​With many major CE companies no longer selling product in Russia, the Russian government is trying a scheme that it hopes will allow those Russian citizens who still want those CE products that are no longer sold in the country.  This week the Russian government published a detailed list of products from a variety of companies that the government now includes in its ‘parallel import’ plan that it instituted in March in response to US and other country sanctions.  The parallel import plan allows Russia to purchase the listed goods from any company outside of Russia regardless of where they were produced, but no longer needs the permission of the trademark or copyright holders to do so.
The Russian Trade Ministry stated that “Parallel import does not mean permission to import and circulate counterfeit goods in Russia - the products must be legally put into circulation from the country of import”, and added that customs services will be paid, although while the Russian government will consider such purchases to be legal, we expect the copyright and trademark holders will not see it the same way, and we expect that anyone selling such items into the Russian market will be tacking on some fairly hefty fees that will push prices up considerably. 
The bigger question would be how closely CE companies will monitor the shipments of goods that have already been shipped to other countries that remain on friendly terms with Russia, and that would depend on each company and how much control they have over their own foreign subsidiaries and how respectful those subs are to corporate mandates.  It is still going to be very difficult and likely expensive for Russian citizens to buy CE products from companies that have banned sales in Russia, but we expect a few iPhones and Samsung (005930.KS) TVs to make it across the Russian border for now.  There are only so many Russians who will settle for a 2017 Yota phone.
 

Smartphone shipments have been weak and estimates for full year mobile shipments have been slowly declining as expectations for 2Q smartphone shipments, particularly in China, are not expected to see much of a recovery, other than modest seasonal improvement from the low in February.  As can be seen in Figure 1, in years prior to COVID-19, there was a steady build toward the 4th quarter shipment peak, which was interrupted in 2020 with the onset of the virus, and boosted in 1Q ’21 as some COVID restrictions were lifted as vaccination programs began to take hold.  This year however, there has been no return to a more normalized pattern, assuming 2Q estimates are correct, as the COVID lockdowns in China and the war in Ukraine, coupled with global inflation pressure consumer spending power. 
While Chinese smartphone shipments seem to be settling into a new, lower level, 5G has resumed its growth path and reached 85.1% of smartphone shipments in May, the highest level ever recorded, and 5G unit volume has returned to more normalized levels after a weak February, even as the number of new 5G models released in May declined.  We expect 5G share in China to remain above 80% for the remainder of the year.
In the past OLED displays were reserved for high-end or flagship smartphone models, given their high contrast, response time, and color stability, but as RGB OLED process technology became more adapted to mass production, OLED displays have been made available to a wider variety of smartphone models, with 43.8% of smartphone models released this year (YTD) with OLED displays, ahead of 2021’s 40.1%, and 2020’s 34.1%.  The premium status garnered by OLED displays in smartphones has made shipments less vulnerable to the ups and downs of shipments in the broad smartphone market, but as that share increases OLED displays are beginning to exhibit the same supply/demand characteristics as the mobile LCD display market.
A portion of that increased volatility comes from the inclusion of Chinese small panel OLED producers, with much being said, particularly in the Chinese trade press, about how Chinese small panel OLED producers are challenging South Korea’s dominance in the small panel OLED space.  Of course, Chinese small panel OLED producers have made inroads, particularly as smartphone brands look to find ways to gain leverage over Samsung Display (pvt), who is the absolute leader, and local Chinese smartphone brands look to local suppliers whenever possible, but as seen in Figure 4, South Korea’s regional share in the small panel OLED display market remains above 75% and defined further in Figure 5.  We are certainly not saying that Chinese small panel OLED producers are not making headway, but while on a percentage basis y/y shipment growth by Chinese small panel OLED producers has been impressive, the overall shipments are still small relative to Samsung, and if the last few quarters are any indication of what is to come, Chinese small panel OLED producers face the same seasonality and customer issues that South Korean producers face.
China’s BOE (200725.CH) has been expanding its small panel OLED capacity over the last two years and has become part of the Apple (AAPL) OLED display supply chain, which has been exclusive to Samsung Display and LG Display (LPL) in the past.  The path has not been an easy one for BOE, as we have outlined in a number of notes, but they have made it to the Apple iPhone platform, which is an accomplishment in itself, while other Chinese small panel OLED producers remain closely tied to local smartphone brands.  We expect Apple to utilize BOE as a tertiary supplier through 2023 as BOE must prove itself to be both reliable in terms of volume and in terms of panel consistency, issues that both SDC and LGD have faced at times.
All in, we expect growth to continue at Chinese OLED suppliers, and with BOE’s potential feed into the iPhone 14 build, the overall Chinese share will increase, but both South Korean small panel OLED suppliers, particularly SDC, have continued to invest in technology over capacity in the OLED space and that has been the one factor that keeps them from the rapid share loss that some predicted.  As the small, panel OLED display space matures further, we believe that Chinese small panel OLED producers will need to spend more on technology development in order to compete on the same level as SDC and LGD, while still increasing capacity, which will push the need for financial support higher, without the ‘automatic’ growth OLED has seen in the past.  The strong customer base that South Korean OLED producers have developed over the years, while certainly not immune to seasonality and macro factors, will allow them to hold onto premium product oriented customers, while we expect Chinese OLED producers will take the same path as they did in the LCD business, that of more generic suppliers, and while that will likely lead to more share gains over time, we expect it will prove hard for Chinese small panel  OLED producers to unseat the incumbents.

