The Smartphone Market at an Inflection Point

We’ve been trying to clear the decks, finalising some bits and pieces from CES, getting the BETT report done and trying to get ahead for ISE next week. This is one of our biggest shows of the year, so the normal issues may be a big smaller next week, but we will aim to get them out. They may be a little later than usual.

We seemed to have have a lot of mobile-related news this week. Apple announced its results, but there were stories of reduced demand for flexible OLEDs for 2018. That may have the effect of discouraging Samsung from making more investments in flexible OLED production. At the moment, Samsung is the only game in town, but that is not likely to last for a long time, so the big question is whether the company could make money from the huge investment. If LG, BOE and the rest that would like to supply Apple can get production going efficiently and with good quality, then Samsung is likely to have too much capacity if it continues to invest. On the other hand, if they are delayed, its investment decision could be a drag on the whole market.

I remember, some years ago, there were several competing memory architectures for graphics cards. It wasn’t clear which would be the winner and some had exclusive suppliers and the wrong decision could have been fatal and at the time, I was just relieved that it wasn’t my decision. The Samsung decision is another one that I’m glad I don’t have to make!

These decisions are being made as the smartphone market reaches an inflection point – the end of smartphone growth in the market in China. That effectively signals close to the end of the growth of the market, potentially.

The other topic that I noted this week was the strange range of financial results, with so many of the most profitable US companies reporting losses as they have taken advantage of the “one off” 15% tax rate on profits coming back to the US that the current US government put into place. Of course, the government says that this is not going to be repeated, but the reality is that ‘behaviour that gets rewarded, gets repeated’. The corporations have been rewarded with a low tax rate for holding their profits abroad. That would suggest to me that they will do the same again! They may have to wait for a turn or two around the American electoral system, to get an administration that is a ‘low tax’ enthusiast. Given the way the US system is swinging from side to side, that shouldn’t take too long.

Apple shouldn’t have to worry too much, it has huge cash reserves, but then again, it had no problem borrowing money if it wanted to, given the cash it had globally. In its earnings call, it said that it has net cash of $163 billion. That’s more than the GDP of Hungary and enough to finance the whole of Sweden or Taiwan for a quarter!

I think I’m looking forward to ISE next week – there are usually some great displays on show and it’s always fun to catch up with friends!