​Back before the internet, and even before electricity, kids had toys.  Maybe they were not particularly sophisticated by today’s standards, but you work with what you have, and endless hours were spent playing with what were mostly wooden toys.  There was one that was quite popular and was even written up in the 1889 issue of Scientific American called the Jacob’s Ladder, a simple toy made of thin blocks of wood and ribbons that looked like each block was descending down the chain when held.  The toy was actually an illusion, as the blocks only reversed sides and did not move, but the effect, at the time, was astounding.

At a recent exhibition in South Korea, Samsung Display (pvt) showed a version of what is likely a prototype of a potential foldable product slated for 2022 or 2023 that we have written about a number of times going back to 3/20/2018 (below) when SDC filed the initial patent, a number of times as further designs were revealed, and most recently in May of this year when SDC showed an earlier prototype.  In the most current version, the display is larger (7.2”), closer to a tablet than a phone and while the 35 second video (ctl-click here) shows little about how flexible the device is or how thick it is when closed, it does show a bit about how the display software works, adapting the image to a variety of formats that single out sections of the device or make it into a continues single image that can scroll across the device. 
Much of the development work behind this device seems to have been completed, which leads us to our conclusion that this will eventually become a viable foldable product with timing more likely set by marketing and production capabilities than technology limitations.  At least from our perspective it seems that SDC has realized that a tri-fold smartphone, given its fully folded thickness, might be a difficult sale relative to the almost paper thin devices currently available, but as a tablet, which would normally be more of a work device and typically carried rather than pocketed, the tri-fold concept makes more sense.  We have noted other tri-fold demos, such as the TCL (000100.CH) device we noted in a 12/23/2019 note (see Fig. 5), similar tri-fold demos from LG Display (LPL) and Visionox (002387.CH), and even a 2014 demo from Semiconductor Energy Lab (pvt) in Japan, but have yet to see an actual product, although it seems SDC is getting close(r).
 

​You finished work, hopped into your car and head home, but when you get there you find that your apartment door is partially open.  You’ve been robbed!  After calling the police, the apartment management and a locksmith, you realize that since the thieves took your 65” Samsung (005930.KS) TV, you will be watching TV on your smartphone until you can get a chance to get to a store and buy a replacement. You get even angrier as you envision the robbers sitting around your beautiful TV with a few beers, watching the Lakers game and laughing about today’s caper.  Well, a call to Samsung and a few questions identifying you and your TV is going to give you at least a little satisfaction as Samsung then activates a remote ‘kill switch’, turning off your stolen TV and putting a damper on the burglars basketball bash. 
Samsung seems to have installed such a remote kill switch in its TVs, allowing the company to disable a stolen or lost TV in the same way your carrier can disable your smartphone if it is lost or stolen.  Samsung used this function when the population in South Africa (see our note 7/14/21) rioted over the detention of the country’s former president and a number of Samsung and LG Electronics (066590.KS) warehouses and factories were looted near the Durban airport.  Samsung was able to identify the stolen TVs taken from their distribution center in Cato Ridge and use the switch to disable the stolen sets.  A Samsung official stated "In keeping with our values to leverage the power of technology to resolve societal challenges, we will continuously develop and expand strategic products in our consumer electronics division with defence-grade security, purpose-built, with innovative and intuitive business tools designed for a new world. This technology can have a positive impact at this time, and will also be of use to both the industry and customers in the future".
While this is a handy item to have and one that might discourage a few potential thieves, if they knew of its existence, it does open the question as to whether the system by which Samsung is able to remotely control TVs is secure and whether it could be coopted by hackers looking to control your TV or worse, enter your network.  Backdoors, which are ways in which companies can enter software potentially to diagnose problems or make upgrades, are a vulnerability that hackers use to either gather information, effect ransomware, or to gain access to other hardware that might allow further illegal activity.  While backdoors are common in lots of software, they are a vulnerability and despite the potential security that the brand might profess concerning access, they are hard to control in absolute terms.  Turning off a stolen TV is a bit of justice for those who have been wronged but of little consequence in the long-run.  Good homeowners insurance and a security system would like be a better alternative.
 