​In our note of 06/01/22 we indicated the love/hate relationship that smartphone brands have had with ToF sensors that map image distance through the use of laser and VCSEL technology.  While Samsung (005930.KS) has abandon their use in its smartphone line, Apple (AAPL) has remained a staunch supporter and continues to use the technology for both identification and in image processing.  While the note was focused on the potential for ToF sensing in the AR/VR space, Apple has taken ToF’s ability to create a three dimensional image of an object one step further in the company’s just introduced iOS 16.
There are a number of systems used to create 3 dimentional affectures for typical 2 dimentional audio recordings.  When recorded tracks are mixed in a studio, sound engineers can use a variety of ‘tricks’ to make sounds appear to have ‘depth’, and as far back as the early 1070’s, 4 channel consumer audio products became available, although they required a 4 speaker system.  As ‘quad’ was never effective enough to justify the added cost of the hardware, such systems disappeared quickly and over time various techniques were used by hardware manufacturers to enhance typical stereo recordings, particularly for films.  One such enhancement was the sub-woofer, which filtered out  all frequencies above 200Hz and passed the remaining low end sinals to a specialized amplifier and speaker to bring out the vibrations associated with action movie soundtracks.
As TV technology continued to improve, many found the imbedded audio insufficient and companies like Dolby (DLB), DTS (XPER), THX (DIS), and iMAX (IMAX) began to find ways to enhance audio by creating processing systems that enhanced audio by using digital means to separate a stereo feed into a number of components (typically 6, known as 5.1) that maintained a left/right speaker set-up but added a center channel, two rear channels and the sub-woofer noted above.  For years this was sufficient for most however as TV screens increased in size, 5.1 audio, which tends to be horizontal (as if performed on a stage), did not correspond to the fact that images on a large screen might be at the top or bottom and not always in the middle and so audio processing companies came up with the idea that since the audio was digitized, why don’t we add two more speakers (above and below, creating a 7.1 format.
Again, this was still not enough for designers who wanted to create even  more realistic audio to match what was happening on large screens, and the idea of ‘objects’ was developed.  Object oriented audio means that aside from the standard 7.1 locations where sounds can be located, certain sounds (objects) are given metadata that allows them to be placed anywhere in the spatial realm but also allows them to move in 3 dimensional space.  This means that a sound engineer can assign a particular sound (loosely defined as a track) as an object and move it to match an object moving on the screen, no matter what direction it moves.   Once assigned and tracked by the engineer that audio object will always appear to follow the image on the screen.
This technology is very effective in theaters and in residential environments where the required number of speakers can be placed, but with the expansion of mobile devices and earbuds, the world of audio plunged back into the dark ages.  Early ear buds (some still are) sounded like tin cans and the many hours of time artists and engineers spent trying to make a recording sound optimal were reduced to a tiny vibrating disc that had the frequency response of a 1950’s car radio.  Ear buds have improved, at least to a degree, but audio that was mixed to 5.1 or 7.1 became flat without the additional speakers that earbuds could not provide.
Implementations of Dolby Digital+™, the most popular digital audio format, began to appear in mobile devices, allowing 3D spatial audio to be implemented in headphones but was a bit limited and mixes had to be adjusted to compensate for the lack of 5.1 or 7.1 speakers, but Apple decided that it could do more than just provide relatively expensive earbuds to its users and came up with the idea of ‘Spatial Audio’.  Spatial Audio uses the accellerometer and gyroscope found in mobile devices to map the sound field to the users head movements, so if the user turns toward the left, the audio moves the same way.  As always, you would need an Apple device to use spatial audio (some Beats products also work) and the Air Pods must be 3rd generation to use the function, but with the release of iOS 16 Apple has taken the idea further and this is where ToF comes in.
Apple users can use their iPhone to ‘map’ their head and ears.  Similar to the Face ID setup, you not only hold the phone in front of your head but you also ‘map’ each side so the system can get an image of your ears and head shape from a number of different angles.  Once the process is completed iOS 16 will remember your ‘head configuration’ so changing Air Pods will not mean a bunch of new head scans.  Once you have been scanned you now have ‘Personalized Spatial Audio’ which is said to reduce the audio artifacts that appear when algorithms convert 3 dimensional audio to headphone formats, but the difference is likely to be rather elusive for the average user.  That said, the idea of mapping audio to each user is akin to making sure that the speakers in a 5.1 or 7.1 set-up are in the proper locations and is certainly a path toward improving audio when using earbuds.
Having been in the audio engineering business years before entering the financial world we can appreciate Apple’s pursuit of improving the audio experience, despite the fact that it is done through tiny speakers jammed intoi your ears.  Any system that helps to recreate the subtleties that are so painstakingly added to recorded music are o.k. with us and we commend Apple for trying, even though we expect the average Air Pod user is likely to never look at audio settings or listens with one bud out.  Yes we are audio purists and elitists and listen only to FLACs when using headphone (not earbuds) and vynal when listening on speakers, but we appreciate Apple’s efforts to make the earbud experience a bit more realistic.

