As we have noted previously, there are considerable differences between sources when it comes to smartphone shipment data.  In order to compensate for such dissimilarities we average shipment data from at least 6 and as many as 9 data sources.  While this does not allow for share totals that add up to 100%, it does remove the effect of unusually optimistic or pessimistic estimates from single sources.  Fig. 4 shows the top 6 Global Smartphone Brands from 1Q 2017 to 2Q 2021 and the share of that group relative to the total market.  Samsung (005930.KS) remains the smartphone shipment leader but is seriously being challenged by China’s Xiaomi (1810.HK), who has picked up much of the share loss from Huawei.  Oppo (pvt) and Vivo (pvt) have taken some share but are running close to trendline while Xiaomi has broken out of its typical range.  Apple’s (AAPL) ups and downs, due to its single release window makes it a harder read, but Fig. 5 shows only the trend lines for each brand, making directional changes a bit more obvious.  We note that the trend lines for Oppo and Vivo are so close that they completely overlap.
 

Not to be left out of the semiconductor industry’s rush to add capacity that we have been witnessing for the last 6 months, China’s largest foundry SMIC (688981.CH) has signed a Cooperation Framework with the government of Shanghai to build a 12” foundry line that will operate at 28nm and larger nodes.  The project is expected to cost $8.87b US with SMIC contributing at least 51% of the capital and the Shanghai government no more than 25%.  The balance will be raised from 3rd party investors.  There is no start date on the project as this is just a framework rather than a completed agreement, but we assume that the Shanghai government has made inquiries about potential 3rd party investors and is confident that they will be able to raise the additional capital necessary.
At the end of June, according to SEMI, 19 high volume fabs will have started new construction before the end of the year and another 10 in 2022.  15 of the 29 fabs (excluding SMIC) will be foundries, with the largest producing ~220,000 wpm (200mm equivalents).  22 of the 29 fabs will be 300mm lines, with the rest between 100mm and 200mm.  The combined output of the 29 fabs is expected to be ~2.6m wafers/month[1] and spending for 300mm fabs in 2022 is expected to reach $17b, an all-time high, but will outpace 300mm wafer production if no additional wafer capacity is announced this year.  Hopefully new chip production capacity will not outpace demand in 2023 – 2024, but if wafer capacity expansion does not match capacity, it will be a moot point.


[1] 200mm equivalents

And while we are on the subject, documents have revealed that the city of Taylor, Texas, about 25 miles from where Samsung Electronics (005930.KS) has its only semiconductor production fab in the US, has offered the company some very attractive tax breaks to establish its new $17b fab in their quaint town.  Taylor, a town of almost 16,300 residents, has been the site of a number of famous and infamous movies and TV shows including Varsity Blues, Friday Night Lights, and The Texas Chain Saw Massacre, and such notables as Tex Avery, animator and creator of Daffy Duck and Droopy, and actor Rip Torn, and while the town does have a crime rate a bit above the US average, one of the town’s biggest problems is the annual migration of the Cattle Egret, a heron that is noisy can damage vegetation. 

​Competing with Austin, the state capital and city of just under 1m, can be daunting but with Taylor offering Samsung a grant of 92.5% of assessed property tax for 10 years, 90% for the next 10, and 85% for the last 10, and that same 92.5% waiver on any new property built on the site, along with the repayment of any development review costs, and a 1,188 acre site (the existing Samsung site in Austin is 250 acres plus 350 that Samsung recently purchased).  If Taylor were to win the Samsung semiconductor fab bake-off, which also includes sites in Arizona and New York, it would create ~1,800 new jobs with construction starting in 1Q 2022 and production in 2024.

