Asia Pacific Equity Research 20 August 2018
Foldable Smartphones Deep dive into impact on major smartphone brands and supply chains; a game changer in the long term
Demand for foldable smartphones is being driven by consumers’ desire for large- Technology - Semiconductors screen devices with increasing multi-media function which overcome the present AC JJ Park physical limitations of hand-carry devices. On the supply side, smartphone makers (82-2) 758-5717 need new form-factor and innovative products to accelerate the replacement cycle [email protected] and boost overall ASP given several years of lackluster smartphone demand. We Bloomberg JPMA PARK
www.jpmorganmarkets.com JJ Park Asia Pacific Equity Research (82-2) 758-5717 20 August 2018 [email protected]
Table of Contents Foldable smartphones: Introduction ...... 3 Foldable smartphones: Implications ...... 4 Barriers in the product roadmap...... 10 Supply-chain analysis...... 11 Implication for overall smartphone space...... 18 Conclusion...... 19 Appendix: launch strategy of major players...... 22
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Foldable smartphones: Introduction
Win-Win strategy Foldable smartphones have long been under development by major players like Samsung, LG, Huawei, Apple and even PC players like Microsoft as a means of overcoming the physical limitations of hand-carry devices like smartphones as consumers desire large-screen devices for increasing use of multi-media functions. Numerous patents outlining the product specifications and operating style have been already filed, but a scalable outcome that leverages the capabilities of a foldable display successfully has yet to be seen in the market.
From smartphone makers’ standpoint, the lack of new-form factors and innovative products continues to lengthen the replacement cycle in smartphone industry. Hence, the set makers need foldable smartphones to accelerate the replacement cycle and help boost overall ASP.
Samsung was the first to come out when it showed off a prototype for a smartphone with a flexible AMOLED display at CES 2011. SEC showcased a prototype of 3 integrated screens (2 folding inwards, 1 external) back in CES 2013, but again commercialization has remained distant for an extended timeframe.
The tentative concept regarding the final product has been similar for all prototypes so far, with the idea being to merge the functionalities of a phone and tablet without sacrificing the portability and ease of handling of a smartphone. This can only be achieved when a large continuous display (7”-9”) is folded compactly into typical smartphone dimensions of (4”-6”)
As far as physical attributes are concerned, the flexible displays embedded in foldable smartphones need to have the best specs in terms of thickness, weight, ability to absorb higher/frequent impacts, resistance to scratches etc. However, the key feature that such phones must have is the ability to retain form even after undergoing multiple folds (to the tune of a million).
We expect that foldable smartphones will launch in the consumer market in 1H19 but will be slow to pick up in terms of scale in the initial years post launch (i.e.2019-20), However we expect them to gain share rapidly amongst the overall flexible display market. We forecast foldable smartphone to account for ~5% and ~17% of total smartphone shipments and revenue, respectively, by 2022. Apple, Samsung and four major Chinese brands are likely to account for the major portion of total foldable smartphone shipments.
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Foldable smartphones: Implications
We build our foldable smartphone model based on a bottom-up approach. Given high price points, patent issues surrounding foldable technology, and complicated user interface, foldable smartphone supply will be mainly driven by major brands. Hence, we expect Apple, Samsung and 4 major Chinese brands to account for the major portion of total foldable smartphone shipment throughout our forecasting period.
Table 1: Foldable smartphone shipments Units in millions 2017 2018E 2019E 2020E 2021E 2022E Smartphone shipment 1,444 1,474 1,513 1,531 1,562 1,585 Foldable shipment 2 10 37 73 Penetration (%) 0.1% 0.7% 2.4% 4.6% Apple - - 16 28 Samsung 1 6 11 23 China 0.5 3 7 17 Others 0.5 2 3 5 Source: J.P. Morgan estimates.
Our model predicts a low-to-mid single digit % penetration for the foldable Foldable display type smartphones by 2022, led by model launches in the premium segments by Samsung Foldable display panel and Apple. Our assumptions include:
Display Substrate For Samsung, foldable shipments are expected to be around 1 million units for the first year and form 8-15% of high-end flagship models (S and Note series) by 2021. However this portion should significantly rise to ~30% of total high-end flagship models in 2022. For Apple, we expect foldable smartphone will only be introduced in the 2021 model series and could contribute to 20%/35% of the new model launches in 2021/22, which implies shipments of 16/28mn units respectively.
In-fold Amongst others we expect only 2 major players (LGE and Huawei) to contribute to the foldable smartphone space in 2019. However, into 2020, we see other players like Xiaomi, Oppo and Vivo also joining the league. We expect to see a material contribution of 17M units from this side going into 2022. We have assumed Apple will introduce foldable smartphones in 2021 because we believe it will adopt OLED screens for all new models in 2020, and it would be unlikely for the company to make two display technology changes in one year.
Out-fold Additionally, in 2019 SEC’s foldable phone is expected to adopt ‘in-fold’ (i.e. screen located inside) due mainly to CPI’s hardness issue. Unlike glass, CPI film is vulnerable to scratches and the panel becomes foggy when it gets scratched. However, we think it should eventually move to ‘out-fold’ and then ‘S-fold’ as it is more intuitive, allows phone to be used while folded, and have comparable display panel size to a tablet when it is unfolded. Hence, we believe SEC will adopt out-fold in the following generation, although there remain a few technology hurdles for S- fold.
Based on our understanding of Apple product strategy, it does not introduce test S-fold models so we think it will wait for ‘out-fold’ or ‘S-fold’ technology to become ready and require higher customization for its product. Source: J.P. Morgan.
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Due to early launches Chinese players and LGE, we expect they will account for ~45% of total foldable shipments in 2019/20. But once Apple also joins the foldable race, their contribution is expected to come down to ~30%.
Figure 1: Foldable smartphone shipments and breakdown Unit in millions, % 80.0 4.6% 5.0% 70.0 4.0% 60.0 17 50.0 2.4% 3.0% 40.0 23 30.0 7 2.0% 20.0 0.7% 11 28 1.0% 10.0 0.1% 3 16 - 1 6 0.0% 2019E 2020E 2021E 2022E Apple Samsung China Others Penetration (%)
Source: J.P. Morgan estimates.
Foldable smartphone pricing and revenue contribution While analyzing a revenue contribution trend, we model a steep increase over our forecast horizon, from a mere ~1% to ~17% revenue contribution in 2022. Although the rise in shipment contribution to overall smartphones seems relatively modest, the revenue contribution is much steeper, owing to a significantly higher ASP for foldable smartphones.
Table 2: Foldable smartphone revenue US$ in billions 2017 2018E 2019E 2020E 2021E 2022E Smartphone revenue 377 402 423 439 484 487 Foldable revenue 3.2 16.0 52.4 80.3 % of total revenue 0.7% 3.6% 10.8% 16.6% Apple - - 25.0 34.0 Samsung 1.7 9.4 15.8 25.1 China 0.8 3.8 8.2 16.8 Others 0.7 2.8 3.4 4.5 Source: J.P. Morgan estimates.
Figure 2: Foldable smartphone revenues and overall contribution US$ in billions, % 90.0 16.6% 18% 80.0 16% 70.0 14% 10.8% 17 60.0 12% 50.0 10% 8 25 40.0 8% 30.0 3.6% 16 6% 20.0 4% 0.7% 34 10.0 4 25 2% 9 0.0 21 0% 2019E 2020E 2021E 2022E Apple Samsung China Others % of total revenue
Source: J.P. Morgan estimates.
