Flexible displays – Press cycle

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Flexible screens back for another press cycle.

 

  • With the success of the Samsung Galaxy Edge, it looks like Samsung is thinking of having another go at bringing flexible displays to the market in a meaningful way.
  • This is the third or fourth time in 6 years that Samsung has considered launching these products.
  • The technology for flexible screens is not the problem as fully bendable displays that can withstand a beating with a hammer have been around for more than 6 years.
  • The main issues are manufacturing yield which determines the price of the display and end user demand.
    • Yield. The economics of LCD and OLED panels depends on very high volumes with only a tiny percentage of devices being defective and having to be thrown away.
    • The encapsulation of flexible displays has long been a sticking point in the manufacture of these products causing far too many panels to be defective.
    • This has had the effect of making the panels prohibitively expensive which would make the phone or tablet so pricey that no one would buy it.
    • Demand. The problem with flexible displays is that beyond one obvious use case which has its own problems (see below), no one really knows what to do with them.
    • The Samsung Galaxy Edge is a case in point as the curved part of the screen has no real function other than for offering alerts.
    • Consequently, it is a nice looking, cool to have but otherwise pointless gimmick.
    • In the mobile phone market, pointless gimmicks have time and again been shown to sell devices in huge volumes at the high end and the Galaxy Edge has been no exception.
    • Unfortunately this will make bringing flexible screens to the main stream very difficult and Samsung has had great difficulty in finding buyers for these screens in the past.
  • I have long believed that the one use case that makes sense for a flexible screen is the ability to have a tablet that folds or rolls up into a phone form factor when not in use.
  • This is because these days a tablet is little more than a phone with a large screen as all the other components and the software is almost exactly the same.
  • This comes with its own caveats which is that the screen when unfolded into the tablet form factor, it needs to be rigid to make it useable.
  • That is likely to prove to be easier said than done and I suspect that this use case is unlikely to make an appearance for quite some time.
  • The net result is that with no real use case in sight for these devices, I suspect that Samsung may decide to hold off launching them in earnest until it can figure out what users can do with them.
  • Hence, I suspect this theme, like every time in the past, will have a quick press cycle and then disappear into obscurity until someone really works out what to do with these screens.
  • I still see upside in Samsung and Microsoft and prefer both to Google. Apple is still looking very attractive for the long-term.

Flexible displays – University challenge

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Flexible displays are hard to make and mostly useless.

  • The latest innovation around flexible screens has been announced by the Queen’s University Human Media Lab in Canada which uses the flexing of the screen as a method of command input.
  • A flexible LG OLED display has been combined with sensors and can detect to what the degree the screen is being flexed.
  • The headline example is using the flexing of the screen to flick through the pages of an ebook which is very similar to what a user would do with a paperback.
  • The paperback has the obvious advantage being readable in bright sunlight and infinite battery life.
  • The researchers also demonstrate using the device as a regular touch screen smartphone.
  • This is all well and good but I suspect that we are still very far from seeing flexible panels hitting the mainstream.
  • Samsung and LG have had fully flexible, virtually indestructible panels for years but to date, only the most basic curved and flexible panels have made it to the market.
  • There are two main reasons for this.
    • First. These devices are quite difficult to make meaning that a meaningful number of the panels fail quality tests and have to be thrown away.
    • This makes mass production prohibitively expensive and the premium that the maker would have to charge for the panel is so high that the user won’t pay for it.
    • RFM research indicates that Samsung and LG are continuing to wrestle with this problem but that little progress has been made.
    • The fact that there is no demand in the market for these devices (see below) has also not enticed them to expedite solving the mass manufacturing problems.
    • Second. No one has really come up with a decent use case for a flexible screen to date.
    • This problem is so acute that I understand that even Samsung had problems in rustling up interest for its curved and flexible displays from device manufacturers.
    • I have long been of the opinion that a major use case for this technology is a display carried on a phone form factor that can be unfolded or unrolled to give a display of 10-14 inches.
    • This would obviate the need to ever have a tablet and I think could kill the market overnight.
    • Unfortunately, the technology to make screens to this specification is still not ready and while simpler versions languish, I suspect that this will remain on the shelf.
  • The net result is that flexible displays are cool to see for the first time but do very little to improve the use case of the device.
  • Consequently, I suspect that flexible displays will not be making any impact on the device or ecosystem economics anytime soon.