​In our 8/10/21 note we mentioned that South Korean tool vendor Wonik (240810.KS) had been competing with ICD (040910.KS) and Tokyo Electron (8035.JP) in developing a dry etcher product for Samsung Display’s (pvt) potential large panel RGB OLED project.  It seems that Wonik has won the competition, but not for the SDC large panel RGB OLED project, as the tool has been approved for SDC’s QD/OLED project, which has a stated capacity of 30,000 sheets/month.  The newly approved tool is used during the TFT production process, but the current line, which has yet to begin mass production, is using dry etch tools from both ICD and Tokyo Electron, so the expansion of the QD/OLED project will be the stimulus for Wonik actually selling its new tool.  
Much will depend on the success of the QD/OLED displays with parent Samsung Electronics, who has had an on-again/off-again view of the technology.  SDC has also been considering shifting its QD/OLED technology to quantum nano-rods, which, if done, would delay the etcher sales further, although the process at the TFT level is similar.  The competition between dry etcher companies for SDC’s large panel RGB OLED project continues, although the status of the project itself remains dependent on the ability of SDC and deposition tool partner Ulvac (6728.JP) to finalize a mass production vertical deposition tool that will allow for fine metal mask RGB large panel production without the size limitations that currently limit RGB OLED to Gen 6 fabs.
 

​While Labor Day is not considered a major shopping holiday, as it falls during the back-to-school period for most, CE brands have an opportunity to stimulate sales with discounts to attract buyers to new, higher margin products, or those where excess inventory needs to be moved.  TV sets are not the usual fare for this holiday, as laptops and tablets are more typical of what might be needed by students, but in light of the fact that Samsung’s line of Mini-LED/quantum dot TVs are both relatively new and have therefore been in a sort of pricing limbo, having little initial reference point, we took a look at where pricing stood during the holiday.
Using the same 33 set Samsung TV lineup that we have used since the May 20 release, we show the following:

• The composite group, which includes six 8K Mini-LED/QD TVs, nine 4K Mini-LED/QD TVs, and eighteen 4K quantum dot enhanced TVs, is priced 14.5% lower than original pricing.
• The 8K Mini-LED TVs are priced 21.8% lower than original pricing
• The 4K Mini-LED TVs are priced 15.3% lower than original pricing
• The ‘QD only’ 4K TVs are priced 11.7% lower than original pricing
• Of the 33 sets in the group, 15 are at their lowest price point since original pricing
• Of the 33 sets, none are above their highest price point
• Of the 33 sets, 3 are equal to their highest price point
• Of the 33 sets, 2 have not changed from their original price
• Of the 33 sets, 20 are at a lower price than when we last checked (8/24/21)

All in we believe Samsung is still looking for a valid price point for its Mini-LED/QD line and will continue to offer increasing discounts as the holidays approach.  With 80 days to Black Friday and 83 to Cyber Monday and the high cost of existing TV inventory, we would expect Samsung and other TV brands to push hard to get product sold, and even with retailers extending the pre-Black Friday period all the way back to November 1, we expect it should be a relatively tough season for TV sales unless TV panel prices continue to drop precipitously for the remainder of the year.  This will create some less expensive inventory, but transportation costs, component shortages, and overall weaker demand will have to see a spark in consumer interest in the TV space if the season is to be salvaged.  Samsung says it expects to ship 1.8m Mini-LED/QD sets this year.

