The good news is that LEDs are much smaller, although Sony has yet to give details about LED size, the number of zones, the details of each zone, and the electronics can handle the image processing (AI & ML), but some of the old problems still exist.  The cost will be a very big factor as instead of 5,000 white LEDs, the RGB system would contain 15,000 LEDs (RGB) and a lens, and instead of controlling the brightness of 5,000 white LEDs, the system will have to control the brightness of 15,000 LEDs (5,000 is just an example, we expect there will be more zones as the Hisense set has at least 10,000 zones).  LED uniformity, while certainly better than 20 years ago, gets more difficult to maintain as LEDs get smaller, and as LEDs age, their uniformity also changes, so the sheer number of LEDs needed makes the complexity of building such devices far more onerous and expensive.
So does this mean that Sony is going to let the idea of an RGB LED backlight TV wither on the vine again?  No, we expect it will make it way toward the top of the Sony premium TV line and will compete with other OLED and potentially Micro-LED offerings. Hisense, the first to introduce a Mini-LED TV, will also showcase the technology, but at least for a while it will take its place in the ultra-high quality color world of video editing monitors and those with dollars to spend on the best of the best, while the rest of us palookas have to settle for Mini-LED, OLED, or QD/OLED sets.  If we are wrong and Sony has found a way to produce RGB LED backlight systems for a reasonable price, we will be in line to try one, but with so many potential display technologies on the horizon, time is of the essence. 

​ Smartphones are incredible feats of technology, squeezing innumerable parts into a rectangle typically under 20 in2 and ~ 1/3 of an inch thick.  Most smartphone owners rarely see what is on the inside of their phones, making purchase decisions (hopefully) on matching specifications to their use profile.  But inside those rectangles, packed in like sardines, are literally hundreds of ICs and other components, along with a battery, display, and assorted cameras.  

There are those that relish the thought of purchasing smartphones and then taking them apart, piece by piece, in order to quantify structure and cost.  Such a group is TechInsights, who are known for their detailed teardowns of various CE devices.  They have been kind enough to afford us a detailed look at one of their smartphone teardowns, which we summarize below.
The phone being disassembled here is the Sony (SNE) Xperia 1V, a device released in July of 2023.   Sony is not a major smartphone brand but is known for the high quality of their phones, so the example below should be a guide as to what to look for in a high-end smartphone.  We note that when the Xperia 1V was released, it sold for $1,399.  The phone weighs 188 grams, runs on Android, and has a 6.48” OLED display, along with four cameras, and runs on a Qualcomm (QCOM) Snapdragon 8 Gen 2 processor.
While the greatest share of the BOM is the broad category of integrated circuits (45.7%), the camera subsystem captures 23.7%, due to the fact that it covers 4 cameras and associated electronics, lenses, etc.  The display subsystem, which is a single 6.48” OLED display and a touchscreen, along with a polarizer and cover glass (total of 70 components), is next at 7.5%, followed by non-electronic parts (frame, etc.) at 7.2%.  More relevant to the investment community would be the breakdown of the total component types and the IC category on a branded basis.  As can be seen in the table below, the IC category carries the largest cost share by a large margin, putting significant weight on the brand share shown in the table that follows.  

​Qualcomm supplies not only the phone’s Application and Baseband Processor (Snapdragon 8 Gen 2), but also supplies the audio codec, a number of power management chips, saw filters, RF tuners, and a number of multi-function front-end modules.   We note that Sony’s share is higher than usual, as it uses its own branded components wherever posible, with SK Hynix supplying both DRAM and NAND.  While the details of the lower level components are less important and carry relatively small type or brand share, it is interesting to note that the phone contains 7 PCB/flex boards which contain, in total, 1,708 components, all packed into something that fits into your pocket.  While we knock smartphone brands for releasing new phones each year that are almost duplicates of what came before, it is a great feat of engineering that smartphones work at all, given the number of components that could fail.  Credit where due.

