Display panel pricing is a touchstone for the CE space as displays tend to be the largest cost single component in almost all mobile devices and many static CE products.  Predicting such prices on a monthly basis takes a combination of data from a number of sources, and while conversations with suppliers, assemblers, and buyers add to the calculations, much of such prognostication is based on trends and a gut sense of the balance of tension between buyers and sellers.  In recent months, after a long spate of price increases, panel prices have been declining, and in some cases at a rapid case, so the art of predicting panel prices has moved from being one where actual prices and expectations are only off by 0.25% or 0.5% to one where the difference can be 3% or 4%.
That said, as we have noted previously, TV panel prices began the downward pricing cycle in July of 2021 and have been declining precipitously since, while IT panel (Notebook, Monitor, Tablet) panel prices continued to rise.  This pushed panel producers to accelerate a move from TV panel production to IT panel production to maintain margins, but that ‘lemming-like’ move also has consequences, that of oversupply, and IT panel prices have also been on the decline since last July, albeit at a much slower pace than TV panels.  There are however resistance points when it comes to panel pricing, at that point is cash cost, at which point the producer has to decide whether to take an order that will generate little or no gross margin.  Although cash cost varies with each producer, on a general basis the last time TV panels reach cash cost across the industry was in September of 2019, and since then there has been the usual cost reductions that panel producers work toward each year, along with both general inflation and the effects of component shortages, which we expect nets out as a panel cash cost a bit above the 2019 level.
The industry usually looks at the approach of cash costs for a particular panel type as the point at which panel prices stop falling, and rightly so in many cases as taking on money losing production tends to be done only when it is necessary to fulfill a commitment to a large customer, and with TV panel prices nearing cash costs, expectations are that prices will stop falling.  This hope is fueled by the fact that there is less TV panel production than a year ago (the shift to IT), which tightens the market a bit, but there is also that balance between buyers (TV set producers) and sellers (panel producers), which was heavily in favor of panel producers until last July, forcing set manufacturers to eat the higher cost or raise prices and lose consumers.  Historically, such a shift takes time to reset and has a tendency to encourage panel buyers to keep pushing for lower prices, even when they know they ‘sense’ that panel producers are hurting, and panel producers are also both competing with others and are want to keep as much of the fab utilized for as long as possible, so while cash cost levels are an indicator that TV panel prices ‘should’ stop falling, that can be a simplistic look at a complex equation.
But, more important currently, given the transition mentioned above, are IT panel prices, as the IT production concentration of many panel producers is weighted toward such panel products.  This makes the effect of IT panel pricing more sensitive to the display business than might normally be the case, and the recent slowdown in demand, as COVID-19 vaccines allow for some semblance of normality, has pressured IT panel prices.  We have seen very recent trade press headlines indicating that IT panel prices in February are falling faster than TV panel prices, and while that might be attention grabbing, we went back to our data to see if such was really the case.
Aside from the headlines, we note that panel price estimates vary across a number of sources, and we use averages whenever possible.  We also deal with variations in the type of panel, which can affect price estimates, and we caution that in most cases we do not have sample sizes from sources, but here’s what we found.  Expectations for February TV panel pricing, sort of an ‘average of averages’ across sizes, indicated a decline in February of 3.0% while that same ‘average of averages’ for IT panels estimates a decline of 3.2% for February, so technically the headlines are correct in that IT panel prices in February are declining faster than TV panel prices.  That said, the question is which is worse, TV panel price declines that could put some panel producers’ TV panel business in loss mode, or the increased effects of IT panel price declines in an industry concentrated toward IT panel production? 
Neither is good, but if we had to pick one, we would say the continuing decline in TV panel prices (see Figure 7), even if they dip below cash costs, is the better of the two, as it gives TV set producers the ability to bring down set prices over the next few months, while IT panel prices are still a distance away from cash costs, giving them room to fall further, and considering the shift toward IT panel production over the last 7 or 8 months, the competition in that space could become brutal.  February is an unusual month for the display industry as the Chinese New Year tends to slow production across the industry, so the trend in March will be a bit more telling, however we expect at least the 1st half of 2022 to be a difficult one for the display space, at least from the perspective of panel producers, so we look toward any data that might help us to understand how the CE space will look in 2022.

