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.

​Few of us worry about cell service, with the US covered by 2G, 3G, 4G and now 5G coverage in all but the most remote locations, and smartphones are enough of a status symbol that unless you keep your vintage smartphone covered, it would be hard to keep from being publicly embarrassed when using an old smartphone.  But there are those that do, and that will be getting more difficult soon.  As of February 2022 AT&T (T) will shut down the remainder of its 3G network, T-Mobile (TMUS) will shut down Sprint’s 3GCDMA network on March 31, and its own 3G network on July 1, while Verizon (VZ) will end its 3G network on December 31 of this year.
The bulk of 3G network users would be older smartphones but there are also older tablets, watches, medical devices, SOS (“I’ve fallen and I can’t get up”) services, and security systems that still operate on 3G, so it is incumbent for folks to check the operation of such services to make sure they are not disconnected.  Here’s a list (certainly not complete) of phones that will not work by the end of this year (or earlier).  AT&T provides a way you can look up your phone’s model to see if it will still work on their network, while T-Mobile says it will contact all affected subscribers.  Verizon gives a number to call to check.

• HTC Desire 500.
• Samsung Galaxy Trend Lite.
• Archos 53 platinum.
• Samsung Galaxy Trend II.
• Samsung Galaxy S3 mini.
• Caterpillar Cat B15.
• Sony Xperia m.
• Wiko Sync Five.
• Wiko Darknight.
• Samsung Galaxy Xcover 2 phone.
• Huawei Ascend G740.
• ZTE Grand S Flex.
• Lenovo A820.
• Huawei Ascend Mate.
• ZTE V956.
• UMi X2.
• Huawei Ascend D2.
• Samsung Galaxy Core.
• Faea F1.
• THL W8.
• ZTE Grand X Quad v987.0
• ZTE Grand Memo.
• Samsung Galaxy Ace 2.
• LG Lucid 2.
• LG Optimus F7 phone.
• LG Optimus L3 II Dual.
• LG Optimus F5 phone.
• LG Optimus L5 II.
• LG Optimus L5 II Dual.
• LG Optimus L3 II.
• LG Optimus L7 II Dual.
• LG Optimus L7 II.
• LG Optimus F6 phone.
• LG Enact.
• LG Optimus L4 II Dual.
• LG Optimus F3 phone.
• LG Optimus L4 II.
• LG Optimus L2 II.

·        LG Optimus F3Q phone
·        Iphone 5 or older
 

In the broad display market, China’s BOE (200725.CH) is the leader in LCD panel production, however in the OLED display space BOE has been playing catch-up with Samsung Display (pvt) and LG Display (LPL), particularly when it comes to producing iPhone displays for Apple.   As we have noted previously, BOE has been included in Apple’s iPhone display supplier list this year after a number of futile attempts at qualification in 2020 and 2021.  While SDC produces the most sophisticated (LTPO) displays, LG Display has been gaining favor with Apple and has seen increasing OLED display volumes last year and again this year, while BOE is just beginning to bring production volumes to scale.
That said, BOE has put out expectations of producing ~40m OLED units overall, with ~30m for the iPhone this year and some optimistic prognosticators have stated that BOE’s share could be as high as 20% (40m+) with Apple this year, although we see more reasonable estimates in the 14% to 16% range.  However it seems that BOE has already hit a stumbling block in that a shortage of display driver silicon, an item absolutely necessary for display production, could limit BOE’s small panel OLED production this month and next.  BOE’s display driver supplier, LX Semiconductor (108320.KS), formerly known as Silicon Works, that is part of LX Holdings (pvt), owned by LG Group (pvt), the holding company of LG Electronics (066570.KS) and LG Display (among others), has been unable to meet its production goals and has had to allocate silicon capacity.  Not surprisingly LG Display’s driver needs come before BOE’s and BOE is expected to fall short of its production goals for 1Q by ~3m units.
Whether the shortage will reduce the overall 1Q and possibly 2Q total unit volume for the iPhone is still a question, with driver inventory level at Samsung and LGD unknown, but it will put BOE in a difficult position, albeit not completely its fault, in its first year as a primary OLED display provider for the iPhone.  Much has been said about BOE’s potential to displace SDC and LGD in the iPhone display market in Chinese trade press once the final qualification process was completed last year, but BOE is still far from catching Samsung or LG Display, as SDC is producing iPhone displays using LTPO, a more versatile backplane that allows for a number of features in the top-tier of the iPhone line and LGD is expanding its production of both LTPS and LTPO production to accommodate Apple’s capacity demands, so while BOE is certainly a competitor, and a potential source of negotiating power for Apple, they still have a way to go before they will be on par with SDC and LGD, and this setback will do little to help that situation.