There are no shortages of comments on Samsung Display’s (pvt) newest display technology QD/OLED.  We have mentioned it innumerable times and most recently there has been talk of a 2nd generational QD/OLED product that is being worked on that will reduce the thickness of the original QD/OLED display. (The 55” TV produced by Samsung (005930.KS) using the original QD/OLED display technology is 1.6” thick).  There has been some controversy as to some of the characteristics of the QD/Display, which is used in a Sony (SNE) TV and an Alienware (DELL) monitor, but the general feeling is that the display technology, especially in its first iteration, is a step up for OLED and display technology generally and is a viable contender against LG Display’s (LPL) WOLED TV technology.
Potential technical issues aside, which will likely be addressed by SDC in the second or third generation product, parent Samsung Electronics has been supportive concerning the new product offering but has been a bit hesitant on the prospects for the technology during its development and early production.  It was surprising to see that Sony was first to announce the availability of the technology in its TV line (shipping expected next month) but Samsung is now offering almost immediate delivery (1 day) through Best Buy (BBY) and is said to be scheduled to receive .5m QD/OLED panels from SDC this year.  While that is a small number of units compared to Samsung ~50m units shipped last year, it would reflect more the early production stage of the technology and Samsung’s lack of information as to how the new technology will be accepted by consumers.
That said, Samsung Display, who will be the sole source of QD/OLED displays to Samsung, Sony, and Dell, must also be realistic as to how many panels they are able to produce this year, and we look at the most important characteristic of panel production, yield, to give an estimate of the number of panels SDC will be able to produce.  As the SDC QD/OLED fab is configured as a Gen 8.5 15,000 sheet/month line, we have to make a few assumptions before walking through the actual estimates.  First, we assume that the fab was built to accommodate MMG (Multi-mode glass), which allows the lines to mix different size panels on the same Gen 8.5 substrate, however most Gen 8.5 OLED lines process a half sheet at a time.  Using MMG would make it impossible to process a half sheet because of the configuration (3 65” & 2 55” panels/sheet or 3 65” panels & 3 34” panels/sheet), so we did calculations for both MMG and non-MMG configurations.  
We also have to make some assumptions as to how many of each panel size Samsung Display is producing[1], which would be based on consumer demand, which is still an unknown, however we build in a roughly two to one ratio for 65”/55” as the price differential between the two is ~35% and the screen size of the 65” model is ~40% larger, with roughly 15% of production going toward the 34” (monitor) size. 
The most important metric in the calculations is yield, as QD/OLED is a new technology and has a number of process steps that are different than typical OLED display production.  Typically yields are quite low when production begins as tools need to be tuned to mass production levels, however it has been rumored that SDC was having trouble with yield and had been moving into mass production with yields in the 50% range.  We expect this was a reason for parent Samsung Electronics’ reticence about promoting the technology late last year, however a recent internal memo from SDC management to employees indicated that yields are now 75% with a target (timeframe?) of 90%+.  It is rare for any company to publish actual production yield, especially for a new product, but it seems that SDC wanted to encourage the fab staff to have an optimistic view of the potential for the product and the prospects for their continued employment on the project.  This gives us some clarity as to where the production yields are currently, which we build into our model below.  As noted, while we are less sanguine about the use of MMG at this fab, we present both MMG based and non-MMG based estimates.


[1] Available to SCMR LLC clients.

​Based on our estimates Samsung Electronics will take ~85% of SDC’s QD/OLED TV panel production this year, with the remainder going to Sony.  As part of SDC’s 2022 QD/OLED production we expect ~110,000 monitor panels to be produced, but we expect there is some flexibility in that figure.  If SDC were to lower the percentage of capacity dedicated to monitor panels, it would lower the total number of panels produced, but increase the number of 55" and”65”, which would boost the number of TV panels it could offer to Sony.  That said, for SDC to be ultimately successful with its QD/OLED project, the company will have to build new capacity to increase production, which would likely take a year if they were to build in an existing location.  In order to meet the 2023 holiday season they would have to make such a decision by mid-year 2022, which would leave little time for Samsung and Sony to evaluate consumer reaction to the product, which puts SDC in the unenviable position of having to make that decision with relatively little customer data. 
If they decide to expand, equipment suppliers will be pressed to also meet such deadlines, which can complicate such timelines.  All in, QD/OLED, or at least Samsung Display’s version of the technology is just beginning to emerge but there is little time to make educated decisions as to expansion plans or SDC will be limited to current production levels until 2024.  While this would certainly give the technology a chance to mature a bit, other display technologies will also improve and QD/OLED will face a stronger challenge from competitive TV display technologies.  Decisions, decisions… 