RFM 2015E – Top 5

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The PC market is likely to offer the biggest surprise in 2015E

Wearables

  • The technology industry is likely to continue scratching its head over what to do with wearables.
  • It is a segment where there is a clear opportunity but nobody seems to have any idea what the real use case for these devices is.
  • Even Apple, which is legendary in its innovative capacity, has produced a device that is little more than a remote control for a smartphone.
  • Most of the noise at CES 2015 is likely to centre on these devices but the criteria for success have yet to be met.
  • These criteria are:
    • Small OS optimised for device function.
    • Battery life measured in months not hours
    • Bluetooth Low Energy (BLE) radio only.
    • Small, fashionable and unobtrusive form factor.
    • Robust and reliable.
  • The only device that I have seen that comes close to meeting these criteria is the Misfit Shine pedometer and sleep tracker.
  • It comes as no surprise that this device sells in reasonable volumes and is the only one that actually makes money.
  • For wearables to take off an exciting use case needs to be combined with these criteria.
  • I fear that the real growth in 2015E will be in the population of the wearables graveyard.

Xiaomi

  • Xiaomi rocketed into the general consciousness with 61m units shipped in 2014A and a fundraising at a crazy $45bn valuation (see here).
  • However, despite significant scale, the company is probably still only making EBIT margins of around 3%. (see here)
  • People are assuming that it is the next Apple, but being a commodity Android maker outside of China is going to put pressure on profitability.
  • This, combined with a great need to invest in developing its ecosystem in China, will mean that investments will have to continue growing.
  • Consequently, I can’t see margins expanding until its ecosystem is wildly successful and Xiaomi can start raising the prices of its devices.
  • This will take time and money which will not be what its new shareholders will want to hear.

Ultra HD TV

  • One of the highlights of CES 2015 is likely to be bigger and bigger TVs with higher and higher resolutions.
  • 4K or UHD made all the running last year and this year I am expecting to see 8K prototypes demonstrated.
  • This is yet another attempt by the TV industry to halt the ravages of commoditisation and competition which has caused the prices of TVs continue to collapse.
  • For example, Samsung is currently selling a 55 inch 4K TVs for $980 upon which I doubt it makes any money at all.
  • Furthermore, 4K does nothing for the consumer because in order to even begin to see a difference between 1080p TV and 4K the consumer needs a 70” TV at the normal viewing distance of 9 feet.
  • The average TV size in the US is 36”
  • To get the full benefit of 4K the user needs to sit 5 feet away from a 100” TV.
  • In my opinion this renders 4K next to useless for almost all consumer applications.
  • This will make user unwilling to pay for the TVs and broadcasters unwilling to bear the huge increase in transmission costs that 4K requires.
  • I do not see any real recovery in profitability in the television industry this year.

PCs

  • 2015E should see the beginning of a replacement cycle of the obsolete laptop form factor.
  • The Surface Pro 3 has shown the way for where mobile computing needs to go but the Intel Core M family should take this one step further.
  • This will enable a tablet weighing 650g (1.4lb) to have the power and utility of a desktop computer. (see here)
  • This is 200g less than the superb Surface Pro 3 currently weighs.
  • This enables the user to have a far better user experience offering the full ergonomics of a desktop while out of the office.
  • The device can also be used as a tablet when needed without having to compromise either function.
  • The problem is marketing, as the marketing departments of Intel and Microsoft do not yet seem to have realised the opportunity that their R&D has created.
  • Until the user is properly informed, the replacement cycle of laptops will continue to disappoint my ambitious hopes.

Mobile Payments

  • Mobile payments have languished for years.
  • The combination of vested interests and proprietary systems has meant that the user experience has been ignored.
  • The result has been a series of attempts at offering payments with mobile phones that have been more cumbersome and awkward than digging in one’s pocket for a credit card.
  • The launch of Apple Pay has given this fledgling industry a wake-up call as this system is a cinch to use and everyone who uses it, loves it.
  • In order to preserve the exclusiveness of its hardware (and its margins), Apple will only make Apple Pay available on its devices leaving 87% of the global market for everyone else.
  • As is did with the smartphone, Apple has shown the industry the way forward but has also left plenty on the table.
  • Consequently, I suspect that 2015E will be a scramble to offer an Apple Pay like experience on Android and other devices. 

Android TV – Into the mix.

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The cable companies and the console makers have the advantage.