​With Super Bowl LV! Coming this Sunday, we thought it might be a good time to check on TV prices, given the “Deals, deals. Deals…” type advertising that is being promoted on just about every possible media type.  Since we have detailed historical data for Samsung Electronics (005930.KS) Mini-LED/QD TV line (2021 only as 2022 sets have been announced but not priced of released) we updated that data to see if the deals being offered for the Super Bowl are as good as some of the advertisements proclaim.
As we have previously noted there are 35 TV set models in the group we have been following, consisting of 6 8K Mini-LED/QD TVs, 11 Mini-LED/QD 4K TVs, and 18 QD only 4K TVs.  Pricing was released on May 20, 2021 and we have collected data 21 times since then, with the last being yesterday.  While two models were at their highest price, the $15,000 98” (QN98QN90AFXZA), a set that has not changed price since its initial release, and the least expensive QD only 32” model, which currently sells for $500 and has for most of its life, but dropped to $400 during the period around Black Friday.  Aside from those two, 22 of the 35 models are at their lowest price since release, although only 5 of those are lower than any previous low price, including those reached during the holidays, so while the discounting seen for the Super Bowl has brought many models down to their lowest prices, only 5 of those are lower than at any point in the model’s history.
We do note that the current discounts seen for Samsung’s 2021 Mini-LED/QD line are considerable against the previous pricing (1/18/22) in some cases, ranging from a low of 0.0% to a high of -26.7%, most have been seeing increases after the November/December holiday period, so while those discounts look good on a percentage and dollar basis, most are back to the same spot seen during the holidays.  We also note that Samsung has announced their new 2022 line, although pricing and release dates have not been set, so there is some incentive for discounting to move older inventory to make way for the new line.  All in, while not the perfect time to buy a TV set (ideally, the period around Black Friday), prices are certainly better than they have been for the last few months, down an average of 25.8% across the line, against original pricing and the biggest single period drop (-8.0%) (period/period) during any pricing period, including the 7.1% drop seen October 20, which began the holiday discounting.  Of course, the last two pricing periods saw increases of 4.9% and 4.2%, so in most cases prices are just back to their previous lows, but the data says its not a bad time to be buying a TV, especially a relatively high end TV as long as it doesn’t cut too deeply into the chips and dip budget.

​If you are one of those folks that ‘have to have the latest technology’, it must have been a difficult time when Samsung Electronics (055730.KS) released their first ‘consumer’ micro-LED TV in March of last year.  The massive 110” 4K TV was a scaled down version of the company’s “The Wall” a commercial product that was built from modules that could be configured into a screen that was 292” (diagonal), which is 11’ 5” high and 21’ 3” wide.  Last year’s 110” micro-LED TV was a bit pricey, offered at ~$155,000 initially, or ~$30/in2 but Samsung is in the price reduction mode for its micro-LED TV, and has not only cut the price to a mere $83,000 (reportedly) or $16.04/in2.  How might one resist such a bargain?  Well Samsung is now also offering (likely available in June or July) a 114” version for $100,000, or $18/in2 or for those smaller homes, an 89” version for a paltry $80,000 or $23.64/in2, although neither is quite as good a bargain as the 110” model on a value/in2 basis.
But the good folks at Samsung are not really trying to rip off consumers with such high prices as the cost of producing these sets is quite high, particularly the cost of producing the micro-LEDs that make up the light-emitting portion of the device.  To begin with there are 8,294,400 pixels for each 4K screen, which are made up of three (RGB) sub-pixels, for a total of 24,883,200 micro-LEDs per display, and as these chips are less than 100um each, even in such large TVs, they are each smaller than a human hair, which makes the requirements for their production quite complex, requiring a clean room and precise control over the LED growth process.  Even under these rigorous conditions there can be considerable variances in micro-LED chip performance, both from a brightness and a color standpoint, and measuring these characteristics on a wafer containing hundreds of thousands of micro-LED die.  Since the measurement of those characteristics is a developing science, not all ‘bad’ die are always identified, so when they are transferred to the substrate of the final display, some need to be replaced, a process that is even more difficult than the transfer process itself.
