year, including ~2m OLED panels, over which the two companies have been in negotiations for some time.  Samsung will also procure 1m QD/OLED panels from SDC this year.
LG Electronics (066590.KS) seems to be taking a different tact toward TV set sales this year, which is reflected in its panel ordering plans.  LGE is concentrating more on profitability than volumes by focusing more on the premium TV set segment and less on generic TV models.  It is expected that they will be purchasing ~5m premium TV panels consisting of ~1m Mini-LED TV panels (up from .9m) and 4m quantum dot panels (up from 3m), increasing their focus on the premium LCD segment and also increasing their purchase of OLED TV panels that also contribute to the premium TV product tier.
The change in focus by LGE leaves room for China’s TCL (000100.CH) to push forward and potentially become the 2nd largest TV set brands globally.  While this would certainly be headline producing, especially in China, while units are commendable, sales leadership and profitability are more so and TCL’s emphasis on undercutting both competitors on price will be a challenge should LGE be successful in building its premium TV business further.  That said, TCL will also increase its LCD TV panel purchases from affiliate Chinastar (pvt) from 18.4m units last year to 22.5m units this year, a portion of which will come from the LCD fab it purchased from Samsung Display in 2020 for $1.08b (Samsung used some of the capital to buy a 12.3% stake in TCL at the time).  In theory this should help TCL to be competitive as it uses more of its own capacity to fill its panel needs.
While all three TV set brands roll the dice each year in reference to panel prices, Samsung has the most leverage, in both directions.  When Samsung Display was a major LCD TV panel supplier, positive panel price movements caused SDC to see higher utilization rates and become more profitable, while Samsung’s TV business struggled with weaker demand and an inability to completely pass on those higher prices.  When panel prices declined, SDC saw low profitability while Samsung’s TV business saw stronger demand.  While that balance was never perfect, it no longer exists for the LCD TV category at Samsung as SDC will be out of the LCD TV panel business entirely this year, meaning Samsung will be buying almost all of its TV panels from outside panel producers.  If TV panel prices rise, TV set sales will weaken but will have less impact on SDC, with small panel OLED displays being their primary product, while Samsung’s TV segment will see lower profitability, however if TV panel prices remain low or weaken, Samsung’s TV segment should see better shipments without the negative offset of weakness at SDC.
Again, no scenario is perfect but it seems that Samsung has made the bet that overall it can do better by purchasing LCD TV panels in the open market than it can by producing them itself, which would indicate that Samsung’s long-term picture for LCD TV panel prices is down, while TCL seems to be going in the opposite direction by increasing its own panel production capabilities.  There is validity in both theories, although we favor the Samsung scenario a bit more when looking at the 10 year price chart for 32” TV panels, which represent ‘generic’ TV sets, but the bigger question is whether the panel procurement goals set by these major TV set manufacturers are realistic or will be subject to change during the year. 
We are perhaps a bit less optimistic about how the TV set space will play out than the three brands, but we also have no vested interest in the actual results, other than from an intellectual standpoint, but lower large panel TV prices have been the reality since August of last year, giving some hope toward  those purchase goals, but we still see some cannibalization of demand last year eating into unit demand this year, which we expect will cause those procurement goals to be lowered at least once this year.  That said, the dollar value of TV set sales should increase a bit this year, at a rate greater than unit volume, as the premium segment grows, so while units might be a focus point for headlines in the trade press, again the winner will be the most profitable, which we expect will be one of the South Korean brands, depending on promotional spending and component availability.