In January China shipped 33.02m mobile phones, down 1.1% m/m and down 17.7% y/y, with domestic brands making up 25.65m units, or 77.7% and smartphones making up 98.0% of the total, a share consistent with much of 2021.  26.3m of the mobile total were 5G phones, for a 79.6% share of the total, and 30 new models were released into the domestic Chinese market of which 50% were 5G.  Mobile phone Shipments in China have returned to pre-COVID-19 levels for the last four months and we expect a continuation of that trend for much of this year, seasonality aside. 
We expect the most significant mitigating factor will be component shortages that could limit shipments or push back model release dates, which leads us to forecast full year mobile phone shipments in China to be 381.24m units, up a relatively conservative 8.7% y/y.  We expect 5G phones to continue to grow share, reaching an average of 80.7% for the year, which would imply shipments of 307.67m 5G units this year, unit growth of 15.6% over 2021’s 266.2m 5G shipments on the Mainland.  While we expect there could be considerable play in all of our shipment estimates for China, we expect that on an overall basis 2022 will be a less volatile year than the last two.
We have noticed a trend that seems to be maintaining itself over the last few years and that is a decline in the share of the Chinese market by domestic brands as seen in Figure 6, which has declined (trendline) since 2019.  That said, there have been some monthly domestic brand share increases that have made such data look less valid, such as the peak in June ’21 of 95.9% domestic brand share, but we expect much of that has to do with the timing of domestic brand releases versus foreign brand release schedules.  Chinese brands certainly have the largest share of the domestic market, but the impact of trade sanctions against former share leader Huawei (pvt) by the US has reduced their share both globally and in China, and while domestic brands have picked up much of that slack, it has opened the door a bit wider for foreign brands such as Apple (AAPL) and Samsung (005930.KS).
 

Yesterday Samsung (005930.KS) announced its latest Galaxy flagship smartphone and tablet lines, the S22 (smartphones) and the Tab S (tablets).  As these items were leaked to the point where there was little that was not known about them, it seems a waste of time to spend much time on same, so we show only the differences between the new models (S22 series) and the old models (S21 series) for comparison.  We see the main difference between last year’s models and this year’s models as the ability to store the S-Pen in the S22 Ultra, which was not possible with last year’s model, along with the details below, most of which are minor adjustments or silicon upgrades   Prices remain the same.  Categories that are blank indicate no change for that model y/y and categories that are missing also indicates no change.

​Smartphones are expensive so putting down somewhere between $500 and $1,200 for a new phone can be a strain for many that find themselves with a damaged phone or one that barely works, so the good folks at US carriers give buyers the option of paying full price for the phone at purchase, or spreading payments out over what is usually a 24 month or 30 month period, encouraging folks to look at the purchase of a new phone or an upgrade as a minor expense added to their carrier bill.  The deal helps the customer, but also tends to keep customers from moving to another carrier, as the entire balance comes due if the carrier account is closed.  Carriers have offers that pay off your previous phone contract balance if you switch, but there are always ways in which the new carrier gets paid back for that up-front incentive, usually with an extended contract.
All of these financial mechanics are in place to keep customers from moving from one carrier to another, so a new phone payment plan adds to the user’s tendency to stay with that carrier at least until the phone is paid off, which helps carriers with ‘churn’, but it looks like Verizon (VZ) has just added itself to the list of carriers that want to make you even stickier, by extending that new phone payment contract to 36 months.  No longer does the customer have the choice of a 24 month or 30 month contract, given only the 36 month payment schedule or the option of paying full price.  Of course you can pay off the entire amount at any time during the life of the contract, but you cannot pay more than the normal monthly amount, even if you want to shorten the contract length, and once you pay off the entire amount any promotional credits you were receiving will end.
To be fair, AT&T (T) also has such requirements, and existing Verizon contract terms remain in effect despite the change, but the new terms apply to all Verizon devices including tablets, hotspots, laptops, and smartwatches, and if you damage your phone during the payment period and don’t have a protection plan, you have to either pay off the damaged phone in full or continue to pay for the damaged phone for the entire contract life, even if you have to but another phone.    Its all a numbers game for the carriers so a longer contract means a greater return/user.  Caveat Emptor… read your contract before signing…