In our note of 9/23/21, we spoke about the proposal made by the European Commission to address the problems for consumers related to the presence of three different connectors (charging and data transfer) on the market.  The problem, a lack of charging interoperability and the environmental impact associated with the problem pushed the EU Commission to propose measures that would reduce ‘charger fragmentation’ and ‘performance interoperability’, and allow consumers to decide whether or not to acquire a charger when buying a new device.  Simply, the EU wants one charger standard so consumers do not have to buy a new charger with each new device.
As part of the review process the EU put forth a matrix of six options for consideration, with the “F” option the preferred choice by the commission.  We have added which options are supported by various organizations, although they seem rather obvious, at least in the working document proposal.  The final agreement could be a single option or a blend.  

​[1] Including tablets, digital cameras, headphones, portable speakers, and handheld video game consoles.

This week EU countries agreed to implement the proposed rules that would limit mobile phones, tablets, and cameras to a single charging port type, which would in theory, allow users to use one charger for all of their mobile devices.  The port specified is what is known as a USB-C, which is commonly used for charging, transferring data, and mimicking your phone on a larger display, and most Android phones have USB-C charging ports currently (77.9% of all phone models available in 2021 and 2022 by our count), but the remainder, mostly iPhones and other Apple (AAPL) products, have a proprietary connector which Apple licenses to cable manufacturers.  With 420m portable electronic devices sold in Europe last year the EU says it would be able to avoid disposing of the 12,000 tons of chargers that are thrown away each year, saving 861,000 tons of copper, zinc, and tin in the process, and reducing the cost to consumers of standalone chargers, which is estimated to be about $2.8b each year.

​The agreement, which would be implemented two years after its final approval is a problem for Apple who has opposed the idea on the grounds that it would stifle innovation, although the company uses USB-C connectors on much of the MacBook line due to its higher power handling capabilities.  Apple will have time to make the changes as the rule implementation does not begin for two years after final approval for smartphones and tablets and two years later for laptops, and Apple’s MagSafe, which is a wireless charger could offer a solution that is less costly than reworking all Apple mobile products to USB-C if the company feels that consumers would accept it, although we believe the new rules as they stand would need to be modified for that option. 
Citing environmental concerns has been the company speak concerning Apple and Samsung’s (005930.KS) elimination of chargers and power cords in new device packaging last year, but it is hard to imagine that the environmental concerns were more than an add-on to justify cost cutting measures for both companies.  As the cost of producing separate Apple products tailored to EU rules would likely be cost prohibitive, we expect Apple will comply globally, especially given the momentum behind such rules in other countries, but will likely petition to have the process modified over the next two years.  We believe Apple has been prepared for such an event and will make the required transition in the iPhone 15 (2023) or the iPhone 16 (2024), but will not see license revenue for the Lightening connector from cable manufacturers trail off until 2024/2025.