Given that as the micro-LED TV size decreases, such as in the 89” version, the micro-LEDs either need to be smaller or they need to be packed more closely together, both of which increase the difficulty and cost of producing these smaller sets, and this is likely why Samsung has temporarily abandon plans to release sets below 80” for the near-term, and given estimates that Samsung has sold only a few hundred of these sets makes it more of a science project than a real retail product.  That said, we are back to the consumer electronics ‘chicken and egg’ concept that keeps companies operating under the belief that if they can come up with a new technology, despite its high cost in the early days, consumers will find some value and will begin to justify the kind of process improvements and mass production that are necessary to bring down the cost.  But this is not a rapid process, which is evidenced by the January 2006 release of the BenQ/Siemens (2352.TT) S88, the first smartphone to use an AMOLED display as its main screen (2”), with OLED smartphones now 16 years later taking up over half of all smartphones produced.
So while we are certainly optimistic that over time micro-LEDs will improve in quality and cost, we are not expecting a competitive micro-LED TV product in the near future.  There have already been significant improvements in micro-LED process technology and there is certainly a path toward mass production, especially when used in conjunction with quantum dots, but right now such sets are a novelty that TV brands use to prove that they have the technology to lead the market, so be patient and remember, due to the magic of compounding, with an initial investment of $100 and putting away $10 per month, after 16 years you will have earned an extra $1.44 at today’s 0.06% average bank saving account interest rate, so start putting that money away now!

While China gets much attention in the CE space, being the largest market for many CE products, and Japan represents ~2.5% share of the TV market, trends that appear in the largest markets should be mimicked in smaller markets.  Japan’s TV shipment data has indicated that overall TV shipments have been declining, particularly in 2H of 2021, similar to most regions, while OLED TV shipments continue to grow, despite the overall slowdown.  With OLED TV shipment tracking in 2018 beginning in April ’18, OLED TV share was only 3.8% of total flat panel shipments, rising to 6.8% in 2019, to 8.3% in 2020, and 11.8% in 2021 (excluding December).  While there will likely be negative growth in Japan’s TV market in 2021, OLED TV units and share have been growing.
 

In consumer electronics remote controls have been essential devices since the late 1930’s but wires connecting them to TVs made them a bit less attractive to TV or radio owners until 1939 when Philco came out with the “Mystery Remote Radio Control”, the first wireless device for operating CE devices without wires.  The Philco device was a wooden box with a few components (including a vacuum tube) a battery, an antenna, and a dial that could ‘dial up’ your favorite radio station without you having to get up or trip over wires.  The rather large device enabled the user to raise and lower the volume of the radio, mute the sound entirely, or choose one of a few programmed stations to listen to, along with being able to switch to the radio’s built-in phonograph if the radio stations were not playing something to the user’s liking, all through a telephone-like dialing mechanism. 
TV remotes became more popular with the “Lazy Bones” remote control developed by Zenith (066570.KS) in the early 1050’s, but was still connected to the TV with a wire, and was replaced in 1956 with the Zenith “Space Command”, a device that used ultrasonics to change channels and volume.  As when the unit’s buttons were pushed, they created a clicking sound which the TV receiver’s microphone could identify,, giving rise to the term ‘clicker’ for older remote controls.  However, with the cost of transistors decreasing in the 1960’s remote controls began operating at frequencies above the range of human hearing, although dogs could still hear them and metal banging against glass could also change the channel.