​The on-again/off-again negotiations between Samsung Electronics and LG Electronics’ (066570.KS) subsidiary LG Display (LPL) have been reignited according to industry sources (unconfirmed) in China.  As we have noted in the past, Samsung’s desire to offer a complete line of display options to its customers and the relatively low production capacity of its own QD/OLED display production, have been pushing the company to procure OLED TV panels from rival LG Display.  Rumors that prices for a high volume contract that would likely span at least two to three years has been a sticking point that has kept the two companies from such an agreement.
The most recent rumor-mill states that progress in the negotiations has been made and an agreement is getting close to being signed, but in the case of a commitment from both parties, which would likely entail additional capital spending on LGD’s part and a guaranteed financial commitment from Samsung, there will be lots of details to be worked out.  In such a case we doubt the more typical ‘cooperation agreement’ typically used in China, would suffice, so we expect if Samsung is to release its own ‘OLED’ TV this year (other than the QD/OLED), it would have to forge such an agreement by June or July, which gives LGD a bit more negotiating power if Samsung stays on its September rumored release date.  That said, Samsung can still walk away at any time and get its marketing gurus to come up with a reason it has decided to postpone such a release.  Since LGD is the only producer of volume large panel OLED displays, its going to be a question of whether an agreement can be reached within the next 90 to 120 days and whether Samsung is able to gather the necessary components (drivers, etc.) to make this all happen for the holiday selling period.
Some say it is a win-win situation for both parties, but that seems rather naïve as there is considerable ‘face’ involved in such a deal.  Samsung has pointedly stated that OLED is not well suited for large panel displays and discontinued its own large panel OLED development program years ago, particularly due to the use of a color filter in OLED TVs, which reduces brightness but creates the colors necessary for typical displays.  LGD will gain a potentially big customer but parent LG Electronics will now face another fierce competitor in Samsung, which will likely put some pressure on OLED TV margins, so it is not as cut and dried as one might think.  There is also the financial commitment and the capacity necessary to meet that commitment, which could entail further capacity expansion on the part of LG Display, and once that commitment is implemented, should Samsung back away for any reason, LGD will be stick with potentially excess OLED TV panel capacity, something LGD has faced years ago in its dealings with Apple (AAPL).  At the same time, should LGD be ‘unable’ to meet the supply requested by Samsung, there could be considerable friction between the two as Samsung would be unable to meet its own TV production commitments.  Its like two tightrope walkers trying to pass each other while over the Grand Canyon...

Samsung Electronics (005930.KS) is expected to begin production of its next foldable smartphone iterations this month for an announcement and (hopefully) release in August.  What will likely be called the Galaxy Z Fold 4 5G and the Galaxy Z Flip 4 5G will mark Samsung’s 4th entry into the foldable smartphone market, with only Huawe (pvt) having three iterations of a foldable smartphone product.  While we expect Huawei will likely have a new offering this year, despite the stringent US trade sanctions that have limited the company’s access to silicon foundries outside of China, two new Chinese competitors have entered the market over the last few months, with Oppo’s (pvt) Find N and Honor’s (pvt) Magic V being released late last year and in mid-January of this year respectively.
The competitive nature of the foldable smartphone market however is a bit less so than in the generic smartphone world where there are hundreds of active brands and almost 140 models released YTD and expectations for unit shipments range from ~1.3b to ~1.4b, while foldable smartphone shipments are expected to be between 14.5m and 17.1m units thus far.  That said, Samsung’s foldable offerings represented ~84% to 88% of the total market last year, and while that share might be reduced a bit this year as the new entrants gain some momentum, we expect Samsung will remain the dominant player in the space for 2022 with a target of 13m foldable units in 2022.
While Samsung is expected to remain the dominant player in the smartphone foldables market, as new competitors emerge, it will become increasingly important for Samsung to maintain competitive pricing for its foldables which typically carry a significant premium over competitive brands.  Justification for such premiums comes from Samsung’s experience in both display production, a function of its affiliate Samsung Display (pvt), its ability to develop or co-develop a number of key components in such devices. And its massive advertising campaigns.  That said, tablets that are in the 8” size tier range in price from as little as $89 to $150, although without 4G/5G connectivity, there is also a bit of price pressure from tablets, so we expect Samsung will be working toward keeping the price of the next generation foldable smartphones at the previous level or lower.
As the cost of the display will likely still be the most costly piece of the foldable BOM, the hinges which allow the phone to fold without creasing the display are also a high cost item that does not appear in a normal smartphone BOM.  Samsung Display (pvt) should be able to reduce the cost of the display as long as the specs don’t change drastically from last year (7.6”), so there has been some speculation that Samsung will eliminate one of the two hinges on the Fold 4 to reduce the device cost.  While there will still be rollers on either side of the folding mechanism, the hinge itself is now expected to be in the middle, similar to Huawei’s most recent foldable release, the P50. 
Samsung has been developing its hinge technology with KH Vatec (060720.KS), a precision casting company that specializes in foldable hinges among other metal smartphone products, and is said to have not only reduced the number of hinges on the new devices but to also have reduced the size, allowing the phones to fold more tightly, making it thinner overall, something consumers have mentioned as a drawback to foldables.  Whether this new hinge arrangement and the higher expected volumes for Samsung’s foldables this year will give the company room to lower the price while maintaining margins remain to be seen, but we expect that Samsung will either have to offer a new ‘model’ type foldable device this year, such as a ‘slider’, or push down the price of both existing models to generate increased unit volume this year.  The good news is that consumers seem to be able to trust that they will not have a device that will last for a year or two and need to be replaced, but that puts more pressure on price in order to gin up consumer interest to the next level.