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”

​Last week we mentioned that a group of 14 US House of Representatives Republicans sent a letter to the Department of Commerce requesting that Honor (pvt), a spin-off from Huawei, be included in the DOC’s ‘entity’ list of companies with whom suppliers must petition the US government to receive a license to trade, which in most cases is not granted.  According to a financial institution in Hong Kong, Honor sent a letter to its core dealers indicating that it may be listed in the near future and those dealers can purchase original shares.  According to the source, the subscription ranges from 5m yuan ($772,300 US) to 50m yuan $7.72m US) depending on the location of the dealer and the timing of the decision, as some regions require an almost immediate answer while others do not.  The top 10 dealers in each province have received the notice and are eligible to purchase shares.
While we are not quite sure how listing might change the status of Honor with the US government, some of the distributors stated that “We believe that the main purpose of the listing is to avoid US suppression.  If Honor has private shares after its listing, it will not be easy to suppress,” which does little to answer that question, but a recent comment from the President of Honor stated that while he does not exclude future listings, there is no plan to go public in the near future. “Glory (Honor) independence has only been eight or nine months, and we have never pursued overnight wealth.  Honor is thinking about how to compete with Apple (AAPL) in mobile phones and full-scenario products, and even surpass Apple.”
We believe the Honor brand sold between 6.7 and 8.4m units in 2Q ’21, against Apple’s ~44.3m units globally and Apple’s 7.9m to 8.6m units in China, so Honor can make a case for direct competition on the Mainland, but while Apple is certainly a presence in China (~8.4% share in 2Q), Vivo (pvt), the top smartphone brand in China, along with Oppo (pvt) and Xiaomi (1810.HK) have a combined share of over 40%, with Vivo alone at 16.7%, so Honor has a way to go in its home turf before it takes on other smartphone contenders.  Perhaps the company is expecting to raise capital to better compete, but we doubt it will change the minds of those intent on pushing the Huawei spin-off onto the DOC list and choking off their component supplier list.

Overall mobile phone shipments in China in July increased 11.8% m/m and saw a y/y increase of 28.6%, the first y/y increase seen on the Mainland since March.  We do note that July of 2020 was a weak month last year, following a strong rebound in 2Q ’20, after the onset of COVID-19 in 1Q.  The overall trend (black dotted line in Fig.1) remains consistent with the past 2 ½ years.  On a YTD basis, total smartphone shipments in China have been 202.82m units, up 15.6% y/y, again noting that the YTD comparison includes the very weak 1Q 2020.  Looking at the last 4 months gives a better picture of the state of China’s mobile phone shipments really are, as it shows the YTD for April through July down 17.11% in terms of total mobile shipments.
5G shipments however continue to grow, up 15.4% m/m and 64.2% y/y, and represented 79.6% of total shipments in July, the highest share since we have been collecting data.  A relative small number of new 5G models were released in China in July (11, representing 42.3% of total new models), this comes off an unusually large number of new models last month (20), which puts the average around 17 new 5G models/month, but given that Chinese consumers have now been able to buy 5G phones for over two years, there seems to be ample models to choose from, putting the focus on total 5G unit shipments.
Seasonality in the Chinese smartphone market runs (5 year average) 47.8% in the 1st half and 52.2% in the 2nd half.  As expected, 2020 was a bit different, with 49.7% in the 1st half and 50.3% in the 2nd, but we would expect this year to be closer to the 5 year average.  That would imply 190.2m units for the 2nd half of this year for a total of 364.34m units for the year, up 18.3% y/y and would be the first up year for the China smartphone market since the data was published.  Assuming and 80% share of total shipments for 5G smartphones, implied 2H 5G shipments would be 152.16 units, or 279.96m 5G units for the 2021 year, up 88.3% y/y.  While the 5G average share of total shipments has been lower than 80% for the year to date (see Fig. 2), the trend has been just under that amount for much of this year and will likely continue to rise for the rest of the year.
We hesitate to forecast Chinese smartphone shipments using averages however, as the pandemic does not seem to have been brought under control as much as we expected, and component shortages could further limit smartphone shipments.  We note also that Huawei (pvt) will be a much smaller component of China’s smartphone shipments this year, which is another mitigating factor, however it seems that other domestic and foreign brands have made up the very weak Huawei smartphone shipments thus far this year.