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Foldable smartphone ASP premium While modelling the ASP for individual brands amidst limited availability of data- points, we assumed that the flagship foldable phones from Apple will be at a 10% price premium to Samsung's foldable smartphones while we assume a 10% discount to Samsung's ASP for the pricing of Chinese foldable smartphones.
Figure 3: Foldable smartphone ASP trends benchmarked to premium iPhone USD, % 1,800 60% 49% 52% 1,600 50% 1,400 37% 1,200 40% 1,000 30% 800 1,577 1,593 1,415 18% 600 20% 1,056 1,051 1,035 1,102 400 932 10% 200 - 0% 2019E 2020E 2021E 2022E Foldable ASP iPhone X' Premium
Source: J.P. Morgan estimates.
The ASP for foldable smartphones should come down as the technology matures and economies of scale start kicking in. For an apples-to-apples comparison we have benchmarked the foldable smartphone ASP to Apple's premium model iPhone X and assumed a flattish ASP trend going forth. We note a ~50% ASP premium over our forecast horizon, which comes down to ~20% from 2022 onwards due to the aforementioned reasons.
We estimate a slightly steeper ASP decline for the non-foldable premium iPhone X model supported by the logic that once the flagship series focus shifts to foldable smartphones, we see a limited scope for spec-upgrade among non-foldable smartphones. Hence the ASP for the non-foldable premium segment should start witnessing a high-single-digit % decline. This would also be required to prevent any cannibalization of sales from foldable smartphones towards non-foldable versions.
BOM cost analysis and pricing strategy We have estimated the BOM cost of the next Galaxy-series “Plus” model (“GS10 Plus”) and SEC’s foldable smartphone (“Galaxy Foldable”) based on the latest high- end smartphones using flexible OLED panels. The GS10 Plus total BOM is estimated to be US$397 vs. US$375 for GS9 Plus. The incremental increase mainly comes from adoption of FOD (Finger-On-Display; in-display fingerprint) solution and triple-cam at the back and dual-cam at the front.
For foldable models, we estimate total BOM cost to be c.US$560 and the major cost increase stems from components related to display (panel, PCB, casing and hinge), battery (cell, power management IC) and memory (assuming 8GB DRAM /128GB+ NAND contents). Given the high premium, we estimate GPM of 65% (vs. ~60% level for flexible OLED) which results in a retail selling price of ~US$1,600.
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Table 3: BOM comparison table between SEC's foldable smartphone vs. latest high-end smartphone US$, % Previous model cost $ Next model cost $ Cost difference $ GS9 Plus iPhone X GS10 Plus Galaxy Foldable GS9 Plus iPhone X GS10 Plus Display + Touch 79 110 87 136 57 26 49 Mobile AP 67 28 67 84 17 56 17 Memory 56 34 56 90 34 56 34 DRAM 34 11 34 45 11 34 11 NAND 22 22 22 45 22 22 22 Modules 45 62 55 65 20 3 10 Camera 45 35 55 65 20 30 10 3D sensing - 20 - - - (20) - BT/WLAN 7 - - - (7) - Battery 5 6 5 10 5 4 5 Electro-Mechanical Contents 107 124 109 150 43 26 41 Power Management IC 9 14 9 13 4 (1) 4 RF/PA Content 19 35 19 23 4 (12) 4 Sensors + User Interface ICs 6 12 7 10 5 (2) 3 Casing/Cover glass (or film) 30 53 30 42 13 (10) 13 PCB/Others 44 10 44 62 17 52 17 Box contents 16 12 18 25 10 13 7 Sum total 375 375 397 560 185 184 163 Retail price 880 999 950 1,599 GPM (%) 58% 62% 59% 65% Source: IHS, J.P. Morgan estimates.
Pricing strategy – strategic decision of product positioning vs. NB/tablet Pricing strategy should be also considered from the product positioning within set makers’ product portfolio. The foldable smartphone’s larger display size and features/functions effectively makes it comparable to tablet and 2-in-1 laptops. In terms of spec, the main difference between foldable smartphone vs. 2-in-1NB/tablet would be smaller screen and less powerful computing power.
However, the smartphone compensates for this with portability and cellular function. Net-net, we think it is unlikely for foldable smartphones to be launched with price points above US$1,800 even considering the price premium for folding feature. Hence, we believe the price “ceiling” for foldable smartphones will be formed around the US$1,800 level.
Table 4: Price comparison against 2-in-1 laptops and Tablets US$ Product Price Spec 2-in-1 laptops Microsoft - Surface pro 1,600 8GB/256GB, 12.3" display, i7 processor, 8MPx/5MPx cameras Microsoft - Surface pro 1,300 8GB/256GB, 12.3" display, i5 processor, 8MPx/5MPx cameras Lenovo – Yoga 920 1,300 8GB/256GB, 13.9" display, i7 processor Samsung – Galaxy Book 1,150 4GB/128GB, 12" display, i5 processor, 13MPx/5MPx cameras
Tablet Lenovo - ThinkPad X1 1,800 8GB/256GB, 12" display, i7 processor, 8MPx/2MPx cameras Apple - iPad Pro (+ cellular) 1,300 4GB/512GB, 12.9" display, A10x fusion processor, 12MPx/7MPx cameras Samsung - Galaxy tab 700 4GB/128GB, 9.7" display, Snapdragon 829, 13MPx/5MPx cameras Source: Bestbuy.com
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Implications from smartphone and 3G/4G relationship 5G roll-out could spark the foldable phone penetration When smartphones were first introduced back in the early-2000s, 3G network service infrastructure was very limited globally. As 3G network gradually rolled out smartphone penetration picked up rapidly, which in turn increased 3G network penetration pace, creating a virtuous cycle.
With faster mobile internet access especially with 4G (LTE) technology launched from 2011, more content/data was consumed by smartphone users, and this drove demand for larger screen sizes.
Once average mobile display panel size reached 4.5"+ with meaningful 4G adoption increase from 2015, monthly mobile data traffic grew exponentially as streaming multimedia content (music, video, game, etc.) become a key function of the smartphone. Lately, video streaming is growing rapidly and the demand for bigger mobile display will likely continue.
Given the improvements that 5G offers in 1) peak/average download and upload speeds, 2) network response times (Latency), and 3) mobility - the ability to access the network even when moving at high speeds, it will be the next catalyst to spur data consumption (i.e. multimedia streaming) demand.
As this trend continues, we think foldable smartphone will likely become an attractive option once 5G network roll-out begins.
Figure 4: Global mobile adoption by technology Figure 5: 3G/4G & Smartphone adoption vs. mobile display panel Penetration (%) Penetration (%), Size in inches 100% 80% 5.5 70% 5.0 80% 60% 4.5 50% 60% 4.0 40% 3.5 40% 30% 20% 3.0 20% 10% 2.5 0% 0% 2.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018E 2008 2010 2012 2014 2016 2018E 2G 3G 4G 3G/4G Smartphone Avg. mobile display size [RHS]
Source: GSMA, Gartner. Source: GSMA, IHS, IDC, J.P. Morgan estimates.