​Much has been said about the ever increasing size of TV sets over the last few years and our recent note (9/1/21) gave some indication as to the variations in available screen size data.  That said, India, as an emerging TV market, has a few characteristics that set it apart from the global data that is focused on the ‘premium’ TV market that includes both large size TVs and what are considered specialty TV products, although what is included in that designation also varies considerably by source.  What does standout however is the difference between both India’s average panel sizes and set pricing and more mature TV markets.  The most popular size TV in the Indian market is 32”, with a 59% share, which compares to ~20.9% in the global TV set market according to Digitimes Research, based in Taiwan.  Pricing in India for 32” TVs runs from $135 to ~$272, while in the US you can grab a Toshiba (6502.JP) 32” Fire TV for the same $135, 32” TVs in the US can run as high as $529 for Samsung’s fancy ‘The Frame’, which becomes a ‘work of art’ when not in use.
Again, due to differences in size categories it is difficult to make direct comparisons as to other TV sizes in India relative to the global markets, one that we can make is the 55” to 65” TV size category.  While this is not part of the ‘ultra-size’ category that goes up to 88+”, it does represent the upper end of consumer demand in India, which represents ~8% of the Indian TV market, while on a global basis that category represents ~21.3% of the market.  The Indian government has a strong interest in developing the TV supply chain, and while it has done so to a degree in terms of TV set assembly, with ~65% of sets sold in India assembled locally, but most of the components, particularly TV panels, are produced outside of the country and India has yet to have been able to attract a panel producer to actually produce panels in country.
As the technology to produce TV panels does not exist in the country, the supposition is that India will need a ‘technology transfer’ from an existing panel producer to initiate a panel production fab on its own.  Normally this would likely entail a complex set of parameters and negotiations with a panel producer and its government, as much LCD technology would fall under the protection of government mandates to protect state technology, but as India seems to still be in the ‘small TV’ era, the sophistication level of that technology have been suggested to be less of an issue than might be the case for 65+” panel production.
In reality, we expect despite the demand for smaller TV panel sizes, it would be unusual for a new fab to be built that would be less than Gen 8, which would not only be an efficient fab for the production of 32” TV panels, but would also be efficient for panel production up to 55”, and that might make negotiations for the technology a bit more complex.  With the biggest producers of 32” TV panels being LG Display (LPL), BOE (200725.CH), and Chinastar (pvt), it would seem rather than negotiating to ‘lease’ the technology to build a state-owned LCD fab in India, it might serve the Indian government better to offer incentives to panel producers themselves, although this has been tried before. 
What is rally missing however is the full infrastructure needed to support a panel production facility, which would include a myriad of other facilities that supply the materials necessary to localize production and keep transportation costs at a reasonable level.  The Indian government is also not known for its ability to maintain a consistent level of funding or even stable policy, which has hampered negotiations in the past, but even with the tense relations that India has with China currently, one would think that some of the smaller Chinese LCD panel producers would be interested in developing such a fab with the support of the Indian government, even if it was just to produce relatively small TV panel sizes.  That said we doubt even the Chinese, who have an iffy record with IP, are likely still not convinced that such a cooperative agreement could be reached and maintained without losing some important IP in the process.

Over the last few years the CE industry has decided that blue light is bad for you especially when you are trying to go to sleep, and has implemented a number of systems that reduce blue light in displays.  Citing studies (mostly animal based) anti-bluers say the blue light suppresses the production of melatonin, a naturally produced hormone that is involved in a number of circadian rhythm systems in vertebrates including hibernation, blood pressure, and sleep-wake timing.  When released by the pineal gland at night it activates melatonin receptors, starting a cycle called dim-light melatonin onset which continues until the body is exposed to daylight, at which point the resulting proteins are destroyed and receptors are no longer stimulated.  That said, there is little evidence supporting the use of melatonin to induce sleep, with a 2017 study (Matheson E, 2017) indicating that taking Melatonin as a dietary supplement allowed sleep onset 6 minutes earlier but had no effect on total sleep time.
Some studies have indicated that exposure to as little as 2 hours of blue light can slow the natural production of Melatonin and can cause phototoxicity (skin and/or eyes become sensitive to light and can blister) and WebMD, source of much incorrect medical information, states “Blue light exposure might raise your risk for certain cancers”, but exposure to blue light during the day may have the opposite effect.  It’s used to treat seasonal affective disorder (SAD), a form of depression related to the changing of the seasons.  All in there is very little conclusive evidence that blue light (in moderate doses) is harmful, but it can be a rallying cry for CE companies that wish to present a woke face to consumers.
Apple (AAPL) has been a big fan of blue light reduction, having added a feature called ‘Night Shift’ to iOS in 2016 that shifts the display’s color mix toward ‘warm’ when it senses diminished external light.  Android phones picked up a similar feature soon after and almost all smartphones now have a ‘night mode’ that is supposed to help you sleep better.  However, a number of studies have indicated that the color shifting feature has little if any benefit, with an examination of whether Night Shift reduced the adverse effects of nighttime iPad use at the Lighting Research Center at Rensselaer Polytechnic Institute finding that the feature did avoid melatonin suppression more that the default settings, but not enough to make any appreciable difference in sleep quality.
In April a study (Kara M. Duraccio PhD, 2021) at Brigham Young University sampled 167 adults (18 – 24) with iPhones that were randomly assigned one of three conditions – iPhone use during the hour preceding bedtime with Night Shift enabled, the same with Night Shift disabled, and no phone use.  The participants were tested for seven nights with the outcome that there were no significant differences in sleep outcomes across the three conditions.  Further, for those averaging more than 6.8 hours of sleep per night, the ‘no phone’ condition generated the best results, and for those sleeping less than 6.8 hours/night there was no difference under any of the conditions, essentially concluding it is better not to use your phone before you go to bed, but not because of blue light issues.
While we have no documentation to prove our theory, we believe that while blue light might have a minuscule effect on potential sleep conditions, more likely is the mental tension derived from e-mails, texts, checking Instagram, and the host of other obsessive behavior that smartphones and social media has instilled in us.  Rather than drifting off into a night of restful sleep, we are thinking about whether that last post was really ‘about you’ or whether it was just a generally stupid comment.  Remember books?  They don’t generate blue or any other kind of light and a well-chosen one can work better than an Ambien.  “I think it’s good that books still exist, but they do make me sleepy” – Frank Zappa – The Real Frank Zappa Book.