On 11/11/20 we noted that reports out of China had indicated that Huawei (pvt) was planning to sell its Honor (pvt) smartphone brand to a consortium led by the Shenzhen government and Digital China (000034.CH), the largest IT service provider in China.  A few days later the actual deal was announced, with a newly formed company Shenzhen Zhixin New Information Technology Co (state) the ultimate owner.  That organization was formed by the Shenzhen Smart City Technology Development Group, the majority shareholder, which is wholly-owned by the Shenzhen government, and over 30 agents and dealers of the Honor brand along with a number of investment firms.  Digital China, a spin-off of Lenovo (992.HK) was rumored to be part of the consortium but was never disclosed, while China Telecom (601728.CH), which is owned by the state government is said to also have a small stake.
Huawei had developed the Honor brand to broaden its smartphone offerings by adding a new mid/low tier line that would allow Huawei to maintain its stature, and found that the brand was even more successful than it had planned, and represented between 30% and 40% of Huawei’s smartphone shipments in China, and higher percentages outside of the country.  As the US continued to tighten restrictions on Huawei’s ability to sell product, eventually extending those restrictions to all suppliers whose products use American made components or are produced using US software, subsidiary Honor found it also was tacitly being included in the ban on its parent, and would likely be unable to procure the components it needed to continue production.  Parent Huawei was large enough to withstand the US trade sanctions, albeit not quite as easily as anticipated, but the Honor brand organization saw the handwriting on the wall.
While the actual price of the Honor brand purchase was not disclosed, it was assumed to be ~$15b, which essentially went from the Shenzhen government to Huawei, who then disavowed any connection to the brand.  The transaction was meant to separate the Honor brand from Huawei’s inclusion on the US Entities list, and Honor was then able to sign its own deals with US suppliers. Since then Honor has seen its share of the Chinese smartphone market vary between ~5% and 14% and has continued to develop and release 14 new smartphone models this year, shipping ~12m units in the 1st half.
However that success might be nearing an end if a group of 14 House Republicans get their way.  The group has requested that the ‘End-User Review Committee” of the Department of Commerce should include the Honor Device Company in the DOC’s Entity list and restrict the flow of US technology and software to the company, as it has done with Huawei and many of its subsidiaries.  Citing a 3rd party interview of a former analyst at a Washington DC think tank which suggested that the spin-off was guided by the Chinese Communist Party and revealed “the extent to which nominally private entities, such as Honor, are deeply embedded within a PRC ecosystem that leverages interconnections among the CCP, state-owned banks, local governments, and venture capital for strategic objectives.”  The group is requesting a response within two weeks and is requesting a briefing with the committee to “ensure the Administration is moving with enough speed to counter CCP attempts at export control evasion.”
The CEO of Honor responded to the letter at an event launching the company’s first ‘flagship’ smartphone since the spin-off.  He emphasized that Honor is now an independent company that is no longer involved with Huawei and said, “We believe that if we keep on doing well in what we do that all these problems can be solved” (see Fig. 1).  The new phone is based on the Qualcomm (QCOM) Snapdragon 888 chipset, whose CEO made positive comments about the phone through a pre-recorded message at the event.
While we certainly are not going to pick a side in this heavily political debate, there seems to be little hiding the fact that the Chinese government, whether directed by the CCP or motivated by face-saving, structured the Honor deal to skirt the devastating effects of the US trade ban, but this is something that happens all the time in China.  We have seen display companies taken over by state owned entities when they looked like they were heading toward failure and more recently with semiconductor start-ups that faced a lack of experienced management. 
The Honor spin-off also had the obvious hope behind it that the economics involved with many US and foreign companies would supersede the fact that it allowed the Chinese government to both bail out Huawei and try to ‘slip one by’ the US.  What they did not consider was that politicians in the US love to hang their hats on scapegoats when things are not going their way, and while China is certainly not without its faults, it has become a representation of the antithesis of the American way of life and therefore is a perfect stooge for US political grandstanding. 
Should Honor be restricted?  If Huawei is then Honor should but that begs the question as to why Huawei was put on the list in the first place.  Ostensibly it was because the US suspected that backdoors in Huawei’s telecom equipment was allowing the Chinese government to monitor US government communication, and then mushroomed into a more ‘…we can’t let them win…’ in the semiconductor space.  As we have said in the past, rather than winning by doing as much damage to your competitor as possible, perhaps winning by being more creative and innovative than your competitor is a better strategy.  It works for Apple (AAPL), but maybe we are just drifting toward the unicorns and rainbows view.