​Huawei’s (pvt) smartphone business has been severely disrupted by the US trade restriction placed on the company that do not allow US companies or foreign companies that use US products to sell to Huawei.  This has limited Huawei’s smartphone business to China and stifled its ability to produce 5G smartphones for its customers.  While Huawei has developed its own flavor of Android, its smartphone customers are also unable to access the Google (GOOG) Play Store, which means they are unable to access many Android applications and updates and without the advanced node 5G chips produced by Samsung and Taiwan Semi (TSM), their phones are limited to 4G..
As a result Huawei’s share of the smartphone market has declined from 19.36% in 2Q 2020 to 1.8% in 1Q this year, with little hope that such sanctions will be lifted in the near-term, and while local semiconductor fabs are able to produce more mature node chips, they are also prohibited from purchasing much of the advanced lithography tools needed for nodes below 28nm.  Huawei went as far as to sell its Honor (pvt) smartphone brand division to investors in order to separate it from the US restrictions although the company has no interest in Honor at this time.  Given the tight rein the US restrictions place on Huawei, the company has transitioned into businesses that are not based on advanced node semiconductors, but has not given up on the smartphone business despite the lack of consumer traction.
It seems that Huawei is able to provide 5G service for its customers if they purchase a mobile phone case that is made by a 3rd party that is not affiliated with Huawei and therefore is able to purchase 5G modem components.  While the case offers some protection for the phone, the real purpose is to give 5G service to Huawei smartphones.  But things go further as a company known as TD Technology (pvt), an affiliate of TD Tech Holdings (pvt) which is jointly owned by Huawei and Nokia (NOK), sells a smartphone known as the TD Tech M40, strangely similar to the Huawei Mate 40 series of 4G smartphones, but capable of 5G service, and we say strangely similar as TD Tech is a licensing partner of Huawei and has acknowledged that it purchases parts from the company.  The Huawei P50 series, released last year has the same lack of 5G service but it seems a company known as Soyea Technology (000909.CH) has developed a “5G Communication Case” that is suitable for the Huawei P50 Pro, and can be purchased for ~$120.
Huawei has recently removed the Mate 40 smartphone line from availability, which many believe is in anticipation of the release of the Mate 50 expected this summer, which is already said to possibly include a ‘mobile phone case’ similar to the one mentioned above, allowing the phone to provide 5G service and stimulating Huawei’s smartphone sales, and while much of the Mate 50 story is speculation, expectations are that there will be a number of ‘cases’ available for the new Huawei smartphones as accessories.  As TD Tech is a real company with over 1,800 employees they can obviously develop their own 5G smartphone line based on Huawei (licensed) technology, as they did with the Huawei clone mentioned above, but as it turns out, much of the TD Tech board is composed of Huawei executives and an undisclosed holding company beneficiary, which creates further suspicions that Huawei is even more closely tied to these ‘clone’ phones. 
We wonder if the US DOD is up on these connections, as a possible workaround for Huawei’s smartphone business and whether TD Tech and Soyea will be added to the US entities list or will be allowed to provide help to Huawei’s smartphone business?  We assume the answer depends on how stringent the DOD wants to be with Huawei and whether it is politically beneficial to tighten the screws on Chinese companies heading into the mid-term elections.  If we know, we have to assume someone at the DOD knows that the Huawei clones are already here…
 