​Micro-LEDs are the wave of the future, at least that is what the display industry is promoting, but from a practical standpoint that wave is still a bit offshore.  A recent report by Taiwan based Trendforce indicates that the annual revenue from the production of micro-LED chips for TVs will see a 250% CAGR between 2021 and 2025, reaching $3.4b 4.5 years from now.  With a number of well-entrenched display companies already producing such displays there are those who believe we are on the cusp of a ‘micro-LED revolution’ that will monopolize the display industry and obviate the need for LCD, OLED, quantum dots, and any other form of display technology.  However, before such a revolution takes place there is an enormous amount of technology and process development that needs to take place, which, when examined even or a cursory level, puts those numbers into a more realistic perspective.
As noted, companies like Samsung (005930.KS), LG Electronics (066570.KS), Sony (SNE), and Chinese brand Konka (200016.CH), all have micro-LED ‘product’, along with a few smaller one-off producers, but in most cases that product is sold B2B, with a secondary focus on a ‘;residential’ type product.  The cost for these products is staggering for a number of reasons, the least of which is the number of LEDs that are needed in such retail products, which ranges from 24.89m micro-LEDs for a 4K TV display to 99.53m for an 8K TV display.  As these chips are usually smaller than 100um they are considerably harder to produce and manipulate than typical backlight LEDs and can be as small as red blood cells. 
This presents a number of challenges to those looking to develop realistically priced micro-LED consumer products, especially as there is a necessity for zero defects in such products, quite a challenge when working with that many LEDs and at such small sizes.  Transfer technology is certainly a question, as moving such vast numbers of such small devices falls outside of typical pick and place technology, with a number of transfer processes being researched to bring transfer times to cost effective levels.  But even if that technology is developed and standardized, the inherent defect level, even in the best of micro-LED production and transfer systems would be unacceptable[1].   Each of those defective micro-LEDs would need to be removed and replaced, adding to the time to produce and the cost of such displays.
But that is some of the easy stuff that is already being worked on by both producers and equipment suppliers, while micro-LED producers are trying to find ways to manufacture such small LEDs with uniformity to wavelength (color) and luminance (brightness), which are essential to a retail product.  Having variations in such metrics would make such displays unusable, but that belies a bigger question as to how those metrics are measured as typical equipment used for measuring same does not scale down to the micro-LED level.  That means testing equipment would have to be designed to measure (non-destructively) every micro-LED on a display and some way to compensate for the inevitable variations that would occur must also be designed.
Even the mounting of such small LEDs becomes an issue as typical PCBs do not have the capability for such small connecting points and connection lines.  Even with mini-LEDs, micro-LEDs larger cousins, PCBs are being replaced by processes that deposit the LEDs on a metalized glass substrate, again with new equipment and challenges for mass production.  There are many other issues that face the production and commercialization of micro-LEDs and while we expect the display industry will eventually solve or find workarounds for most or all of such challenges, we find headlines that feature huge CAGRs for Micro-LEDs a bit self-serving.  They probably do help to sell such expensive research reports but they do little to help lay investors to understand the complexities of creating a viable supply chain that can produce Micro-LED products profitably and add to the confusion that some have as to the longevity of existing display modalities.  