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Figure 6: 3G/LTE penetration vs. Monthly mobile data traffic Figure 7: Monthly mobile data traffic vs. Avg. mobile display panel Penetration (%), Monthly data traffic (GB/month) Mobile data (GB/month), Size in inches 70% 12.0 5.5 12.0 60% 10.0 5.0 10.0 50% 4.5 8.0 8.0 40% 4.0 6.0 6.0 30% 3.5 4.0 4.0 20% 3.0 10% 2.0 2.5 2.0 0% - 2.0 - 2008 2010 2012 2014 2016 2018E 2008 2010 2012 2014 2016 2018E 3G/LTE Penetration Monthly data traffic [RHS] Avg. size of mobile display Monthly data traffic [RHS]
Source: GSMA, Gartner, Cisco. Source: Gartner, Gartner, Cisco, IHS, J.P. Morgan estimates.
Meaningful 5G adoption will kick in post 2020 According to our Asia Telco team (link), material 5G capex spend is unlikely until 5G spectrum is assigned/auctioned. China, Korea and Japan Telcos are likely to be assigned/auction 5G spectrum in 2018 or early 2019. China Telcos aim for a commercial launch in late 2019 or 2020.
For the US market, standardized technology (5G New Radio) will become available in 2019, and according to telco management teams at our latest TMC conference (link), they expect early 5G handsets in 2019 as 5G “iconic” Android devices in late 2019, and “iconic” iOS phones in late 2020, as well as critical mass among 5G capable handsets around 2022-2024.
As such, 5G network services are expected to become ready in US and leading Asian countries from early 2020 at the latest and this likely be the tipping point when foldable smartphone penetration accelerates meaningfully, in our view. Of note, this is in-line with our bottom-up approach based on our research into smartphone brands’ product strategy.
Figure 8: Asian Telcos 5G Spectrum Auction Timeline
Source: J.P. Morgan estimates.
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Barriers in the product roadmap
The biggest hurdle remains the ability of the screen to bend completely (inwards/outwards) multiple times, while retaining its original physical form and optical properties. Moreover, the embedded panels and electrodes should also be damage-resistant while bending, so that the integrity of display can be sustained over the life of the phone.
Since most smartphone screens consist of several superseding layers of glass/polymer to support the features built-in for their interface, such physical constraints imply that there is a trade-off between the functionality of the screen and its physical resilience to bending.
AMOLED panel itself can be folded easily, but the module (including panel, polarizer, touch sensor, and cover lens) cannot be easily folded due to its low flexibility. Durability of such phones is another concern. With external displays and moving parts like hinges, the foldable smartphones would be subject to extra vulnerability.
Maturity of key technologies remains a concern The thickness trend of AMOLED panels includes individual thickness form constituents like cover lens, OCA, polarizer, encapsulation, substrate, touch sensor and protection film.
The reduction in panel thickness has been gradually worked upon and total thickness has been reduced to 0.85mm (in case of Y-OCTA) but still the target thickness for foldable panel module remains distant at ~0.55mm. Cover-lenses are being gradually replaced with ultra-thin glass (or colorless polyimide) and touch sensors on thin-film encapsulation have replaced film add-on touch. Reducing the thickness of the polarizer while retaining its optical properties remains a major hurdle, for which panel-makers plan to use innovative techniques like coating polarizer.
Successful implementation of all this requires a certain level of maturity in the underlying technology to ensure that the yields for foldable displays will be stable for high unit volume. This maturity in the display technology is so far lacking and current alternatives to polarizers have been unable to match-up with the requirements. Other concerns include: Colorless polyimide which is used for higher flexibility has lower transparency than glass. Moreover, to make it scratch resistant, the manufacturer has to use a coating that reduces flexibility. Ultra-thin glass, which is used to replace cover glass, is very fragile and allows for limited radius of bending before it begins to crack. Embedded display elements like display electrodes and Touch sensors on thin film encapsulation will also need to be resilient to multiple folding.
Battery/Motherboard concerns Another important concern arises due to the lack of foldable smartphone batteries. Given a higher display screen area combined with high-resolution density would need higher battery back-up, it is imperative to develop foldable battery solutions that fit the new form-factor and design of the phones.
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Another option could be the use of separate battery units. However in order to maintain the slim form-factor of the overall device, they would need to have higher capacity to provide similar back-up in a less voluminous structure.
UI/UX issues – Need of a new operating system Foldable smartphones will also need to be equipped with a supporting UI/UX that is specifically designed to complement the added functionality. A new software/OS, list of add-ons/ specific applications would be needed to support the foldable screen experience and enhance usability. This fresh UI would further increase the cost of development of foldable smartphone.
Economic concerns for the manufacturer Significantly high price-points could provide further hurdles as high BOM cost burden and technology would need to be transferred to the end-consumer, but generating a rich demand at such high price-points, especially in a saturating high- end smartphone market, is an additional problem where the replacement cycles have been getting longer and longer.
Another business-side concern that reduces viability of these solutions is that most of the smartphone makers, such as Apple, SEC, Huawei and Lenovo, have a rich portfolio of tablets as well. Manufacturing a device capable of handling both the functions of smartphones and tablets threatens to cannibalize the market of the latter, which means an economic opportunity loss for the manufacturer.
Supply-chain analysis
Sub-sector implication summary The success of foldable phone represents the revitalization of premium smartphone demand in the long-term. Having said that, there appear multiple components with positive content implications for both value and volume – display panel, transparent cover film, substrate/boards, and potentially casing (longer machine hours and larger surface area).
There are also components with positive volume content implications (more usage within phones) – touch film, batteries, passive components, and others. Although limited volume impact, we generally expect a stronger computing power to fuel larger screen devices. On the other hand, we see limited implications from foldable for module products such as cameras, wireless charging and others. Lastly, we point out that cover glass is a potentially a losing sector given form-factor changes to film.
As such, CPI is most preferred followed by green highlighted sub-sectors (Panel, Substrate / Boards, Electronic Mechanics, Casing and Battery) while cover glass is the least preferred as summarized below in Table 5.
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Table 5: Foldable smartphone implication by sub-sector
Sub-sector Value Volume Company Panel (+) (+) SEC (SDC), LGD, BOE CPI (+) (+) Kolon Industries, SKC, Sumitomo Chemical, Mitsubishi Gas Chem, Nitto Denko Cover Glass (-) (-) Corning Polarizer (=) (+) Nitto Denko, Sumitomo Chemical (Dongwoo), SDI, LG Chem Touch (=) (+) Nissha, Alps, Broadcom, Sumitomo Chemical Substrate / Boards (+) (+) SEMCO, BH, Young Poong, Ibiden, Unimicron, Compeq, AT&S, NOK, ZD Tech, Flexium Electronic Mechanics (+) (+) Foxconn, KH Vatec Casing (+) (+) SEC, Foxconn, Catcher Battery (=) (+) SDI, LG Chem, TDK (ATL), Murata Semiconductor (=) (+) SEC, SK hynix, Micron, Toshiba, WDC, Qualcomm, Intel, Texas Instrument, Mediatek, STMicro, Maxim, Skyworks, Qorvo Passive (=) (+) Murata, SEMCO, Taiyo Yuden, TDK Camera (=) (=) SEMCO, Partron, MCNEX, Power Logics, LGIT, Sharp, Shenzhen O-film, Largan, Sunny Optical, Kantatsu, AAC Source: J.P. Morgan.