Samsung Electronics (005930.KS) is the volume leader in the smartphone space in most quarters, and as such is constantly being pressured by rivals to innovate their smartphone offerings, especially as smartphone display size reached a size where the device barely fit into a pocket.  Samsung Display (pvt), a Samsung affiliate, took the expertise it had developed in flexible OLED display production and applied it toward developing a commercial display that was flexible enough to fold without breaking.  While Samsung was not the first to develop such technology (others had demoed concept displays and prototypes in previous years), and was outdone by China’s Royole (pvt), who released the first foldable smartphone (developer version) in December 2018, after being announced earlier in the year.  Samsung released its first foldable smartphone in September 2019, the Galaxy Fold, after announcing the device at CES earlier that year.
The initial reviews of the Galaxy Fold were favorable from a technology point of view but not from a practical one, as problems with visible crease lines in the display caused many to set aside the technology in order to give Samsung time to fix the display issues.  As the company had already committed to the foldable concept they delayed the actual release date (April 2019) until they were able to make changes to the display and the fold hinge to reduce the crease.  While this gave hesitancy to consumers that might have been early adopters, especially the lengthy ‘care’ instructions given to consumers upon the final release, Samsung Display and its parent continued to push forward with the concept.
Since then Samsung has released at least two foldable smartphones each year and is expected to announce the 2022 versions in August, with delivery in September, and while there have been numerous ‘leaks’ and unsourced mock-ups about these next-generation foldables, the category continue to evolve.  Samsung’s biggest foldable competitor is Huawei (pvt), a Chinese company that is under severe US trade restrictions and is tacitly limited to selling its products in China, but in 2021, despite the poor performance of smartphone brands generally, two additional Chinese brands entered the foldable market with the Xiaomi (1810.HK) Mi Mix Fold, and the Oppo (pvt) Find N devices., and thus far in 2022 both Honor (pvt) and Vivo (pvt) (both Chinese brands) have already released their first foldable smartphones.
Much of this activity was generated when Samsung made a concerted effort to promote its foldable phones in 2H last year.  We believe that Samsung felt that enough time had passed from the initial, somewhat sketchy release in 2019, that they could safely assure the public that the durability of these devices had improved significantly, and sales jumped 273% q/q in 3Q ’21 and reached almost 8m units for the 2nd half, relative to a bit over 1m units in 1H.  While the unit volumes for Samsung’s foldable smartphones grew substantially in 2H last year, we note that they are miniscule relative to the roughly 690m mobile units that shipped during that period, but if nothing else, it generated considerable interest from consumers and competitors, and likely lit a fire under those brands that were already developing foldable offerings.
Despite Huawei, and the initial models from Xiaomi and Oppo, Samsung remained the dominant vendor in 2021, as seen in Figure 2, with an 88% share of the market based on unit volume, although a slightly lower share based on value, given Samsung’s Flip foldable line, which brought the price of foldables below $1,000.  Still, Samsung held an 85% share based on sales value, with the 2021 Galaxy Z Flip 3 capturing over 50% of total foldable smartphone unit volume for the year (Figure 4).  Not only did the big jump in volumes spark interest in foldable smartphones from competitors, but it also began a spate of foldable smartphone forecasts that we have compiled to garner some understanding of expectations for the foldable smartphone category going forward.
We note that while we aggregate estimates and forecasts, there are always outliers and some of the years further out might have only one or two forecasts, which would account for the unusual volume jump in 2025 and what would look like a decrease in the following year.  More likely those years would follow a more linear pattern as forecasts become more plentiful for those years.  While unit volumes are certainly a key to understanding the foldable smartphone segment, Samsung’s introduction of the ‘Flip’ model in 2020, and its price reduction in the following year had a significant effect on unit volumes but lowered the ASP across the category.  This is important in that it gives us some indication as to price points that will attract consumers to foldable smartphones in high enough volumes to make them a distinctive smartphone category, which was Samsung’s ultimate objective.
Based on available pricing data, we believe the weighted ASP for foldable smartphones in 2021 was $1,688, which would equate to foldable smartphone revenue of $15.3b.  If we go further and adjust for the ASP for each brand, that figure drops to $14.6b, as the lower priced offering from Samsung carries more weight than others.  That said, we would expect both the unweighted and weighted ASP to decline each year as Samsung increases manufacturing volumes and competitors move to large scale mass production.  That said, given that there is limited seasonal data for the category and that we are rather unsure of the reliability of forecasts in the out years, we hesitate to predict sales figures for the category at this time.  We do note that the first glimpse of foldable smartphone shipments for 1Q ’22 are massively ahead of 2021, although it is an easy compare, but we feel that by the end of 1H, we should have enough of an understanding of the ‘new’ seasonality for foldable smartphones that we might make more reliable estimates for the 2023 and 2024 years.  While we note that hesitation, we do give credit to Samsung for taking a nascent category and making it a viable product differentiator, a task that no other smartphone brand was able to do.  Kudos…