By the 1980’s companies like Jerrold Electronics (COMM) were producing more sophisticated ultrasonic remotes, but most were designed to work with a particular brand of TV or CE device, so in 1985, Steve Wozniak of Apple (AAPL) fame, started a short-lived company CL9, whose objective was to develop a universal remote control.  The CL9 product was a well-designed but expensive device that faced competition from other ‘learning’ remotes that were less sophisticated but simpler.  Unfortunately, while ‘learning’ remotes solved the problem of not having to buy an second remote for every device, they are still difficult to program and complicated to use, so we still wind up with a few remotes that are needed to tell the TV to switch to streaming services that are not included in the TV itself or similar functions. 
All of these devices require making sure the batteries in the remote are up to snuff and replacing batteries is a chore, so last year Samsung (005930.KS) came up with the idea of putting solar cells on its TV remotes, allowing them to charge when in a sunny location, in theory a good idea, but not that practical.  This year Samsung is trying something else.  While leaving the solar cells available to the remote during the day, Samsung has included circuitry that can ‘harvest’ the RF signals coming from devices that produce radio waves, such as your router.  Such micro-harvesting is an area of interest in the IoT world, as many of such devices require only small amounts of power to operate and are located in places that would make battery replacement difficult or dangerous.  By collecting the RF energy that is all around us and converting it to electrical energy, such devices are able to power themselves to a large degree.
4G and 5G spectrum have been shown to be near the efficiency of other forms of energy harvesting, such as temperature gradients or vibrations, which means that cities that are blanketed with such RF signals are a fertile ground for energy harvesting, with a study done almost 10 years ago showing that a broadcasting tower located ~4mi from a collector generated enough energy to power a standard microcontroller.  While the amounts of energy gathered are small, usually measured in micro-watts, they are available 24/7 and are free, so the development of RF energy harvesting antennae and conversion components will allow the harvesting to become more efficient and will be applied to devices that don’t require large amounts of power for operation.  Samsung seems to be trying to present itself in an ‘eco-friendly’ light with their remotes, with the idea of both solar cells and RF energy harvesting being one of the few times where in the short run being eco-friendly is also something that is both convenient and ecologically sound.

​Once again speculation runs wild over the potential purchase of OLED panels by Samsung Electronics.  While the last batch of rumors said it was just a matter of the fine details before an agreement between Samsung Electronics and LG Display (LPL) was signed and roughly 2m panels began to be shipped to Samsung as part of its 2022 premium TV line.  Since Samsung has not mentioned an OLED product in blubs before CES, rumors are now moving away from the sale over a difference in negotiated pricing.  According to local Korean trade press, it seems the two companies have been a bit further apart than previously thought, with LGD offering panels to Samsung at ~$650, while Samsung is offering to buy at ~$550. 
Samsung would certainly be a large customer if such a deal would go through, but even with LGD’s offered price, which is ~10% below the price that LGD sells to its parent LG Electronics, Samsung is looking to undercut LGE’s OLED TV pricing by enough that pure OLED TVs will become an option in their TV line, rather than a competitor to its own QD/OLED, Mini-LED/QD, and Micro-LED TV lines, which all fall into the ‘premium’ category.  With two of those three premium lines already established, Samsung seems to want to use OLED to fill out its LCD/QD line, which is situated below the Mini-LED/QD line.
As LG Display is essentially the only volume producer of large panel OLED displays, the growth is OLED TV set shipments and the increasing number of brands that offer them falls directly to them, and Samsung would be taking a sizeable chunk of their production in 2022 (~20%), which could leave some brands unable to meet their own OLED TV goals.  The question then comes down to profitability for LGD and consequently LG Electronics, who would see less profit from the Samsung order than otherwise.  If LGD is confident that they can sell ~10m OLED TV panels in 2022 without Samsung, it would make sense to hardline the price.  If they lack that confidence and are willing to accept a lower margin, they make the deal. 