Display Panel (positive to value and volume contents growth) We believe technology entry-barriers are much higher at foldable display (based on OLED screen) vs. curved flexible OLED or flat plastic OLED. Hence, Samsung with its high level of technological expertise and rich production experience fairs better than followers (LGD, BOE, and others). Besides, there are few brands who can offer to justify a premium to end-users. Therefore, existing customer relationship matters also a lot. We view Samsung as being in superior position given existing strong references with premium brands (e.g. SEC Mobile division, Apple, and top Chinese brands).
Among multiple followers, LGD and BOE are close to foldable display commercialization. But both companies lack curved flexible OLED production on a large scale. Hence, we expect time to market will be a couple of years slower than that Samsung Display.
Cover glass/material/film (mixed contents implication by product) For cover plastic film (to be used for folded screens), we note five major players in the market – Kolon Industries (Not Covered), SKC (Not Covered), Sumitomo Chemical (N covered by Shogo Umeda), Nitto Denko (N covered by Masashi Itaya) and Mitsubishi Gas Chem (Not Covered). This film is often called as CPI (Colorless Polyimide) film or transparent film. Having i) chemical compounding recipe good enough for hundreds of thousands folding test, ii) output being comparable to glass on the hardness, iii) coating capability (internal or external) are the key criteria for the success in this sector.
We have confirmed with the supply chain that folding tests have been mostly met by three major makers (Kolon Industries, SKC and Sumitomo Chemical) with little difference. However, on hardness and coating additional development is required so that not all five players will win initial orders in 2019. In our view, Kolon Industries and Sumitomo Chemical are couple steps ahead of SKC, but the gap is not too wide, while Mitsubishi Gas Chem and Nitto are still at the early stage of development. Between Kolon and Sumitomo, Sumitomo was ahead of Kolon at lab/pilot production stage, but Kolon prepared for mass production earlier while Sumitomo
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does not have mass production capacity yet. As of 1H18-end, Kolon Industries holds 1 million square meter per year capacity, which is equivalent to 20 million 7” screen.
As panels become foldable from flexible (curved) OLED, protect film changes from PET film to PI film because PET film cracks after folding it few times. SKCKOLONPI (Not Covered) has been selected as production partner for the SEC's first foldable smartphone that will be introduced in 1H19, but we expect other PI players such as Kaneka (Not Covered), Toray Dupont and Ube (Not Covered) could also join in long-term once meaningful production volume begins.
Figure 9: OLED structure by type
Source: SKCKOLONPI.
On the other hand, we notice that Corning (N, covered by Samik Chatterjee) could face challenges on the content in the long term. Its Gorilla Glass (cover glass brand name) solutions likely be replaced by CPI/Transparent film and we expect Corning to lose M/S at premium smartphones (vs. used to maintain sole vendor position in last 7-8 years at premium mobile brands). There is a talk that Co is developing bended glass solutions; yet it does not offer material advantage over CPI/Transparent film.
In our discussions with Corning, the firm believes the key features in terms of scratch resistance and durability that made glass the medium of choice for cover glass relative to plastic in the current generation of smartphones are likely to continue to be top drivers of consumer preference and position glass as the preferred solution even in foldable phones. According to the company, CPI (Colorless Polyimide) suffers from disadvantages relative to glass in terms of lower scratch resistance and lower transparency.
While the key features required for foldable displays, in relation to flexibility to fold and retain form and robustness to prevent damage, are in opposition to one another when considered from the perspective of material science, Corning believes a thinner glass relative to Gorilla glass could potentially be the solution for foldable applications. Corning currently is developing a foldable glass, Willow, which is applied to other surfaces in the form of a laminate and provides improved scratch, chemical and damage resistance, as well as color-free transparency.
The current generation of Willow glass is 200 µm thick and Corning is actively working with handset OEMs to develop next generation glass solutions (including next generation Willow), which would be able to service the foldable smartphone
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market. However, a commercial cover glass product for foldable smartphones is likely only in the medium term and Corning believes initial implementation of this form factor might compromise on durability with plastic-based solutions. Additionally, initial launches are likely to be only in small volumes, to primarily gauge customer interest in this new form factor.
Touch/Polarizers (slightly positive volume contents) We do not anticipate material structure changes in touch panels. For flexible OLED products, the current touch panel structure is based on i) Normal type and ii) LC circular type. There is chance Samsung's proprietary solution, Y-OCTA (replacing polarizer film), will be used for the upcoming foldable display project given its benefit as light form-factor. However, this is already happening and we do not conclude the trend is relevant with hardware design changes for foldable devices.
This applies also to the touch IC or finger print solutions. We believe Samsung is working on developing under-glass finger print solutions for the next Galaxy S10 product in 1H19 and foldable screens likely will also adopt this feature to solve physical space problems and enhance cosmetic design uniformity. On the other hand, the touch sensor at Apple, which is an ASIC that is being done by Broadcom, continues to show a healthy design win pipeline. Hence we assume that Broadcom is focused on a solution for Apple around 2021 for its foldable phone.
Table 6: Flexible AMOLED technology trend for smartphones Future 1st Tier 2nd Tier Cover Plastic 3.0D Glass 2.5D Glass Polarizer Coating Thin Thick Touch In-Cell On TFE Add-on Encapsulation ALD TFE Barrier Resolution Ultra HD Quad HD Full HD Pentile PPI Over 600 5XX 4XX Screen Size Over 6.5" Over 5.7" Over 5.0" Screen Ratio Transform 18:09 16:09 Formation Foldable Curved Flat Shape Real Full With Notch Rounded Driver IC Multi-Mux Mux No-Mux Bonding IC SOF COP COF Fingerprint All/FOD Spot/FOD - Source: IHS technology
Current edge-AMOLED technology that involves cover lens, adhesive Polarizer and flexible AMOLED sums-up to a thickness of around ~1mm; however foldable AMOLED would require the cumulative width to be reduced to <0.5mm. As mentioned above foldable would not require several material changes, but changes in thickness could be achieved using the Y-OCTA technology with LC polarizers, which reduce thickness levels to <10 micrometers.
For the existing flexible AMOLED smartphones, the polarizer providers are the following: Samsung Galaxy (Nitto/Dongwoo/SDI), iPhoneX (Dongwoo), LG V30 (Nitto) and BOE/others (Nitto/Dongwoo). Amongst the supply-chain names, LGC might extend the functionality of its in-house produced LC polarizers (for OLED TV solutions), to help achieve the target structure for LC polarizers that help in achieving the desired 10-20micrometer thickness.
For touch sensors, Nissha, Alps and Broadcom are supposedly developing touch sensors for foldable smartphone display. On the other hand, TPK is developing Sliver Nano-wires (SNW) material which the company thinks are the most suitable
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technology to replace ITO when foldable devices start to take off. According to TPK, SNW has higher Transparency and lower line visibility and is more bendable and stretchable. However, we think the company’s hopes for SNW appear unrealistic. If Samsung, as the dominant OLED market leader, does not intend to adopt SNW for its foldable device, it is difficult for us to imagine other smartphone OEMs will do so instead.