​According to Korean trade press Sony (SNE) will be releasing the first commercial TV sets using Samsung Display’s (pvt) QD/OLED technology in June.  The Bravia A95K will come in 55” and 65” models and is expected to sell for $3,000 and $4,000 respectively.  This is a bit unusual in that SDC parent Samsung Electronics (005930.KS) would be thought to have 1st mover advantage with a new technology developed by its affiliate, but there has been considerable back-and-forth between the two over the technology, with Samsung Electronics allegedly delaying the initial release in May, but postponing that date over disagreements concerning panel price and panel allocation. 
The price of the two models, should these numbers prove true, would put the sets at the top of the premium OLED list, at least for 4K TV sets, as pricing for 2022 models from a number of brands have not yet been revealed.  As a new technology, or a new production process, one would expect a price considerably above existing premium TV sets, with both novelty and the high cost of production and low yields the general culprits, and by no means is this an inexpensive TV set.  However, while the process is different from producing WOLED and involves production steps that are new or less typical and therefore require more specialized equipment and more rigorous testing, the price is not unreasonable in our opinion.
While we cannot directly compare other display technologies to QD/OLED until production models are available and evaluated by display testing specialists such as Displaymate, or Rtings, we do note that the price of Samsung’s initial Mini-LED/QD 65” TV model released last May (65” 900A 4K) has declined 26.9% from its original price in less than a year.  Mini-LED/QD technology is considerably different than QD/OLED technology and is based on processes that are more mature, so we would look at such price reductions as a stretch for QD/OLED in its first year, especially as competition will be quite limited and the display single sourced, but a $4,000 starting point is certainly within the realm of retail customer budgets.

​You don’t usually hear that a major CE company is refusing to take new orders for a product, but Sony (SNE) is doing just that, not because they want to, but because they could not fill the orders if they took them and its not because of a monstrously popular product, but a lack of components that is leading the company down this path.  Sony is not taking new orders for its popular mirrorless cameras, the Alpha a7 II ($1,598) and the Alpha 6400 ($1,000), despite the November and December holiday period when sales for such cameras are the highest.  Component shortages have left the company to apologize to consumers on its website and hand over the individual customer issues to retailers, who have been told that customers will have to wait until early 2022 (no specific date) before they can take delivery. 
Such ‘mirrorless’ cameras fall into an unusual class, as technically your smartphone camera is considered ‘mirrorless’ , as are many point-and-shoot digital cameras, but in this regard the term is used for cameras with interchangeable lenses.  The big difference however is the addition of the EVF, electronic view finder, which shows exactly what the image will look like using current settings, allowing the user to adjust those settings to optimize the image before taking the shot.  Additionally such systems can include an image stabilizer, which keeps the sensor steady, even when shooting without a tripod, allowing for slow shutter speeds (better for low light) that would be impossible for most SLRs.
That said, as such devices continue to increase semiconductor content, they fall prey to the same shortages that other CE products are seeing, and given the more specialized nature of some of the components, they tend to be short run products that get bumped by high volume silicon.  Sony is not alone here, as Nikon (7731.JP) was forced to delay the release of a new interchangeable lens camera for 45 days when factories producing components in Asia were shuttered due to COVID-19.
Its not like the camera business can easily withstand a bad month or quarter either, as the increasing quality of smartphone cameras has pressured stand-alone camera sales for the past few years, leaving manufacturers and component suppliers wary of increasing capacity, and while the industry saw a bit of a recovery in 1H, with Sony and others raising forecasts, August saw y/y shipments go negative, followed by a 30% drop in September.  Sony says they will minimize the impact of the shortages by redesigning and sharing parts, as well as increasing inventory, but the former takes time and the latter caused prices to rise further for other CE products.