​Figure 1 - Rainbow Unicorns - Source: theunicornlife.com            Figure 2 - Trade War Cartoon - Source: Kevin Kallaugher

​Samsung Electronics (005930.KS) held their latest ‘unpacked’ event today, releasing 4 new products, all of which have been talked about in the tech media ad nauseam.  They are…the Galaxy Z Fold 3 smartphone, the Galaxy Z Flip 3, the Galaxy Watch 4, and Galaxy Buds 2.  They are all currently available for pre-order and will become available on August 27th.  The Z Fold 3 5G (unlocked) sells for $1,799 and the Galaxy Z Flip 3 (unlocked) sells for $999, both exactly as expected.  The Galaxy Watch 4 comes in two sizes in either Bluetooth or LTE, with the former needing to be paired with a smartphone and the later cell enabled.  The prices range from $145 to $115 for the LTE versions and $95 to $65 for the Bluetooth versions.  There is also a ‘Classic’ version that sells for between $195 and $165.  The Galaxy Buds 2 sell for $150.  Since these devices have been leaked for months, rather than spend time going over the specs of each device, we have attached links to Samsung’s site where the specs are available. 

We know that 2Q was not a good one for smartphone shipments in China, with overall shipments down 22.3% q/q and down 26.9% y/y, with a big sales spurt in April of 2020 making the y/y comparison look even worse.  That said, the incremental data for 2Q this year confirms that it was a weak quarter, not only for Huawei (pvt), which was expected, but for all other major brands on the Mainland.  While Huawei did not even enter the top 5 brands in 2Q this year, against a 44.5% share in 2Q last year,  even Vivo (pvt) the share leader in 2Q ’21, saw its shipments drop 15.1% q/q, although it still saw a 23.5% y/y gain.  As Huawei fell into the ‘other’ category this quarter, we cannot break out their share or comparisons, but the table below points to how the other top brands fared during 2Q this year.
The gains shown in share from top brands in China obviously come at the expense of Huawei, formerly the share leader, and while we know the ‘other’ category saw a large q/q and y/y increase in 2Q due to the inclusion of Huawei’s shipments, it also included those from spin-off brand, Honor (pvt) that fell out of the top five list in 2Q, although we believe Honor saw a 40.8% q/q increase in shipments against a weak 1Q, and a -46.3% y/y comparison against last year’s spectacular 2Q.