Figure 10: Forecasts for foldable smartphone thickness trends
Source: IHS Technology.
Substrate/Boards Focus on slimmer design (positive value/volume contents) We note that substrate (main mother boards and the way it is packaged) and PCBs inside the foldable phone are set to see multiple positive developments: i) larger area (from 5-6" usual screen sizes to 8" +/- level), and ii) slimmer form-factor (using slimmer packaging such as substrate-like-package and multiple rigid-flexible PCBs). This is to cope with hardware form-factor challenges that foldable devices face; all needs to be thin/slim enough to make phone's artistic design better while supporting required performance.
We believe existing supply chain vendors will continue work with OEMs and panel makers. Among Samsung supply chain, SEMCO, BH, and Youngpoong are the primary vendors in each space and SLP/RF-PCB adoption is not high even within premium segment. Hence, we could expect potentially both value and volume growth from this segment.
Given the distant time to market, it is difficult to tell the potential changes for the Apple supply chain. However, given that iPhones already uses the cutting-edge packaging technology, value growth may be limited. We note sizable volume growth once adoption is made to greater scale. Conventional HDI vendors include Ibiden, Unimicron, Compeq, and AT&S. FPC vendors are NOK, ZD Tech, and Flexium. For R/F-PCB vendors, we expect similar names (from Samsung food chain) to appear.
15 JJ Park Asia Pacific Equity Research (82-2) 758-5717 20 August 2018 [email protected]
Electronic Mechanical Parts Hinges to be introduced (positive value/volume contents) Customized solutions for mechanical components like hinges using specialized material would be required for enabling foldability in displays. Although several patents regarding foldable displays have come up recently, new solutions for assembly materials to support the display have yet to be developed. This results in bulky designs (like big hinges on the ZTE Axon M).
We believe that since assembly materials form an ancillary part of the smartphone, they would be externally developed and outsourced to 3rd party vendors to remain cost efficient. In such cases, EMS players like Foxconn would also emerge as key players because they have the capability to make heavy investments in the set assembly application. Specifically for Samsung supply chain, KH Vatec (Not Covered) could be a production partner given its recent announcement to have developed the hinge for foldable devices.
Casing Larger and potentially superior cosmetic design (positive value/volume contents) One of the key requirements for foldable device will be i) light form-factor, and ii) heat free material. In order to meet this, we view using aluminum as the most effective option. However, whether the casing design is based on uni-body or hybrid depends on the manufacturing yield challenges. The prototypes and patent-filings of foldable devices at present point to dual-housing/dual-casing (front and back), which could be a strong tailwind to the casing vendors.
Besides, adding hinges (located at the edge of the connecting bar to connect the screen) should be considered with the casing design. This needs to show a sophisticated cosmetic design; therefore new materials could be experimented with and introduced, in our view.
Samsung used to control casing in-house and recently started outsourcing mid/low- end series to external vendors. However, given the importance of the foldable device launch, we believe it will be 100% internally produced at the beginning, later gradually being outsourced to supply partners. Hinges are currently under discussion to be developed by SMID casing partners and we believe Samsung internally also has a solution. On Apple side, Foxconn and Catcher traditionally have been two primary partners for iPhone.
Battery Stacked shape essential to support power (positive volume contents) It is uncertain to what extent battery space is available and allocated at foldable. But, it appears evident battery capacity needs to be enlarged to support stronger power performance as a result of bigger screen and related semiconductor performance. We view battery space as highly correlated with the level of substrate/board specs.
There could be also increasing needs of stacked battery form inside the phone to address physical challenges. Stacked batteries carry higher dollar content per same capacities; hence it could be read as a value growth. However, production yield challenge will be quite high that profit generation may be limited at small scale.
16 JJ Park Asia Pacific Equity Research (82-2) 758-5717 20 August 2018 [email protected]
Key consumer electronic battery suppliers are SDI, LG Chem, ATL (under TDK), and Murata at the moment.
Semiconductors Stronger performance needed (slightly positive value contents) Overall semiconductor spec requirement needs to improve for better performance but brands may sacrifice a little bit to deal with increase in bill-of-materials from other notable areas (display and boards). Other than power management IC (possibly the doubling quantity/contents), we note most chipset volume will remain unchanged relative to that of normal smartphones.
There is a chance mDRAM contents may grow, but we note that it is based on the OS optimization with user interface. Generally speaking, we think it will be within the expected range of usual upgrade curve. On the NAND flash side, higher storage unlikely be a substantial differentiation point since foldable devices are aimed at enriching user experience when consuming media content (on cloud computing environment in the midst of 5G network adoption).
Key vendors are SEC, SK hynix, Micron, Toshiba Memory, and WDC in memory space. Notable mobile SoC (System on Chip) and RF suppliers include Qualcomm, Intel, TI, MediaTek, STM, Maxim Integrated, Broadcom, Skyworks, Qorvo, Murata and others.
Passive components Moderate contents per box growth (slightly positive volume contents) We think multiple small-scale electronic mechanical contents (such as MLCC, chip resistors, and others) would generally see a higher volume given size migration in the midst of semiconductor performance upgrade. Murata, SEMCO, and Taiyo Yuden have strong presence in the IT MLCC segment.
Notable contents upgrade will come from increase in multi-SAW filters/Duplexers contents to operate in different range of bandwidth spectrum at 5G enabled networks. However, this is not specific to hardware form-factor changes from the foldable trend. If 5G penetration kicks in earlier-than-expected, it could be potentially positive demand driver to foldable device in the long-term. Key players are Murata and TDK in this space, while Qorvo and Skyworks are well positioned to reap the benefits of 5G – with integrated solutions.
Camera module Tougher assembly challenge (neutral implication for content) The dollar increase in content from foldable device appears limited and we view resolution or multi-cam adoption as an independent component trend. At limited hardware space, module assembly will face challenges. Therefore, we view module assemblers with high manufacturing expertise will maintain their position and expect no major changes to other relevant components (image sensor, lens, actuator, and others).
Key module suppliers include SEMCO, Patron, MCNEX, and Power Logics from Samsung supply chain. LGIT, Sharp, and Shenzhen O-film are major players from Apple supply chain. On the lens side, Largan, Sunny Optical, Kantatsu (subsidiary of Sharp), and AAC are the major vendors.
17 JJ Park Asia Pacific Equity Research (82-2) 758-5717 20 August 2018 [email protected]
Implication for overall smartphone space
Samsung Electronics SEC will be one of the first major smartphone set makers to introduce foldable smartphones, and we expect them to launch in 1H19. Although the shipment unit are likely to be quite limited, growing from 1% to 8% of SEC's total handset shipment unit, the revenue contribution should grow rapidly from 3% in FY19E to 29% in FY22E on the back of much higher price tag vs. non-foldable.
As the new innovative product should have a much higher margin profile, it will likely be the key driver behind company’s effort to push up the IM division’s profitability amid intensifying competition and longer replacement cycle. As such, a successful launch of a foldable smartphone series could be the new rerating event that could result in multiple expansion.