​A survey by SellCell.com has indicated that 20% of Android users intend to upgrade their phones to the Samsung Galaxy S22 line to be announced next week.  The survey, which had almost 11,000 Android owners participating, pointed to the Galaxy S22 Ultra, the company’s closest model to the now defunct Galaxy Note line, as their choice (44.4% of those making a change), while the standard S22 is the 2nd most popular at 30.1%, followed by the S22+ at 25.5%.  Over the last few weeks the Galaxy S21 Ultra, last year’s model, has become the most traded-in smartphone in the Android world, accounting for 22.3% of all Android smartphone trade-ins, which some conclude is a result of the popularity of the soon-to-be-available Galaxy S22 Ultra, but as the new phone is not yet available for pre-order we find it hard to correlate that data, especially as the Galaxy Z Flip and the Galaxy Z Fold are also on the top 10 most traded-in list, having only been released 5 months ago.
While 20% of Android users wishing to upgrade to a new model might seem like a relatively small number, the multiplier of Android users is ~2.8b globally, which would translate to 560m users willing to upgrade according to the survey, but as with most surveys, those answering the survey tend to have a pre-defined conclusion that draws them to the survey itself, rather than a man-on-the-street survey that randomly chooses participants, so we have to temper the overall survey results, but it does reflect a bit on a survey done last year that indicated that Android users were less likely to convert to an iPhone in 2021 than in 2020 as that trend continues into this year, or at least until the new Galaxy models are released.
The survey went a bit further, breaking down those who expect to upgrade by gender, with 30.4% of those expecting to upgrade being male while only 14.2% of women seem to be making that choice, with those intending to upgrade to a Samsung S22 model, 61.5% were men and 38.5% were women.  But the biggest segment of ‘upgraders’ came from the 25 to 34 year old segment, where 27.3% of respondents were expecting to upgrade, higher than both the 18-24 (21.0%) and the 36-44 (24.0%) segments, with the Galaxy S22 Ultra edging out the other models in all but the 18-24 year old group.
As we noted, we temper the results of such surveys a bit, but the seeming popularity of the Samsung Galaxy Ultra, likely the most expensive of the three flagship models, would lean us toward the popularity of the former Samsung Note line, which was equipped with the S-Pen, which we believe was its most popular feature.  While the S22 line is expected to have S-Pen support in at least one model, the S22 Ultra, there is the possibility that will also migrate to the S22+ or even the S22.  If so, that could change what is now a bias toward the top of the Galaxy S22 line, but for now the survey would indicate that Samsung’s S22 line will be well received by Android users.

​Earlier this month we noted that China’s largest panel producer BOE (200725.CH) was said to be planning to orient the 3rd phase of its Gen 6 small panel OLED production line toward the production of IT panel products, looking to gain further traction with Apple (AAPL), with whom they have forged a relative new iPhone panel supplier relationship.  However recent South Korean trade press comments have indicated that the company is more interested in developing its ability to produce LTPO (Low-temperature Poly-Oxide) displays, a technology that Apple adopted last year for the iPhone 13 Pro.  The technology allows for a higher speed refresh rate (120 Hz.) and is key to the use of the variable refresh rate feature, which allows for the phone to adjust the refresh rate to the content type, which conserves battery life.
As we have noted previously, BOE entered Apple’s iPhone small panel OLED display supply chain after a protracted qualification examination and was able to supply between 15m and 16m flexible OLED displays for the iPhone 13 last year.  As part of the qualification process, BOE not only had to provide the quality that Apple required, but had to prove that they were able to produce the quantity necessary, meaning that their current yield was high enough to meet those requirements.  BOE had been producing the iPhone 13 displays at their B7 and B11 fabs, however the objective for the company is to shift production for the iPhone to its new fab (B12) in Chongqing, which began production on its phase 1 line, the first of three planned lines., late last year.  The second (phase 2) line is expected to go into operation during this year, although the date remains in question.  We would expected such sometime in 1H.
BOE has set a target of producing 40m to 50m iPhone panels this year, some of which will still be produced at the B11 fab, but with that higher target, it is necessary for BOE to also be able to produce LTPO flexible OLED displays, which would likely be produced at B12.  The issue however would be quantity, and comments from the media seem to indicate that while the second line at B12 will open this year, equipment for the 3rd line, which is expected to be producing LTPO displays, has yet to be ordered.  This will likely have little effect on the absolute number of units BOE produces for the iPhone this year, but will keep much of BOE’s production oriented toward those models that are not LTPO, meaning the lower end iPhone models. 
We expect BOE will have the opportunity to produce some LTPO displays for Apple this year, but they might be replacement screens, which is how the company began production for Apple initially.  That said, if BOE is able to procure the equipment for the 3rd B12 line and is able to begin production relatively early in 2023, we expect they will be able to become a primary supplier across the entire iPhone line in that year, challenging both Samsung Display (pvt), currently the primary LTPO display supplier for the iPhone, and LG Display (LPL), who has become a secondary LTPO supplier this year.  As to whether that 3rd line at B12 will be oriented toward smartphone production for Apple or whether it will be oriented toward OLED panels for IT is less of an issue as we expect BOE is orienting themselves toward also entering Apple’s iPad display supply chain in 2023, so the decision as to the B12 phase 3 line format would likely be based on how successful BOE is with LTPO production this year and next.