​Samsung Electronics (005930.KS) has been a proponent of the embryonic Micro-LED TV market, introducing a retail TV line (The Wall) this year to augment the commercial Micro-LED signage product it sells directly to business customers.  While the commercial product is based on modules, allowing the configuration to be determined by the customer, the retail product is produced as a single unit in a number of sizes, although currently available in only the 110” and 99” sizes, which cost ~$155,000 and $147,000 respectively, with the 99” model not yet in production.  Samsung has been producing less than 20 units each month during 2021, against customer orders, but is expected to produce 200 110” units in January to both supply sets for a number of trade shows early in the year, such as CES, Eurotrade, and FPD China, where the company expects to show the sets to consumers and businesses and (hopefully) take orders.
Samsung has been planning to release 101”, 99”, 89”, and 76” models this year but has delayed production until it better understands how the public will respond to these smaller but still expensive TV sets.  Samsung will be switching from PCB board based LED displays to LTPS (Low temperature Poly-Silicon) TFT backplanes produced on a glass substrate for the newer models, which will allow for the LEDs to be more densely packed, a necessity for the smaller TV sizes.  The modules for Samsung’s commercial Micro-LED modules ranges from 1.68mm to 0.84mm between adjacent LEDs.  Given that the same number of pixels (8.29m pixels for 4K resolution) must be fit in to a 76” set that is 48% smaller than the 110” models, the spacing between each pixel must decrease as well, making it difficult to populate a PCB board.  By producing the TFT structure on a glass substrate, in the same way it is done for LCD and OLED displays, and transferring the micro-LEDs to the glass substrate, such densities can be achieved, albeit still at a high cost.  AU Optronics (2409.TT) is expected to be producing the micro-LED backplanes for Samsung.

​OK, you did it, you bought an 8K TV despite the fact that there is little native 8K content to watch.  The salesman was quite good at describing how ‘smart’ the TV was, taking your mundane 4K content and amping it up to 8K, and he was also convincing with the story that you want to be ready when native 8K content becomes available, so you won’t have to rush out with all of the other luddites to buy an 8K TV.  Of course, he did not indicate that you cannot ‘create’ new image information when viewing a 4K image on an 8K TV, you can only duplicate more of what is already there, so you gain the ability to sit closer to the TV without seeing individual pixels, and little else.
But vindication is coming! Or at least it is for those who have purchased the TCL (000100.CH) Series 6 ROKU (ROKU) 8K TV , a 65” model that sells for ~$2,000, as TCL will soon begin to offer a native 8K subscription streaming service, giving you a break from those YouTube (GOOG) clips that you use to show buddies how cool your 8K TV is.  The content is part of a collection from The Explorers Foundation, an non-profit organization devoted to raising awareness of the challenges and issues associated with the preservation of the planet’s heritage through conservation and research.  This means you will eventually have access to 8K content from such projects as “American Crocodiles in Jamaica”, “Scarlet Macaw in Honduras”, or “Lemurs in Vohimana” (Protected Rainforest in Madagascar).
As big fans of nature content, we are certainly all for such access, even if we are still relegated to 4K, but while those who have actually purchased 8K TVs might have an interest in such content, we expect they are looking for a bit more than nature footage and the infrastructure for native 8K streaming is not available for broadcast.  You will have to be satisfied with those YouTube clips and a few 8K movies that have to be compressed in order to pass them through your fiber and Wi-Fi.  It is still a struggle to justify 8K TV, and will likely remain so through 2022, despite the offerings from CE companies looking to score in the category, so hold on for another year and watch any native 8K you can.  No information on the cost or the date when the 8K service will begin but the Explorer’s app is free.

The big guessing game in the CE space is whether the break in TV panel prices will give TV brands the ability to offer substantial discounts during the holidays and stimulate TV set sales, which have been and are expected to be lackluster.  Component shortages, inventory prices, transportation bottlenecks, and TV panel prices all play into such calculations, and while each brand has their own issues, we took a look at the US CPI (un-seasonally adjusted TV index) and how that relates to actual aggregate TV panel prices to get some understanding of where we are in the cycle, and the possibility for a better than expected holiday season.