Figure 11: SEC – IM division and Foldable sales trend Figure 12: SEC – IM division and Foldable sales trend US$ in billions, as % of handset sales Unit in millions, as % of handset shipment unit 100 35% 350 8% 8% 30% 300 7% 80 29% 25% 250 6% 5% 60 20% 200 18% 4% 15% 150 4% 40 3% 11% 10% 100 2% 20 2% 5% 50 1% 2% - 0% 0% - 0% 0% 0% 2018E 2019E 2020E 2021E 2022E 2018E 2019E 2020E 2021E 2022E Total Handset sales Foldable sales As % of Handset sales Total Handset unit Foldable unit As % of Handset unit
Source: Company data, J.P. Morgan estimate. Source: Company data, J.P. Morgan estimate.
Apple We believe it is unlikely that Apple will be a leader in the launch of foldable displays, rather we expect to see Apple adopt a fast follower approach if customer adoption for this new form factor is strong at the premium end of the smartphone market. Given the expected price premium for foldable smartphones, we believe Apple will be well positioned to incorporate foldable displays into its high-end flagship models to start with, likely providing new customers another reason to move into the Apple ecosystem.
Although the launch of a foldable smartphone would likely cannibalize sales of the iPad in the long-run, we believe it will position Apple well to win new customers from tablet manufacturers who lack a significant presence in high-end smartphones (e.g. Microsoft).
18 JJ Park Asia Pacific Equity Research (82-2) 758-5717 20 August 2018 [email protected]
Conclusion
We believe that foldable smartphones are a game changer in the smartphone industry as we saw major spec upgrades such as color and camera functions in the feature phone era and meaningful transition to smartphone from feature phones followed by bigger screen smartphones.
We believe foldable smartphones will help accelerate replacement demand, after a couple of years in which the industry has been sluggish due mainly to the lack of differentiation, higher penetration rate even in EM, longer replacement cycle etc.
Given large-size screen backed by 5G networks, we also expect increasing demand for multi-media functions and increasing importance of battery life as a key change relative to current LTE based smartphone.
Since foldable smartphones should sell at higher prices even relative to premium smartphones, we expect tier 1 brands (Apple and Samsung) to have an advantage over tier 2 brands and key component makers such as display module, CPI, substrates, and Electronic mechanics are key beneficiaries, in our view.
In terms of share price implication, given limited volume in 2019, the foldable smartphone market likely will take off in 2020 at the earliest followed by double- digit % revenue contributions to overall smartphone industry in 2021. Hence, we cautiously expect tier 1 brands and relevant supply chain names to begin to react positively in 2H19 and the trend likely to continue given a structural growth story.
Figure 13: Total smartphone shipment and Y/Y growth trend Units in millions, % 1,600 80% 1,400 70% 1,200 60% 1,000 50% 800 40% 600 30% 400 20% 200 10% - 0% 2007 2009 2011 2013 2015 2017 2019E Total smartphone Y/Y growth (%)
Source: IHS, IDC, J.P. Morgan estimates.
19 JJ Park Asia Pacific Equity Research (82-2) 758-5717 20 August 2018 [email protected]
Table 7: Foldable smartphone supply chain valuation table Local currency, Mkt cap (US$ mn), multiples (x), return (%) Price Market Cap P/E(x) P/B(x) ROE(%) YTD Company name (LC) ($mn) FY18E FY19E FY18E FY19E FY18E FY19E Return Samsung Electronics 44,100 251,035 6.2 6.1 1.2 1.1 21.2 18.3 -13.5 SK hynix 74,500 48,095 3.3 3.4 1.1 0.9 39.7 27.8 -2.6 LG Chem 365,500 22,880 14.0 12.6 1.6 1.4 11.5 11.5 -9.8 Samsung SDI 213,500 13,019 20.4 14.4 1.2 1.1 6.2 8.4 4.4 SEMCO 137,500 9,107 17.4 12.1 2.2 1.9 13.1 16.3 37.5 LG Display 22,450 7,123 n.a. n.a. 0.6 0.6 0.1 3.3 -24.9 LG Innotek 142,500 2,991 16.8 10.3 1.6 1.4 9.8 14.1 -1.0 *SKC 44,650 1,486 10.2 9.2 1.1 1.0 10.9 11.2 -5.0 *Kolon Industries 65,400 1,490 11.6 8.7 0.8 0.8 8.5 8.7 -26.5 *SKCKOLONPI 48,650 1,267 n.a. n.a. n.a. n.a. n.a. n.a. 3.0 *Young Poong 717,000 1,171 6.4 4.7 0.4 0.4 6.8 8.6 -33.2 *BH 24,500 679 8.2 6.9 3.3 2.2 47.4 39.5 -10.3 *Partron 7,300 351 29.4 12.1 1.2 1.1 10.4 10.9 -22.7 *KH Vatec 10,150 182 32.5 10.0 0.9 0.9 2.9 9.0 -27.8 *Mcnex 16,100 131 n.a. n.a. n.a. n.a. n.a. n.a. -22.4 *Power Logics 4,490 137 n.a. n.a. n.a. n.a. n.a. n.a. -25.5 Murata 17,545 35,527 18.2 14.7 2.3 2.1 15.1 14.6 16.0 TDK 11,030 12,848 16.9 13.5 1.6 1.4 10.9 11.2 22.7 Nitto Denko 8,355 13,049 13.4 12.5 1.7 1.6 13.3 12.9 -16.5 Sharp 2,740 12,273 22.6 19.9 3.6 3.1 17.3 18.2 -29.2 Sumitomo Chemical 614 9,137 7.6 7.7 1.0 0.9 11.9 12.0 -24.2 *Mitsubishi Gas Chem 2,274 4,737 7.0 7.1 0.9 0.9 12.1 11.5 -29.7 Taiyo Yuden 2,869 3,107 17.7 12.7 1.9 1.6 14.6 14.3 63.4 NOK 2,017 3,139 9.9 9.2 0.7 0.7 7.5 7.6 -23.3 Ibiden 1,543 1,954 17.3 15.9 0.7 0.7 4.6 4.7 -8.5 Nissha 2,118 968 18.0 8.8 1.1 1.0 12.1 12.3 -35.4 *BOE 3 17,673 14.0 10.7 1.3 1.2 12.7 13.7 -39.7 O-film 16 6,318 20.9 14.8 3.9 3.2 22.7 22.7 -22.8 SUNNY 89 12,376 28.4 20.0 9.5 6.9 40.1 38.2 -11.4 AAC 81 12,587 15.9 12.9 4.5 3.7 30.7 29.8 -42.0 Hon Hai 81 45,776 11.1 10.2 1.2 1.1 11.3 11.6 -14.8 Largan 4,430 19,356 22.2 17.4 5.4 4.5 28.1 27.2 10.2 MediaTek 247 12,706 17.7 13.9 1.4 1.4 10.1 11.5 -15.2 Catcher 362 9,071 9.0 8.5 1.8 1.6 19.8 19.1 10.2 *ZD Tech 76 1,990 10.7 9.8 1.1 1.0 10.7 10.3 15.9 *Compeq 29 1,126 8.7 7.8 1.4 1.2 16.4 16.1 -24.5 FLEXium 99 1,021 11.5 9.5 1.6 1.5 16.8 17.6 -7.4 *Unimicron 18 863 51.0 42.7 0.6 0.6 1.2 2.2 8.0 Intel 47 217,178 11.4 11.1 2.9 2.5 18.1 18.8 2.0 Texas Instrument 110 106,591 19.1 17.6 10.1 9.7 55.3 57.9 5.0 Qualcomm 66 97,049 18.3 15.8 5.1 47.3 56.3 24.4 3.2 Corning 33 26,747 19.0 16.3 2.3 2.2 13.6 14.3 3.2 WDC 65 19,340 5.5 5.3 1.5 1.3 22.6 18.6 -18.7 Skyworks 92 16,439 12.7 11.6 4.3 3.5 32.4 29.4 -3.3 Qorvo 60 16,678 19.3 18.2 9.2 9.6 51.8 59.6 14.7 Maxim 82 10,240 13.1 11.4 2.1 1.9 17.7 16.9 22.4 STMicro 17 13,350 12.6 11.4 2.4 2.1 19.3 17.7 -6.9 *AT&S 21 690 12.6 10.8 1.2 1.1 10.7 10.5 -12.7 Source: Bloomberg. Prices are as of Aug 17, 2018. Note: * indicates companies that are not covered by J.P. Morgan.