​ToF (Time of Flight) sensors were a hot topic two years ago, and we admit we were certainly intrigued by the ability of these devices to create an image map that allows for accurate depth resolution that can be used by imaging applications to make adjustments to focus based on object location.  LG Electronics was the first to incorporate such sensors in 2014 as part of the LG G3 smartphone, but the first well-known application for ToF in CE products was the Microsoft (MSFT) Kinect motion sensor used in conjunction with Xbox consoles back in 2010, which was a major hit for the company from a publicity perspective.  The real kicker came when Apple adopted the technology in the iPhone, and dozens of smartphone brands have adopted the technology to assist camera applications.
The problem came when Samsung Electronics revealed that the Galaxy Note 20 would not contain a ToF sensor and the Galaxy S21 would also abandon the technology, with Samsung saying it lacked a ‘clear advantage’ for the consumer, which took much of the ToF momentum out of the market.  There was a good reason why Samsung did not focus its attention on ToF, and that has to do with a decision the company made as to the type of ToF sensor it would produce years before, but leave us say that it was not based on a lack of consumer interest but on a profit motive for Samsung.  While not carrying the cache of Samsung’s marketing, ToF sensors are still found in a wide variety of smartphones by Apple, Sony (SNE), Honor (pvt), Motorola (MSI), Huawei (pvt) and others, but are more the focus of those in the automotive space, tying them in to obstacle recognition systems, but it seems they have also found a new home.
Infineon (IFX.GR) and PMD Technologies (pvt) have developed a 3D depth sensing ToF system that will be used in the Magic Leap 2 (pvt), an AR headset designed for enterprise customers that is due out later this year, which will ‘capture the physical environment around the user’ to give the device an understanding of how to interact with the environment.  The system will give the device accurate image coordinates and mapping of hands, faces, and objects in real-time, and is able to work in both bright light and complete darkness.  The sensor chip itself has been optimized to reduce heat and power consumption to maintain battery life.
One feature of the Magic Leap 2 AR headset is its ability to reduce the ambient light surrounding a projected image without changing the image itself.  This allows for better focus on the AR image but also makes it necessary to maintain some perspective on distances without the light that would normally illuminate other objects.  Given that ToF is UV laser based, the lack of light does not affect its ranging capabilities and can provide the necessary depth information to keep users from losing track of where they are relative to the projected image, almost converting the device from an AR to a VR headset.
As a specialty device, especially one geared toward business use, the Magic Leap 2 will not push ToF sensors back into the limelight, but can bring ToF back into the CE nomenclature.  While there will be other silicon based features in the Magic Leap 2 and other AR/VR headsets, the fact that an AR headset can be ‘dimmed’ without losing the depth perception necessary for safe use, is a step toward expanding the use of ToF sensors in the CE space, and we expect over time to see ToF sensors become an integral part of the XR world.

As we have noted previously the India smartphone market is the 2nd largest globally and represents a large opportunity for smartphone vendors who are able to understand the nuances of this vast country.  That said, India’s GNI (2020) was $1,900/capita, which compares with $64,140 in the US, $10,550 in China, $116,440 in Liechtenstein (the highest), $230 in Burundi (the lowest), and $11,077 for the world combined.  In order to cater to the entire Indian population, aside from flagship models, smartphone brands must pack many features into low and mid-priced phones, something Chinese brands are quite good at, and if we look at the top 10 best-selling smartphones in the country, as shown in Table 1, we can see that all but one are under $300 and two of the lowest priced models are among the top 3 sellers.