The simplest comparison was the CPI TV Index vs. the aggregated price of TV panels since January 2020, as shown in Fig. 1.  As can be seen, the TV CPI index lags the index by about a month, with TV panel prices peaking in July and the TV CPI peaking in August, however the TV CPI did not follow the rising TV panel prices seen in the latter half of 2020.  It was not until the beginning of 2021 that the TV CPI began to track TV panel price increases and while the more recent TV CPI data better reflects the change in TV panel prices that began in September, we expect the TV CPI will take longer to readjust to lower panel prices.   TV panel prices have declined 35.3% from their peak while the TV CPI has declined less than a percent, and while this is not a real comparison as the bases are so far apart, at least from a visual point of view, they seem to be tracking more closely over the last three months than in the last 18 months.
But when it comes to consumers, TV panel prices and the TV CPI are far less relevant than what they see when walking into Best Buy (BBY) or are checking TV prices on Amazon (AMZN).  While underneath the loose budgets that consumers will try to hold to when viewing possible TV or other CE choices lies wage inflation/deflation, a smattering of knowledge, much brand hype, and a desire not to buy something that is overpriced, if something looks like a good bargain, it attracts attention.  In order to see whether TV panel price reductions and TV CPI decreases have made an impact on ‘real’ TV prices, we took a simple survey.  We traced the pricing for the 10 top selling TVs at Best Buy to measure where they currently stand relative to their high and low points.  Since Best Buy does not provide historic data, we used pricing on Amazon to trace pricing, and while this was more often 3rd party pricing, rather than Amazon’s, it does give a reasonable representation of the pricing cycles of these TVs.
Just to clarify the data set, the top ten ‘Best Sellers’ at Best Buy consisted of five Samsung (005930.KS) TVs, two LG (066570.KS) TVs, and three Insignia TVs, which are Best Buy’s house brand.  Of the 10, three were 2021 models, five were 2020 models, and two were 2018 (!) models, with one of the LG models being an OLED TV.  In terms of TV size, there were two 75” and two 65” TVs, with the rest with one each (75”, 58”, 55”, 40”, 32”, 24”), with only two being 4K TVs, five being UHD resolution, and the remaining ones HD.  The average price for the ten models was $585 on Best Buy, although leaving out the OLED TV brings that average down to $450.   Prices on Amazon were typically equal to or higher relative to Best Buy, with the average on Amazon 8.9% above Best Buy, but much of the differences came from the two 70” models, which were 29.2% and 66.3% higher on Amazon, likely because they are in relatively short supply.  
What was most interesting was that while the Amazon prices were down 22.5% from their high points on average and up 17.8% on average from their low points, the current prices of the ten sets on Amazon were 8.9% higher than the current Best Buy prices and the current Best Buy prices were only 0.2% higher than the average lowest price point (historically) on Amazon.  If nothing else, it points to the fact that the ‘best sellers’ at Best Buy are better deals than even the lowest historic prices on Amazon.  While the data proves the point that it is certainly better to shop for bargains on-line, particularly among Best Buy’s ‘top sellers’, than to walk into a store and wander through aisles of TVs with a salesman, it does not give any indication as to how much discounting is being done across the broad spectrum of TV sets sold in the US, despite the ‘previous price’ listed for each set at Best Buy.  We believe those ‘previous prices’ should be ignored, considering some of those sets were over two years old and have seen many short pricing peaks and valleys that had little to do with actual consumer prices. 
We also looked at the 10 most and least expensive models offered at Best Buy, however, most were not available on Amazon and price tracking data was therefore not available but just in passing, the average price of the 10 most expensive TVs at Best Buy was $17,155, with the top of the range set by a Samsung 98” 8K set at $60,000 and the least expensive a Samsung 85” 4K TV at $5,500.  At the other end of the spectrum the 10 lowest priced TV sets at Best Buy averaged $121.30, with the most expensive being a $160 Toshiba 32” TV and the least expensive being an Insignia 19” TV at $80.