20 JJ Park Asia Pacific Equity Research (82-2) 758-5717 20 August 2018 [email protected]
Figure 14: YTD return - KR foldable smartphone supply chain Return (%) 60% 38% 40%
20% 4% 3% 0% -1% -3% -5% -20% -10% -10% -13% -22% -23% -25% -26% -27% -28% -40% -33%
Source: Bloomberg. Note: Price as of Aug 17, 2018; Grey colored companies are not covered by J.P. Morgan.
Figure 15: YTD return - JP/CH foldable smartphone supply chain Return (%) 80% 63% 60% 40% 23% 16% 20% 0% -20% -9% -11% -17% -40% -23% -23% -24% -29% -30% -35% -60% -40%
Source: Bloomberg. Note: Price as of Aug 17, 2018; Grey colored companies are not covered by J.P. Morgan.
Figure 16: YTD return - TW/US/EU foldable smartphone supply chain Return (%)
30% 22% 20% 16% 15% 10% 10% 8% 10% 5% 3% 3% 2% 0% -10% -3% -7% -7% -20% -13% -15% -15% -19% -30% -24%
Source: Bloomberg. Note: Price as of Aug 17, 2018; Grey colored companies are not covered by J.P. Morgan.
21 JJ Park Asia Pacific Equity Research (82-2) 758-5717 20 August 2018 [email protected]
Appendix: launch strategy of major players
We summarize the latest speculation on major smartphone maker’s roll-out plans for foldable smartphones across the world. ZTE has been the first to launch a foldable smartphone so far although ZTE Axon M is not a real foldable smartphone, but rather a two-screen phone with folding function.
Samsung Electronics As a front-runner in the foldable smartphone launch, we expect Samsung to come up with its foldable model in 1H19 and at an expected retail price of $1,800 without a carrier package. The size dimension of unfolded display would be around 7.3” while folded it would measure 4.5”, both of which would sport an OLED screen with 4k resolution (3840 x 2160 pixels). Initial renders suggest that the device will have two displays, the foldable inside display and an outer display. The full-sized 7.3 inch panel would be capable of folding-in as 2 separate parts, while there would be an external display on the outside that would be visible once folded.
Channel predicts that mass volume production is targeted for 1H19 with initial production starting around 4Q18. After receiving the required parts through various channels, Samsung is expected to undertake production (processing, manufacturing etc.) within duration of 3 months. The major component i.e. Display should be sourced from SDC (Samsung Display) which is expected to commence foldable OLED production by 2018-end at its A3 line. According to a local media, SDC currently possess the technology to achieve low-thickness glass (~0.1 mm) which is a key requirement to produce foldable displays.
Samsung is expected to complete the trial production by the end of 4Q18 and is expected to enter mass production with a plan to manufacture 1million foldable OLED panels.
Figure 17: Samsung’s foldable smartphone prototype showcased in CES 2013
Source: Samsung Electronics.
22 JJ Park Asia Pacific Equity Research (82-2) 758-5717 20 August 2018 [email protected]
Huawei Media reports suggest Huawei’s foldable smartphone will be released sometime in 2019 and will sport a book-like design that could be used both as a tablet and as a smartphone. News articles suggest BOE is expected to manufacture 8-inch in-folding OLED flexible panels that would be deployed in Huawei’s foldable smartphones. The phone is expected to be made of a metal and glass body and would be of a thin profile with 7.5mm thickness when folded.
The filed patent also suggests a book-like phone that can be opened up to create a larger tablet, with a smart Surface Book 2-style hinge connecting each of the folder's two screens. Huawei is expected to adopt an “in-fold” deign for its foldable model.
There should be a laptop mode as well, allowing the user to operate most functionalities of a mini-computer using a desktop-based UI operating on a 120- degree fold screen and the remaining screen as a fully functional keyboard.
Figure 18: Huawei Foldable smartphone
Source: LetsGoDigital
LG Electronics Among foldable OLED technology players, LGE is one of the major contenders after Samsung. According to media reports, LGE’s foldable model is expected to come with a massive 8.5 inch 4K AMOLED screen .The phone is expected to feature a bezel-less design with flexible display that is capable of folding horizontally halfway down the length of the phone thanks to a four-link hinge (the same mechanism as used in the Microsoft Surface Book as well).
23 JJ Park Asia Pacific Equity Research (82-2) 758-5717 20 August 2018 [email protected]
Designs suggest a dual-camera on the back, which would allow for a camera to remain on the folded display, thereby allowing the user to capture images even when the phone is in folded form. This might also help in capturing photographs and recording videos even when the screen is not active (as in the case of a Go-Pro camera). The phone is also expected to sport dual mics, dual speakers and dual antennas as well.
Figure 19: LG Foldable smartphone
Source: LetsGoDigital
Motorola Media reports suggest the foldable smartphone model from Motorola will be based on a total screen size of 7”AMOLED HDR 10 screen designed to support QHD resolution of 2560×1440 pixels and an aspect ratio of 18:9.
The phone would be designed to operate in 3 different modes. First, the media mode would involve a primary display of 6” combined with another 0.75” of multi-purpose display located at the bottom of the screen (with some quick-access icons). Second, would be a clamshell mode that would provide the phone with an ability to fold at 120 deg. supported by a polymer joint with high durability in the middle. Third mode would be a compact mode in which the entire phone would fold completely showcasing just a 2.5” external display for important functions and touch inputs along with the fingerprint scanner.
It is expected to be a slim form-factor with expected thickness of 3.7mm when fully stretched (opened) and ~7.5mm (when folded). The patent information suggests using a heated hinge mechanism to prevent the deformation of screen at the hinge during the folded stage. Motorola plans to use heat sensors that would heat-up the hinge at low-temperatures so that any deformation in display gets automatically corrected. This would allow the phone’s display to be folded multiple times over the hinge.
24 JJ Park Asia Pacific Equity Research (82-2) 758-5717 20 August 2018 [email protected]
Apple: Foldable iPhone Apple is also in the early stages of planning a foldable iPhone but the tentative timing of launch remains distant with an expected launch in 2021. There are no details on possible specification available. However, the patents filed give an initial look inside the form-factor and built of the phone.
It is also expected that Apple's phone may involve Micro-LEDs which offer higher power savings compared to usual panel and also provide a reduced screen thickness necessary for a foldable smartphone. For other foldable components like logic board and battery capacity, Apple could also employ the 3rd party component provider like Samsung (SDC/SDI/SEMCO).