  • Not to be outdone by Amazon, Google is also having another stab at TV with the release of another entertainment offering called Android TV.
  • The biggest change that Google has made is that it has given up trying to make a unified user experience across all devices but instead has optimised the UI for the TV itself.
  • Google has taken away the fancy features such as telephony and cameras and focused solely on the delivery of content to the user.
  • This basically puts Android TV in line with all of the other, increasingly numerous and difficult to distinguish offerings such as Fire TV, Apple TV, Roku and so on.
  • All of the usual suspects such as Netflix, Amazon Prime, Pandora Hulu etc will have their apps on the device and Google is encouraging developers to write apps for this new platform.  
  • How this fits in with Chromecast is uncertain as Chromecast runs entirely on the web with no need to write apps.
  • I suspect that Google will keep both going in parallel as Chromecast has already sold a lot of units and Google will need to know which offering users prefer.
  • At the end of the day Android TV is very similar to all of the other offerings out there which means that none of them will be able to really differentiate.
  • Only two camps are capable of doing this: the cable TV companies and the console makers.
  • The cable TV companies still have a vast share of the audience on their platforms and consequently I suspect that the opportunity for them is to incorporate this functionality into their boxes.
  • This will give the user the ability to have all of his services in one place with one remote control.
  • The cable TV companies have, until recently, been in denial with regards to Internet TV but they are now looking at ways of upgrading their boxes to allow the other services their users love.
  • This will put their offering head and shoulders above a new entrant requiring another box and another remote control.
  • The cable user base is both sticky and not very well informed.
  • The console makers also have an edge as their boxes offer something that none of the others do which is high end gaming.
  • I suspect that this will appeal only to gamers but with 80m XBox users already out there, this is an opportunity big enough to be of significant value.
  • Hence, I think that the Internet TV offerings are going to struggle without something differentiated to sell to the user.
  • Amazon has its Prime users but these are reasonably small in number
  • Hence, I suspect that all Google will have to compete with will be price but I can’t see it making the content cheaper to get a few users in the door.
  • Hence, I suspect that this offering will languish just as its predecessor did.
  • It is clear that the value remains in the ability to offer some degree of exclusive function or content and I do not expect success of any offering that cannot live up to that minimum standard.

 

Broadcast TV – Mostly about sports

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BT’s win over Sky for the champion’s league highlights the crucial nature of sports.

  • The value of broadcast rights is rapidly declining as many users are quite happy to consume content that has been time shifted.
  • There are some emerging exceptions to this rule (see here) but the one real exception is sports.
  • Users are unwilling to watch sporting events that are not occurring in real time and because of this, the broadcast rights for live sports are likely to continue gaining in value.
  • The over-the-top plays (OTT) like Netflix are banking on the new trend of consuming TV series all in one go (binge viewing) but there is no way that this can happen with sports.
  • Hence, OTT has nothing to add to sporting events meaning that they will become more and more valuable while the rights for other types of content will become less and less.
  • This was highlighted strongly yesterday with BT’s willingness to pay £299m ($478m) for the rights to broadcast the Champions League.
  • The last time these rights were auctioned Sky paid £160m which shows that BT’s ambition to break Sky’s stranglehold on the UK market is almost without limits.
  • It also clearly demonstrates where the value of content is moving to and what users are likely to be willing to pay a premium for.
  • This is an ominous sign for mid-2015 when the rights for the Premier league come up for blind auction.
  • The Champion’s League is the second most popular reason for subscribing to Sky Sports with the Premier League by far the biggest reason.
  • This is an absolute must win for Sky as it will lose its differentiation if it fails to secure these rights in 2015.
  • This is a trend that I expect to be repeated in other parts of the world and the broadcasters must secure these rights.
  • Failure to secure these rights will see an acceleration of households cutting the cord and the end of the broadcast monopoly as we know it.
  • This is going to place pressure on the margins of the broadcasters and further enrich the professional sports industry.
  • If the broadcasters can hold onto their subscribers via exclusive sports and be smart about how they offer catch-up television and on-demand (see here), they might just survive.
  • The broadcasters have time to act but their current position of denial is not helping their ability to adapt to meet the inevitable change in their industry. 

 

Samsung Round – Pointless can sell

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It is pointless but that does not matter.