All in, it will take a much wider sample to see whether the impact of TV panel price decreases will be able to work their way to consumers by the end of the year.  As set producers built inventory against a fear of continuing component shortages, they built in months of higher cost inventory that still has to be worked through or written off at the end of the year.  With three months of lower cost TV panel inventory, the cost average will come down, but given the multitude of other factors, particularly raw materials, semiconductors, and logistics, we expect much of the effects of TV panel price reductions will be seen in 1Q, making the post-holiday period a more likely place to be looking for real TV bargains.  TV panel producers are already seeing the effects of the price declines and have begun to lower utilization rates, which will continue to pressure y/y comparisons, but the bigger question is whether TV set brands will keep any margin they gain, or pass it on to consumers to move units.  Given the margin issues that have faced TV set brands for much of this year, we expect the former but hope for the latter.

Note:  We are only looking at Samsung’s display, TV, and mobile businesses in this note.
Samsung Electronics (005930.KS) reported 3Q sales of 73.98t won ($63.24b US), up 17.4% q/q and up 10.5% y/y and operating profit of 15.82t won ($13.52b US), up 25.9% q/q and up 28.1% y/y.  The company generated gross margins of 42.0%, the best since 3Q ’18 and operating margins of 21.4%, also the best since 3Q ’18.  On a comparative basis 3Q is typically up 8.9% (5 year avg.) q/q and up 6.1% y/y.

Samsung’s display business, which represented 12.0% of sales, was up 29.0% q/q and up 21.0% y/y, and saw a decline in operating margins from 18.6% in 2Q to 16.8%, as costs increased. TV panel prices declined in the quarter, continuing to generate losses in Samsung Display’s (pvt) large panel display business, but small panel sales were strong as Apple (AAPL) and other customers built inventory toward recent model releases.  Samsung did mention strength in foldables but gave little detail on their contribution to total display results.  Samsung guided for continued growth in the display business in 4Q, again led by small panel OLED displays offsetting losses in the large panel TV business.  There was mention that OLED devices, other than smartphones, would begin to play a bigger part in total OLED sales, although are expectations for real growth in that space are oriented toward 2022 and there was also mention of Samsung’s program to begin production of its new QD/OLED TV product as an offset to its (intentionally) declining TV display business.  There was also mention of component costs and shortages, neither of which are specific to Samsung, as points of concern for both 4Q and 2022. 
On an overall basis Samsung’s display business, which is greatly tilted toward small panel OLED, is better positioned than most, although that was not the case for much of last year and earlier this year.  Samsung Display had been the most aggressive of display producers in reducing its exposure to the large panel TV production space in 2019 and closed or sold much of its large panel production capacity.  As large panel prices rose during 2020, SDC held off closing remaining large panel LCD production at the request of Samsung Electronics, its large customer in that market, but SDC’s overall outlook on generic large panel LCD production has likely changed little, especially with the large panel price reductions seen recently.  SDC hopes to replace the generic large panel LCD business with its soon-to-be-released/announced quantum dot/OLED displays, which will become an integral part of the company’s large panel display business if successful. 
As we have noted in the past, there is significant risk associated with developing a new commercial technology in the display space, but if the product passes muster, it will leverage Samsung’s TV business into a ‘premium’ panel category, something Samsung Display has been missing and will give SDC a display product with which it can use to compete against LG Display’s (LPL) OLED TV panel business.  That said, such a product would generate losses for some time, so we expect no profit contribution from that business until 2024.  While we expect SDC to be successful with QD/OLED, we put more emphasis on SDC’s push to expand its OLED display business into the notebook and monitor space, which began in earnest this year, and see continued expansion in that business as SDC improves its OLED notebook cost structure over the next year.  While OLED notebooks will remain in the ‘premium’ notebook category in 2022, we expect their use in mid-tier notebooks to expand in 2H 2022.