The proposed design, as per media, suggests that there could be solid inflexible glass covers for sections of the display that are not affected by the fold. There would also be with a flexible coating /cover over the gap between the 2 solid screen sections.
Figure 20: Apple’s patent for foldable iPhone
Source: patentlyapple.com
Table 8: Specifications of upcoming foldable smartphones Specification Samsung LG Motorola Huawei Timing (Build) 1H19 Unknown - 1H19
Price (US$) 1,800 - - 1,100 2 Displays (1 foldable inside and 1 Form factor 1 Display (1 foldable inside) 3 Displays (1 foldable, 2 outside) 1 Display (1 foldable inside) outside) 4.5"/7.3" folded/unfolded. Flexible 6" Flexible OLED, 0.75" quick- Display OLED with 4K resolution 6.2”/8.5" (folded/unfolded) OLED 5"/8" (folded/unfolded) access, 2.5" exterior (3840x2160 pixels) Battery 6,000 mAh 6,000 mAh 4,100 mAh 8,000 mAh
Camera 1 dual-cam + 1 single-cam 1 dual-cam + 1 single-cam 1 dual-cam + 1 single-cam 1 dual-cam + 1 single-cam
Memory 6GB RAM; 128/256GB Storage 8GB RAM; 128/256GB Storage 6GB RAM; 128/256GB Storage 6GB RAM; 256GB
Source: Multiple media reports, GSMarena, Concept phones, Digital-trends
25 JJ Park Asia Pacific Equity Research (82-2) 758-5717 20 August 2018 [email protected]
Existing foldable smartphone: ZTE Axon M ZTE launched Axon M in 2018 and marketed it as a multimedia device. The smartphone has been designed to be pocket-friendly when in folded form and comes with four modes of operation. The “Dual” mode allows users to use separate apps in 2 separate screens while the “Extended” mode allows for seamless screen experience for accessing emails and playing games on the full display. Other 2 modes include a Mirror mode, which allows users to mirror the same content on both the screen and finally a “Traditional mode”, which allows users to use the device as a conventional smartphone with the convenience of portability
It features two 5.2-inch dual full-HD TFT LCD displays with Corning Gorilla Glass 5 protection. It is powered by Snapdragon 821 SoC backed by 4GB of RAM and packs 64GB inbuilt storage. For the camera specification, there is a 20-megapixel single camera which can be used for rear (f1.8) and front-facing shots.
Figure 21: ZTE Axon M
Source: ZTE.
26 JJ Park Asia Pacific Equity Research (82-2) 758-5717 20 August 2018 [email protected]
Companies Discussed in This Report (all prices in this report as of market close on 20 August 2018) Samsung Electronics (005930.KS/W43850/Overweight) Analyst Certification: The research analyst(s) denoted by an “AC” on the cover of this report certifies (or, where multiple research analysts are primarily responsible for this report, the research analyst denoted by an “AC” on the cover or within the document individually certifies, with respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report. For all Korea-based research analysts listed on the front cover, they also certify, as per KOFIA requirements, that their analysis was made in good faith and that the views reflect their own opinion, without undue influence or intervention. Important Disclosures
Market Maker/ Liquidity Provider: J.P. Morgan Securities plc and/or an affiliate is a market maker and/or liquidity provider in securities issued by Samsung Electronics. Lead or Co-manager: J.P. Morgan acted as lead or co-manager in a public offering of equity and/or debt securities for Samsung Electronics within the past 12 months. Client: J.P. Morgan currently has, or had within the past 12 months, the following entity(ies) as clients: Samsung Electronics. Client/Investment Banking: J.P. Morgan currently has, or had within the past 12 months, the following entity(ies) as investment banking clients: Samsung Electronics. Client/Non-Investment Banking, Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following entity(ies) as clients, and the services provided were non-investment-banking, securities-related: Samsung Electronics. Client/Non-Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following entity(ies) as clients, and the services provided were non-securities-related: Samsung Electronics. Investment Banking (past 12 months): J.P. Morgan received in the past 12 months compensation for investment banking services from Samsung Electronics. Investment Banking (next 3 months): J.P. Morgan expects to receive, or intends to seek, compensation for investment banking services in the next three months from Samsung Electronics. Non-Investment Banking Compensation: J.P. Morgan has received compensation in the past 12 months for products or services other than investment banking from Samsung Electronics. Other Significant Financial Interests: J.P. Morgan owns a position of 1 million USD or more in the debt securities of Samsung Electronics. Company-Specific Disclosures: Important disclosures, including price charts and credit opinion history tables, are available for compendium reports and all J.P. Morgan–covered companies by visiting https://www.jpmm.com/research/disclosures, calling 1-800-477- 0406, or e-mailing [email protected] with your request. J.P. Morgan’s Strategy, Technical, and Quantitative Research teams may screen companies not covered by J.P. Morgan. For important disclosures for these companies, please call 1-800-477- 0406 or e-mail [email protected]. Explanation of Equity Research Ratings, Designations and Analyst(s) Coverage Universe: J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Neutral [Over the next six to twelve months, we expect this stock will perform in line with the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Not Rated (NR): J.P. Morgan has removed the rating and, if applicable, the price target, for this stock because of either a lack of a sufficient fundamental basis or for legal, regulatory or policy reasons. The previous rating and, if applicable, the price target, no longer should be relied upon. An NR designation is not a recommendation or a rating. In our Asia (ex-Australia and ex-India) and U.K. small- and mid-cap equity research, each stock’s expected total return is compared to the expected total return of a benchmark country market index, not to those analysts’ coverage universe. If it does not appear in the Important Disclosures section of this report, the certifying analyst’s coverage universe can be found on J.P. Morgan’s research website, www.jpmorganmarkets.com. Coverage Universe: Park, JJ: LG Electronics (066570.KS), Nanya Technology (2408.TW), Panasonic (6752) (6752.T), SK hynix (000660.KS), Samsung Electronics (005930.KS), Sony (6758) (6758.T)
27 JJ Park Asia Pacific Equity Research (82-2) 758-5717 20 August 2018 [email protected]
Kwon, Jay: CJ Corp (001040.KS), LG Corp (003550.KS), LG Display (034220.KS), LG Innotek (011070.KS), SK Holdings (034730.KS), Samsung C&T (028260.KS), Samsung Electro-Mechanics (009150.KS), Samsung SDI (006400.KS), Samsung SDS (018260.KS) Chatterjee, Samik: Arista (ANET), Ciena (CIEN), Cisco (CSCO), CommScope (COMM), Corning (GLW), F5 Networks (FFIV), Infinera (INFN), Juniper Networks (JNPR), Lumentum (LITE), Sensata (ST), Viavi (VIAV)
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28 JJ Park Asia Pacific Equity Research (82-2) 758-5717 20 August 2018 [email protected]
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29 JJ Park Asia Pacific Equity Research (82-2) 758-5717 20 August 2018 [email protected]
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"Other Disclosures" last revised August 18, 2018. Copyright 2018 JPMorgan Chase & Co. All rights reserved. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan. #$J&098$#*P
30 Completed 20 Aug 2018 09:07 PM HKT Disseminated 20 Aug 2018 09:08 PM HKT