​Samsung Electronics (005930.KS) is said to have delayed the production of its 89” Micro-LED TV, with production pushed back from May to sometime in 3Q this year.  The 101” model which the company also announced would be in production this year does not seem to have a production date as of yet.  Samsung is expected to begin production of the 99” Micro-LED it announced last year during the 2nd quarter, according to South Korean tech press and has already been producing the 110” version since last year.
Both the 99” and 110” models use PCB for control circuitry, based on LEDs that are 75um across and 125um high, however the newer models will be based on smaller Micro-LEDs that are 1/7 the volume, based on cylindrical measurements and are said to be deposited directly on a glass substrate containing the TFT backplane, rather than PCB boards, a process similar to that used by China’s BOE (200725.CH) for Mini-LEDs, which should ultimately reduce the cost.  That said, such smaller Micro-LEDs, while they allow for higher resolution displays, they are packed more closely together (.44mm for the 89” set), decreasing placement error tolerances and changing some of the characteristics of the Micro-LEDs themselves, particularly red Micro-LEDs. 
While we don’t know if the delay is related to the production of the smaller Micro-LEDs, the characteristics of those LEDs themselves, or the potential changes to the substrate of TFT configuration, we expect it will make little difference to Samsung’s TV sales and these sets are quite expensive and relatively few units are sold to consumers, but while Mini-LEDs are an extension of existing LCD technology, Micro-LEDs are not and will require far more R&D and interim modifications that existing LED based products.  That said, if the challenges of developing cost effective Micro-LED displays are eventually met, they have the potential to change the display industry over time.  Of course, many will (and have) predict the demise of existing display technologies, as they did when OLED displays began to appear on smartphones as far back as 2003, and again in 2005 when Samsung released its 21” OLED TV, and again when both Samsung and LG (066570.KS) showed 55” OLED TVs at CES in 2012, and while OLED has certainly become an integral part of the display industry, it takes time to move an industry with such high capital investments built into each company.   “I was taught that the way to progress was neither swift nor easy.”  Marie Curie

Samsung Electronics (005930.KS) has announced pricing for its Quantum Dot/OLED TV models, which are in pre-order mode.  While not all of Samsung’s 2022 TV line pricing has been revealed, the two sets are to be priced at $2,400 for the 55” model and $3,500 for the 65” model, which puts them at the top of Samsung’s 4K TV line in those sizes.  As both are 4K models, they would compare to Samsun’s Mini-LED/QD 90B series (2022) which sell for $2,600 and $1,900 respectively, putting the QD/OLED sets 34.6% and 26.3% more expensive than their closest sets in Samsung’s 2022 YV line.  When compared to LG Electronics’ 4K OLED TV lines (2021 models), using their most expensive models, the Samsung QD/OLED sets are 52.2% and 50.0% more expensive than the OLED sets.  While these are prices set by Samsung on its website, Amazon (AMZN) is offering the 55” model (no delivery date) for $2,197 to Prime™ members with an April 11 release date and delivery between April 15 and April 18.
The table compares Samsung’s QD/OLED TV pricing against similar Samsung Mini-LED/QD TVs, Samsung QD only TVs, and the most and least expensive LG OLED TVs.  We note that LG OLED TV pricing is based on 2021 models.  We note also that there has been some question as to the actual pricing for Samsung’s S95B models as some Samsung representative s are quoting a ‘corrected’ price of $2,200 for the 55” and $3,000 for the 65”.  While this might ultimately prove correct given the Amazon price mentioned above, the official prices on Samsung’s webstore are used below.

​At Samsung Electronics’ (005930.KS) shareholder meeting the company once again indicated that the Metaverse was one of two areas that it has selected as new growth businesses (the other is robotics).  Samsung’s Vice Chairman indicated that he would actively seek business opportunities in Metaverse which sparked renewed speculation that the company was preparing to announce or release a “Metaverse Device”, as he indicated last month at Mobile World Congress.  As we noted previously, no specifics were given although we noticed that the company’s Metaverse site 837X (Decentraland) is closed until March 21 when a new event is planned.  While this could be nothing more than new merchandise, it would be a good place to drop a few hints to the AR/VR community.
Given the extreme hype surrounding the Metaverse and Samsung’s expertise and history in the display space, it is easy to connect the dots as to Samsung’s eventual plans however as we noted in our 3/1/22 note, Samsung has been in and out of the VR space before and will likely take a more realistic approach to the AR/VR space in this go-round.  However they cannot keep the Metaverse chatter going forever without a distinct product so we expect at least a glimpse of a product before the holidays this year.  If nothing occurs by the end of 2Q we expect there will be a slew of questions as to why such a device/product has not been revealed and pressure on management will be intense, so unless we are wrong and the current Metaverse talk is just ‘Chairman Speak’ (Why promise if nothing is almost ready?) Samsung should be back in the VR/AR world this year.