​Samsung’s consumer electronics division (~56% is TV), which is ~19.1% of sales, grew sales 5.2% q/q and 0.1% y/y but operating margins for the division as a whole declined from 7.9% in 2Q to 5.4% in 3Q.  While the TV division margins are not broken out, costs associated with the TV business (components, panel prices, logistics, etc.) were responsible for much of the margin reduction.  However the TV segment itself (10.6% of total company sales) grew 9.1% q/q but declined 5.1% y/y against a strong 3Q last year.  Typical 3Q q/q growth (including last year’s +55.2%) is 13.1%, although excluding 2020 would be a more normal 2.6% q/q increase, so it was still a strong quarter in terms of q/q sales averages with Samsung’s QD TV (not QD/OLED) and other premium products leading the way.
4Q guidance for the TV segment is for growth q/q but down again on a y/y basis as lessening COVID-19 restrictions move consumers away from a sequestered lifestyle.  Guidance for 2022 in the TV segment was less optimistic, with more emphasis on logistical issues slowing TV market growth.  While logistics are certainly an issue, we question whether that is the source of reduced demand, but we do agree with the lower demand outlook for TV sets.  That said, if TV panel prices continue to decline in 2022, while it will hurt LCD panel producers, it would be beneficial for Samsung’s TV business, giving them room for the discounting needed to compete against Chinese competitors. 
Samsung, as are almost all other TV set brands, is hoping that ‘premium’ TV products will offset lower overall set demand, and while the premium market will certainly be the growth driver for the TV set business in 2022, we expect Samsung’s broad range of premium TV products will take considerable shelf space in 2022.  With quantum dot enhanced LCD TV, Mini-LED TV, Ultra-large TVs, and potentially QD/OLED TV offerings, Samsung will certainly give consumers ample choices in the premium category, but competition from Chinese brands such as TCL (000100.CH) and Hisense (600060.CH) in key markets will still be an issue in 2022. 
Samsung will have less of a cost burden to carry than those Chinese brands that have their own TV panel production as large panel prices decline, and will be able to cherry pick the market for the best supply deal, which was the intent back in 2019, but the margin leverage usually gained by TV set manufacturers when panel prices decline could be offset by continued component shortages and logistics costs.  If we had to be somewhere in the TV space in a year when demand is reduced, it would be with either Samsung (more premium product and little large panel LCD production drag) or LG Electronics (066570.KS), given the growth of their OLED TV business in 2022, although LG Display (LPL) still has enough large panel LCD production to see some negative influence from that part of their business next year.  

Samsung IT/Mobile division (38.4% of sales) saw sales up 27.6% q/q, against a weak 2Q, but down 6.8% y/y against last year’s strong 3Q.  The mobile segment itself (37.0% of total sales) grew sales 27.6% q/q but declined 8.3% y/y.  IT/Mobile operating margins declined from 14.3% last quarter to 11.8% in 3Q.  Overall, Samsung’s smartphone shipments grew in the quarter with the introduction of new foldable smartphones and an expanded mid-tier lineup, but increased marketing costs (foldables) squeezed margins a bit.  Guidance for 4Q is for increased smartphone demand with a caveat toward component issues.  2022 guidance was still optimistic, with a focus on growing the foldables line, making it a significant part of its ‘flagship’ Galaxy offerings, which have been weak over the last two product cycles.  Samsung has begun to offer a ‘bespoke’ service for its foldables, customizing devices to customer specifications, which the company hopes will increase consume focus on foldable overall, but the service is too new to gain any insight in whether it will serve to generate additional sales without lower margins.

​Across the board, the segments we look at, Samsung did as well or better than most, and given their size, volumes, and internal capacity, they were able to sidestep at least some of the component and logistical issues facing most in the CE space.  The company still seems optimistic about 4Q but a bit less so for 2022, although we expect they are better positioned overall if 2022 looks more like pre-COVID years.  That said, Samsung’s success in 2022, in the markets we cover, will depend on their ability to differentiate their CE products.  Without that differentiation they will face the same diminishing returns that a slower CE growth environment places on participants.  They have a better shot than most but we expect 2022 will be a more difficult year.