​While Samsung’s (005930.KS) Vice-Chairman Lee Jae-yong’s legal team is pushing for the courts to release the billionaire from his 2.5 year prison sentence by placing him on parole, the company’s current management has continued a special review of the company’s mobile unit in light of weak results from the company’s flagship Galaxy S21, which was released in late January this year.  Typically, Samsung Galaxy S series smartphones sold over 30m units, while last year’s Galaxy S20 sold between 23m and 27m units and this year’s series is thought to have sold a bit over 13m units, which has burdened Samsung’s ability to meet its smartphones sales targets this year.
Also under review in the mobile division are Samsung’s 5G smartphone sales, which have fallen behind Apple (AAPL), and Chinese brands Vivo and Oppo (pvt), despite Samsung’s early lead in the category.  Samsung’s  mobile supply chain is also in question, as shortages of certain components have the potential to limit smartphone sales, and the company’s relationship with application processor supplier Mediatek (2454.TT) has soured as Samsung’s leverage with the company dwindled along with smartphone sales.  According to our data Mediatek processors have appeared in only one Samsung model this year, while in six models in both 2020 and 2019.
Samsung officials declined to comment on the review, but added that each business unit can conduct their own review without top management being involved, however we believe this review is being done by Samsung’s Business Support Task Force, the organization that was formed in 2017 to replace the Future Strategy Office when Lee Jay-yong was originally jailed, as that group had been accused of orchestrating the bribery scandal that jailed the vice-Chairman and led to the impeachment of the then President of South Korea. 

The CE space is ripe with claims; Claims that ‘my product’ is the best, or ‘we have the largest market share, or our product has the best technology, and as folks who look at and catalog massive amounts of data, we understand that making such claims by citing data is not always quite ethical, as narrowing data sets is a way to bring up standing, and the fine print at the bottom of the page that defines the data is rarely read.  That said, OLED displays have been making claims about how they save power when compared to LCD displays for many years and while the fine print is again a part of the answer to the validity question, from a logical standpoint, they should be less power hungry, at least for small panel OLED devices.
Small panel OLED displays use red and green phosphorescent OLED materials and a blue fluorescent OLED material to produce full color displays.  Since these materials are self-emitting, when a segment of the display is black, those pixels are turned off, reducing power consumption.  This differs from LCD displays, which generate light from an LED backlight, which passes through a liquid crystal ‘gate’ and on to a color filter that changes the white light to the three colors necessary to produce the millions of colors needed.  However, when a section of the image is dark, the liquid crystal gate closes, blocking the light to the user, but the backlight itself remains on, and continues to consume power, so from a technical perspective, an OLED display should consume less power.
But what about real life?  Does this really make that much of a difference to smartphones users, who would be the most affected by battery issues?  While LCD display users are typically looking at images displayed on a white background, OLED users have been told that the best way to use their OLED smartphones effectively is to switch to ‘dark mode’, where the background is black, but some users are not used to ‘dark mode’ and have resisted the change, and likely have compromised much of the power saving benefits of OLED displays.  This is particularly apparent with iPhone users, who have been exposed to OLED displays for only 4 years and less if you count the entire iPhone line, compared to Samsung users, who have been using phones with OLED screens since 2004.
There are some ground rules however before the question gets answered, as the brightness of the display, and by this we mean the user controlled brightness, has a great deal to do with the power consumption, regardless of the technology, so there is a material difference in results that would be generated in bright sunlight where the display would be turned up to full brightness as to those generated in relatively dark lighting situations.  The answer also does not consider the consequences of high brightness and low brightness on color correctness and the phone’s ability to correct for these circumstances, but the data does include a number of different models (model years) of the same phone, and a number of different applications to see if the application itself influences the results.  We show in the table below the averages to reduce the amount of data.

​When looking at the averages for all four OLED smartphones, the data confirms that ‘dark mode’ is a power saver at all three brightness levels.  In terms of the applications tested, one phone saw a 1% increase in power consumption at the lowest (30%) brightness level for three of the six applications tested.  Other than that all phones saw a reduction in power which ranged from 1% to 69%, by switching to dark mode, in all brightness modes, for all applications.  So with only the minor exceptions noted (this was from the oldest of the four phones) dark mode is a big benefit for those using OLED smartphones, and regardless of whether the OLED display inherently saves power over an LCD display at a variety of brightness levels, switching to dark mode will make sure you drain the least amount from your battery and have the longest time to use the phone between charges.  Thanks to Purdue students for conducting the very detailed analysis.