  • Samsung has finally launched a curved display device.
  • It is the Samsung Galaxy Round which has a 5.7” AMOLED display with a very slight concave shape.
  • It also has a 13MP camera, 1920×1080 resolution, a 2.3Ghz processor and is 7.9mm thin.
  • As a result of the curved screen, the device also has a curved back meaning that it will rock from side to side when laid on a flat surface.
  • This is the basis upon which the added functionality has been based.
  • Rocking the phone to one side will display core information like time, missed calls, emails etc.
  • If listening to music, then the rocking the device one way will advance the track and rocking it the other will play the previous one.
  • Given the high specification and the curved display, the device is very expensive with the price being set at $1,013.
  • Currently the device is only being launched in Korea and has all the hallmarks of an experiment.
  • The curved screen is solution looking for a problem and the functionality that has been implemented around it is just a gimmick.
  • However, that does not matter as history has shown time and again that pointless gimmicks sell phones if they are perceived to be cool.
  • Furthermore, this is a highly differentiated form factor which is a rare thing in a world of black glass Android devices.
  • At this price point, volumes are going to be tiny but is the reception of the device that Samsung will be looking for when it comes to deciding about pushing this form factor across its portfolio and geographies.
  • The device has the added advantage of being less breakable when dropped face down and of being more ergonomic when held to the face.
  • This device is indicative of the problems that the mobile phone industry has with curved displays.
  • It does not know what to do with them and as a result has been reluctant to launch devices due to the added costs involved.
  • However, it is the users which will decide whether this will be a success or not.
  • Long term, I am a big fan of bendable and flexible displays as these have the potential of creating a devices with tablet sized displays that can fold or rollup and fit in the pocket.
  • This is a problem that needs solving as phablets look foolish when held to the head and are much more cumbersome to use one-handed.
  • This could be a major advantage for the Koreans, as only they can make these screens and if they become a differentiator, they could easily be kept in-house.
  • Differentiation is hard to come by in the Android market, but Samsung is trying potentially with some success.

 

Flexible Displays – Two years late

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After two years, Samsung has decided to experiment.

  • After much delay it seems that a device with a curved display is about to make a debut on the market.
  • This technology has been in the works for more than three years but now the Samsung Galaxy Note 3 is expected to have a brother called the Galaxy Note 3 active.
  • The device will have a bendable plastic display and will also be waterproof along the lines of the Sony Experia devices.
  • The delays have been caused by two problems.
  • Firstly: yield. The encapsulation of the curved display has proved to be tricky and yields have been so low that the devices would have been too expensive and too unreliable for the market.
  • I believe that this problem has largely been solved.
  • Secondly: demand. Samsung has been struggling to work out what these displays add to the user experience and has come up blank.
  • Likewise, many of its handset customers are of the same opinion as Samsung has met with no real demand when trying to sell these screens to other handset makers.
  • I have long been a believer in bendable and flexible displays but at the moment, I am in the minority.
  • I agree completely with Samsung and the other handset makers that there is no obvious use for a curved or a flexible display.
  • However, even a curved display enables significant form factor differentiation and in Android that is a very rare commodity.
  • A screen that curves around the bezel is a pointless gimmick but history has repeatedly shown that pointless gimmicks sell phones if they are perceived to be cool.
  • Hence, I see this as an experiment by Samsung to see what demand a curved display will generate.
  • If it proves popular, I can see many more models in the works and also screen supply evaporating for customers outside of the Samsung group.
  • It is through these screens and the resulting form factor differentiation that I can see Samsung hanging onto its margins in smartphones while it works out how to move up into software and services.
  • Samsung is cheap but there is no momentum or catalyst that I can see that will enable the shares to challenge previous highs.

 

Google Gaming – The wrong tree.

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A Google console is a bad idea.

  • With the launch of the Ouya Android console, the blogs are also alive with the notion that Google is also working on an Android based console.
  • It makes total sense for Google to pursue gaming but a console device is not the right way to do it.
  • When I look at Digital Life , Google has superb coverage.
  • Not only is there an app. for almost every activity I could ever want to do online or on a smartphone, almost all are of excellent quality.
  • The exception is gaming.
  • US users spend 32% of their time on their smartphones playing games and at the moment, Google has nothing with which to address that segment.
  • Being a games publisher or hardware maker is not the way to address this segment.
  • Google needs to be the network through which multiplayer games are played and gamers talk and socialise.
  • This is how one learns about one’s gamers and how one can monetise them through targeted advertising.
  • This is what Google is missing to complete its coverage of Digital Life on mobile (and in the fixed internet) and a console is not going to do it.
  • Gaming has become very polarised with the high-end console games at one end and the phone and tablet based games at the other.
  • This is why the Nintendo Wii U is dying and an Android based console from Google is likely to fare little better.
  • These days, there is far more to a console than just games and having a box under the TV is an opportunity to deliver many other services to the user.
  • Top of the list here is TV but without the co-operation of the broadcast industry this will go nowhere.
  • Even the highly specified Xbox One can only manage an HDMI pass through for integrating TV where the user still has to effect almost all TV related functions on the set-top box from the broadcaster.
  • This is because the broadcasters know that their days are numbered and they will try and hang on for as long as they can (see here).
  • This is one of the reasons that Google TV failed in the first place and I see no real reason for Google to repeat the mistake by launching a console.
  • Hence if Google is going to go into gaming, it should be through the creation or acquisition of a network through which games can be played online and users can socialise.
  • This is something that Google badly needs to complete its offering of Digital Life and hence I expect it to do something sooner rather than later.
  • However, the launch of a console is likely to result in the spilling of more red ink and the derision of the broadcast TV industry.