​Lastweek we noted March and 1Q smartphone shipments in China.  In that note was the line, “5G smartphone shipments in April in China were 16.19m units, up 42.3% m/m but down 41.1% y/y against a very strong March in 2021 (+82.5% m/m & +342.5% y/y) after the 2021 New Year holiday”, which should have read ‘March’ rather than April.  Please excuse the error.  That said, we also noted that typically April smartphone shipments in China have been up 21.8% m/m (5 year average) although down last year, while we noted such a gain might be a bit more difficult this year given the macro circumstances and Chinese COVID lockdowns. 
Our very early data from China indicates that April smartphone shipments were only 17.6m units, which is down 18.0% m/m and down 36.0% y/y far worse than expected.  As these are unofficial and unconfirmed shipment metrics we cannot definitively say how bad April smartphone shipments were in China, but we expect to reduce our full year expectations for Chinese smartphone shipments once we can confirm the April numbers.  With the first four months of this year seeing substantial y/y Chinese smartphone shipment declines, it is getting progressively harder to see a scenario where a recovery could balance out that early weakness.  We believe Apple saw only a slight decline in Chinese smartphone shipments in April and China’s Honor (pvt) brand saw a large y/y gain as it saw only modest sales in April last year, while other major Chinese brands saw shipment decline between 32.0% and 42.7% on a y/y basis, should the April preliminary data prove correct.  The effects of recent COVID lockdowns in Shanghai, Zhengzhou, Shenzhen, and Beijing are being blamed for the poor results, with consumers unable to shop and manufacturers unable to ship.

Smartphone brands always seem to be deadlocked in a battle for share supremacy.  Whether it is units shipped, sell-in, sell-through, units in use, or some other metric, there is always a “Mad Libs”-like headline proclaiming “…and so (Brand A) has now overtaken (Brand B) to become the best-selling smartphone in the (Country) during (Period)…”, only to find that during the next month, quarter, or year, another brand fills the top spot.  Production targets are also a watchword of smartphone brands, with usually grandiose projections being made for the following year during the Thanksgiving/Christmas holidays, which tend to be more a projection of what the brands would like to ship in an ideal environment, rather than what they believe the upcoming environment might support.  But those projections also give smartphone suppliers a broad picture of ‘demand’, and help them adjust their production and capex spending for the upcoming year.
Sources for smartphone data vary considerably, and in many cases do not agree with each other, which is why when we use outside smartphone data we average as many sources together as possible, and while this sometimes keeps our share totals from exactly hitting 100%, it does reduce the influence of outliers and those that include or exclude certain items that other might or might not.  That said, Table 1 shows that the most popular selling phone models are the iPhone 13, released in September of last year and two budget Samsung (005930.KS) phones, one from last year and one from late 2020, a bit surprising, although Apple (AAPL) tends to be in the top 5 every year.

The data in Figure 1 however shows that in most recent quarters, Samsung is the overall global share leader, although that tends to change to Apple in 4Q when the latest iPhone version is released.  More telling is Figure 2, which shows the top 5 smartphone brands by usage, more a reference to the number of active smartphones for the top brands.  That data shows that both Samsung and Apple garner roughly the same usage share, and Huawei (pvt), who has fallen off the top smartphone tables since the US trade sanctions curtailed their smartphone business, is still number 4 when it comes to models currently being used by subscribers.
In recent quarters it has become a challenge for smartphone brands to differentiate themselves from each other, focusing on a particular feature to try to set them apart.  Screen size and resolution was a big feature attraction, but pocket size tends to keep that limited now, and multiple cameras were in vogue a year or so ago, with the current de riguer being phones that have the cameras built into the display, removing those unsightly ‘notches’ that seem to annoy smartphone aficionados.  At least for the time being Samsung seems to have taken the size feature to a new level with their popular foldable smartphone line, with other brands pushing hard to come up with a better foldable mousetrap, an Apple sitting somewhere on the foldable horizon, waiting for the category to stabilize before taking the plunge. 
But with each new model year it seems progressively more difficult for smartphone brands to come up with features that make it easy for users to justify replacing a relative young smartphone and 5G has done little to push that envelope as 5G modems and antennae costs are relatively low.  Gaming features, such as high refresh rates and extended battery life have helped a bit, but the smartphone market overall is getting a bit long in the tooth and needs some impetus to grow.  Perhaps software would be the way in which brands could attract users to upgrade, but that would entail smartphone brands making fewer modifications to Android, giving developers and easier time to ensure compatibility across brand hardware, but what it really comes down to is smartphones need new applications that make them more than just displays.  Some suggest medical applications as a game changing application, and the FDA seems more open to health tracking applications recently, so blood pressure, heart rate, ecg, and blood glucose monitoring could be just what the smartphone market needs to start an upgrade cycle, but few brands seem to be interested in marketing themselves as ‘health conscious’ rather than ‘faster to view YouTube videos’.  Maybe another year of little or no growth might convince them to look for a killer application rather than cameras that rival professional SLRs.