Samsung Electronics’ (005930.KS) Vice-Chairman announced during a meeting with reporters at Mobile World Congress, that the company is preparing devices for the Metaverse platform, such as AR glasses.  He noted that ‘it is difficult to specify the release date right now, but the development is in progress with a focus on completeness.’  When pressed if that meant a product sometime this year he replied, ‘The quality of the product is important’, adding the general comment that ‘It is important to create mutual experiences between products and to give value to consumers’, all of which leads to no answer to any of the important questions concerning Samsung’s actual plans for the Metaverse.
While we would not expect much from Samsung executives in the way of product release dates, such replies were so vague as to be distracting and annoying, but given Samsung’s premier place in the CE space, it would be difficult for the company to not have a number of Metaverse related projects in development, particularly given their expertise in a number of areas that are key to AR/VR hardware development.  In 2015, in cooperation with Oculus (FB), Samsung released a VR ’quasi-headset’, a device that used a Samsung smartphone as the display, more to show what VR’s possibilities were to both developers and consumers.   In 2017/2018 Samsung released the Odyssey and Odyssey+ VR headsets, both of which were PC powered and based on Windows Mixed-Reality and Steam (pvt) VR, neither of which are still being produced.  The headsets were $500 each with controllers and had two OLED displays (1440x1600) that had an odd pixel configuration that had alternating pixels of red and green and red and blue. 
Despite favorable reviews Samsung terminated support for the Odyssey VR headsets in September of 2020 and the original Samsung XR website is no longer but Samsung has been developing a number of technologies that are applicable to VR, such as holographic devices, that the company has been quietly demoing for years and micro-OLED and micro-LED displays that have potential for AR/VR product development.  That said, Samsung would have to compete with Facebook’s Oculus brand, which is the most popular VR headset due to its relatively low price and admirable specifications.  As Facebook is obviously seeding the market and losing money on every device, Samsung will face the difficult task of creating a device that can compete, as we expect Samsung will not consider sustaining losses on a new product category for an extended timeframe.
Samsung is involved in the development of many display oriented projects, not only through its affiliate Samsung Display (pvt), but through affiliations with many companies and institutions with whom it has partnered.  On such that is still in the development stage has developed a way to produce displays with ultra-high resolutions, up to 10,000 pixels/inch, which is far above the more typical 400/500 ppi seen in most smartphones.  While such a project is still far from mass production, Samsung is one of the premier image sensor producers, has extremely sophisticated semiconductor capabilities, and has already developed Micro-LED displays for larger systems.  While each of these projects and the multitude of others that Samsung is participating in do not individually guarantee a commercial AR/VR product, we would expect that Samsung has little choice but to hop on the Metaverse train with at least some hardware this year or next.  Perhaps initially as a component or module supplier, but as the AR/VR market develops, it would be hard for Samsung not to participate.  The biggest stumbling block in our view would not be the hardware, but making the devices ultimately compatible with Samsung’s other devices, as while Samsung is big on advancing technology, they are there to sell stuff by ‘creating mutual experiences between products’, as noted above.

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.

​While we still have some time before Samsung’s (005930.KS) 2022 Mini-LED/Quantum Dot TVs actually become available, we checked in again to see if the pricing of the 2021 models has changed for President’s Day, a state holiday (formerly known as Washington’s Birthday) that is observed in only 38[1] of the states in the US on the 3rd Monday in February.   The results were mixed, with 40.0% of TV prices in the 35 we track increasing, 14.3% decreasing, and 45.7% remaining the same. There was almost no rhyme or reason to those changes, although that leads us to believe they are likely inventory related, but the only identifiable pattern being the price increases on almost all of the low-end quantum dot models, which saw some aggressive discounting during the Super Bowl.  Other than that President’s Day does not seem to be a time to take advantage of TV discounts, at least not this year.


[1] Not Observed in: Delaware, Florida, Iowa, Kansas, Kentucky, Louisiana, North Carolina, Rhode Island, or Wisconsin.  Georgia & Indiana celebrate Washington’s Birthday on December 24th and New Mexico celebrates President’s Day on the Friday after Thanksgiving.