 

Microsoft – Damage control

 

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Microsoft’s climb down is a very encouraging sign. 

  • In response to general clamour, Microsoft has changed its policies with respect to the Xbox One on both online use and used games.
  • The only remaining difference between PS4 and Xbox One now remains the price and I expect that too, will fall into line prior to launch.
  • The online requirement has now been reduced to one time system setup when the device is powered up for the first time.
  • Limitations on the sale, sharing and trading of games have also been lifted.
  • Microsoft was at pains to state that disc-based games would function on the Xbox One exactly as they do on the Xbox 360.
  • Here is the catch: Disc-based games.
  • Microsoft says nothing about how games that have been downloaded to the console will work.
  • For the smaller games this is irrelevant.
  • It is where the big $60 games have been downloaded where this will make a difference.
  • I suspect that the vast majority of these games will be available on disc as well as download meaning that the console logically should treat them equally.
  • If it does not, no one will buy the games online which will be a major blow to Microsoft’s ambition to get people buying stuff through its Xbox Live service.
  • It makes no sense for Microsoft to program the console to treat the big games differently depending on how they have been purchased.
  • Hence, I do not think that this is a sleight of hand.
  • I think that this is a change of direction by Microsoft in response to intense criticism and the very real risk of losing market share in the living room.
  • This is particularly encouraging because of the strategic importance of Xbox to Microsoft’s overall strategy to be a part of the user’s digital life.
  • The games get the device under the television but it’s the other things it can do around video, communication and so on that will really make a long-term difference.
  • I am have been long concerned with the “ivory towers” syndrome at Microsoft where each business unit exists in glorious isolation and acts solely in its own interest.
  • It is excellent that Don Mattrick has taken one for the team.
  • This embarrassing climb down does little for his business, but is incredibly important for Microsoft as a whole.
  • It gives me hope that that Microsoft can overcome its legacy and become so much more than the sum of its parts.
  • It is belief in this outcome that makes the shares interesting.

 

Intel TV – Crux not fixed.

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Intel has nothing to make a splash in over-the-top (OTT) internet TV.

  • Intel has already confirmed that it is working on an internet television platform with the aim to provide broadcast TV, catch-up TV and on-demand video.
  • This is all well and good but at the moment only 5% of US households have “cut the cable” despite a fairly sizeable number of offerings to choose from.
  • This strongly implies that internet TV is not yet have the depth (programming) or the reach (fast enough internet) to present a viable challenge to the existing broadcast industry.
  • The ideal solution will be one where a subscriber can access to everything he wants through a single electronic programming guide be it live sports, broadcast TV, catch-up TV or on-demand programming.
  • Live sports and broadcast TV are currently closely controlled by a few companies that will do everything in their power to ensure that TV over the Internet does not take-off.
  • TV over the internet is the single greatest challenge that the broadcast industry has ever faced and one, if ignored, that will quietly put it out of business.
  • This is why I think that when Google, Microsoft and others banged on the door to discuss integrating broadcast TV into their hardware, they were met with a flat refusal.
  • Turkeys do not vote for Christmas (or Thanksgiving) and allowing the OTT players any space at all will simply hasten the demise of broadcast.
  • Intel is still optimistic but I suspect this is because it has not yet tried to negotiate with broadcast.
  • When it does, it will be met with the same response and so yet another offering will far short of what it needs to take-off anytime soon.
  • There is no doubt in my mind that TV over the internet is the future but until the penetration levels hit around 25% or so it will be a long and hard road.
  • Hence, I see no reason why Intel’s offering will be any different to anyone else’s and as it does not have the draw of games, it is likely to languish.
  • PS4, Xbox, Apple TV and Roku dominate this market and there is no reason for anyone to suddenly to switch to Intel.
  • If Intel can bring broadcast into its offering then it will have something, but for now it will be an also ran.