Wi-Fi is confusing.  In the ‘old’ days, Wi-Fi versions were called ‘802.11’ followed by a letter, which was usually shortened to just the letter, such as Wi-Fib or Wi-Fin.  However, since the specifications for Wi-Fi are developed by engineers, there were lots of ‘in-between’ Wi-Fi specifications that kept Wi-Fi designations from being sequential.  The Wi-Fi Alliance, the organization responsible for such specifications decided to convert those older designations into a simple form as shown below, hopefully simplifying things for consumers, who have had to deal with trying to understand the compatibility between their router and their smartphone when the router says “compatible with 802.11 a,b,g,n” and their phone says “Wi-Fi 802.11 a/b/g/n/ac).  Unfortunately things are still a bit opaque as the current version of Wi-Fi is 802.116e, which doesn’t have a new and simple designation, making the name changeover a bit messy, but don’t worry because Wi-Fi chip supplier Mediatek (2454.TT) has just shown a demo of its new Wi-Fi 7 chip, which it expects to release in 2023, cutting short the life of Wi-Fi 6e.
The good news is that specifications for Wi-Fi 7 are almost completed, which means that we should start to see such demos from other Wi-Fi chip suppliers later this year, paving the way for release next year and widespread use in 2024.  Not only does this simplify the Wi-Fi nomenclature, but the specifications for Wi-Fi 7 are considerably better than those for Wi-Fi 6e, and will allow for data speeds up to 46Gbps, which would mean you could download a 25Gb Blu-ray movie file in a few seconds, and AR/VR headset Wi-Fi connections will be able to take advantage of those higher connection speeds[1].
Bu wait, there is more…  Aside from the faster connection speed, Wi-Fi 7 will provide for the use of 16 antennae, twice that of Wi-Fi 6, which means a router should be able to handle more devices with less bandwidth (speed) sharing and interruptions, with the possibility that final specifications will allow for all three frequency bands to be used by such devices at the same time, further helping any bandwidth contention, all of which could put Wi-Fi speeds ahead or wired connections for the first time.
All in, Wi-Fi 6/6e will have a shorter life than originally expected, as Wi-Fi 7 is moving quickly toward commercialization.  While still two years out for the mass market, the incremental change will reduce some of the limitations that home VR systems face today, and while there are still many mountains to climb before users will no longer have to spend all of their time in the real world, its one less brick in the wall.


[1] Connection Speeds are theoretical as actual connection speeds will be lower.
 

​2021 was a difficult year for smartphone brands, facing relatively weak demand and supply chain and production problems.  Samsung had set a goal of shipping 300m smartphone units in 2021, an ambitious goal considering how things looked in early 2021, but Samsung held steadfast to its original goal.  That said in terms of actual shipments, they likely fell a bit short of that goal, given the ~45 day average time it takes for produced product to reach distributors or consumers, but they did at least meet that goal in terms of production, with the company itself producing 238.9m units and OEM/ODMs producing another 60m+, totaling just over 300m produced.
The chip shortage caused production bottlenecks, but more troubling were COVID-19 outbreaks that limited or halted device production, particularly for Samsung’s OEMs, whose assembly plants in India and Vietnam saw periodic work stoppages and production limitations.  Sporadic travel limitations in China also affected OEM smartphone production, but China was not a place where Samsung’s influence was felt, even with the ebb of former market leader Huawei’s (pvt) smartphone business, with the company selling fewer units than almost any of China’s top smartphone brands.
That said, Samsung was still the top global brand, at least through 3Q, even with the challenges, and relatively weak flagship (Galaxy S21 Series) sales of ~24m to 27m units, the second year where that series underperformed compared to earlier years (35m to 40m).  By focusing on mid-tier lines, the company was able to offset the S series shortfall and bring in production numbers above goal.  With the confidence of being able to meet those (production) goals in such a difficult year, Samsung is expecting to produce 285m units in 2022 internally, and an additional 48m to 50m from OEMs, an increase of roughly 10%.  As with most CE companies enthusiasm is quite abundant, regardless of the circumstances, especially early in the year, so who are we to rain on their parade this early in the year…