[1] For a 4K device with a five 9’s yield, there would be 249 defective micro-LEDs on average.  That would increase to 996 in an 8K display

Samsung is the major competitor to Sony’s dominance of the image sensor market.  Even after losing business from Huawei (pvt) due to the US trade ban last year, Sony still had a share just a bit less than double that of Samsung, the number 2 contender in the almost $21b image sensor market, but Samsung continues to push product limits and has been gaining ground over the last two years with an aggressive new product schedule.  In August 2019 Samsung released the first image sensor (IOSCELL™) with over 100m pixels which has been used in over 35 smartphone models by Samsung itself, Xiaomi (1810.HK), RealMe (pvt), Motorola (MSI), Honor (pvt), Infinix (688036.CH), and Vivo (pvt), and while since then Sony and others have released CIS sensors with higher pixel counts (Sony – 127MP), Samsung has just announced another step up in the image senor wars.
Samsung announced today the ISOCELL HP1, a 200MP image senor and the ISOCELL GN5, a 50MP version with high speed auto-focus.  The new sensors use a process that Samsung calls Chameleon Cell, which senses the lighting environment and can combine between 4 and 16 adjacent pixels to gather more light in low light environments.  If light is sufficient, all 200 0.64um pixels are used individually.  The sensor is 1” x 1.22” slightly smaller than the 1” x 1.33” 108MP ISOCELL HM3 and can shoot 8K video at 30 frames/second and 4K video at 120 fps. 
We would expect the next Galaxy S series, due out in January 2022 to be among those sporting the new sensor, which will undoubtedly be followed by high pixel count versions from Sony and others, but it seems that Samsung has pushed the image sensor boundaries a bit faster than others and continues to set the pace.  While pushing higher quality image sensors into the smartphone market is certainly a plus for consumers, we still try to grasp at what point such features reach a point of diminishing returns.  Hopefully there are enough consumers who would be able to tell the difference between images taken with such high pixel count sensors and would count such as a reason to pick smartphone models with same, but the size of that consumer base seems to get smaller with each iteration as we expect most look at their smartphone cameras as utilitarian devices that can capture selfies, food pics, cat videos, and dogs with Frisbees when called on and are less concerned recapturing Ansel Adam’s-like images for coffee table books.

We have mentioned that some of China’s stock exchanges encourage and allow discourse between listed companies and shareholders or potential investors.  In most cases these are relatively simple exchanges concerning details such as current shareholder counts or clarification on public or private share offerings, but occasionally they get a bit more specific and almost combative.  Not all companies actively participate in the program, but to get an idea of the interplay in such Q&A sessions, we pull out two such conversations posted earlier today between an individual and the management of Visionox (002387.CH), an OLED panel producer in China (note:  This is a translated exchange so wording might look a bit strange).
Q            The company believes that the current stock price does not fully and reasonably reflect the company’s value.  First, it will do a good job in production and operation. However, the performance loss in the interim report is serious.  Second, it will strengthen communication with the capital market.  However, the additional approval documents have not been implemented in the past year.  What are measures to boost the current stock price?
A             Thank you for your attention. In addition to what you mentioned, there are also significant increases in product revenue and improvement in gross profit at the operating level. There are continuous introductions from customers, the supply of products from Honor, ZTE, moto, OPPO, Fitbit, and the recent support of the Hefei production line. The mass production and delivery of brand customers include the conversion of new technological innovations such as under-screen camera and high refresh rate, the layout of the medium-sized direction, the establishment of the new display technology Micro LED pilot line and the first flow of wearable samples. The piece lights up. Industrial development will not be accomplished overnight, and any measures will not take place in a day. Please pay more attention and support. Also welcome to call the investor hotline 010-58850501 for more exchanges. Thanks!
Q            Visionox shipped 14 million pieces in the first half of the year, and the utilization rate of the Gu’an production line was only 50%.  Is this because of poor product competitiveness?  Still no shortage of orders?  Can the product market development space support the production capacity of the production line?  What is the significance of increasing investment to expand production capacity?
A             Thank you for your attention. According to data from third-party organizations, in the current mainstream application areas, smartphones and smart wearables, OLED penetration rates are steadily increasing; in medium-sized laptops, tablets, and vehicles, applications are gradually expanding. Among them, institutions It is predicted that in the field of laptops and tablets, OLED shipments this year are expected to exceed 10 million units for the first time. The downstream application market of OLED has broad prospects, and the penetration rate in various fields continues to increase. At the same time, the company is actively deploying in the aforementioned directions as it continues to expand new application fields. At present, smart phones and wearable products have been widely delivered to first-line brand customers. Since the beginning of this year, the smart phone field has successively delivered Honor V40 and 50 series of flexible products, exclusively for ZTE's new generation of under-screen cameras, and Red Magic 165Hz ultra-high refresh rate screens. , Moto and other related mobile phone AMOLED screens. In the field of smart wear, we have supplied OPPO watch 2, Mi Band 6, Fitbit Charge 5 and other products. Thanks!
The reason why the ‘investor’ is a bit aggressive in trying to get answers from Visionox management is that the Visionox stock chart looks like this:

While the chart of BOE (200725.CH) China’s leading panel producer looks like this:

​While we would love to see such a system instituted for US companies, other than on social media, we expect it would not be easy for the SEC to monitor and likely a nightmare for company legal departments.  It is interesting to see how companies respond to a range of questions, with some responses helpful for clarification and others a bit more toward the hostile side.  Given the relative politeness of even the tough questions in China, we expect such a system in the US would perhaps be less polite when tough questions are asked, but it would certainly be nice to ask questions on a public forum at any time and receive a timely answer, rather than having to wait for a quarterly call.  We can dream can’t we?

​Samsung Electronics (005930.KS) has made a lot of noise recently with the release of its newest foldable smartphones the Galaxy Z Fold and the Galaxy Z Flip, but while the press is certainly beneficial for the company, foldable devices are only a small part of Samsung’s mobile business which has been under considerable pressure this year.  In fact, as we noted recently (see our note 08/05/21) that the mobile division’s performance was under a detailed review that would likely lead to either a structural change or a management upheaval as Samsung’s Vice-Chairman resumes his leadership responsibilities.  With weakness across the smartphone market, Samsung has had to reduce its expectations for smartphone shipments from an optimistic 290m to 300m units to a more conservative 260m.
In order for Samsung to meet its revised shipment expectations, the company will begin production of the Galaxy S21 FE smartphone this month for release in the next few weeks, which puts it about four months later than originally expected.  Shortages of components, particularly application processors, has held back production for the S21 FE and has also affected shipments of the company’s A series smartphones, which are the company’s most popular phones.  Samsung has originally expected to ship ~15m S21 Fes but has lowered those expectations to between 10m and 12m this year.  Samsung will begin production of the 2022 flagship Galaxy S22 line in November, but shipments will not begin until January of next year.
Now that 5G smartphones have become commonplace and carry little or no premium pricing, the smartphone business returns to ‘feature’ competition although the trend of adding additional cameras to such devices seems to have played itself out.  There are some features that brands hope will set them apart in 2022, such as under-display cameras, but there are few new technology features that can be applied to typical smartphones that will make them suddenly more attractive next year.  Foldables are certainly the most attractive new segment, but Samsung’s goal of selling ~7m of the Z Fold/Flip 3 series is admirable but represents only 2.7% of Samsung’s revised shipment goal, meaning that while 2021 might be called the year of the foldables, in a global market of ~1.3b units foldables don’t move the needle.  Without the high volume workhorse smartphones like the S21 FE (Galaxy S20 FE sells for ~$700), or the Galaxy A series, which range in price from $425 down to $110, selling well, Samsung’s mobile division is going to struggle again next year, and while we expect component shortages to ease in 2022, any release delays will only make matters worse.