Download - W30 july2014

BUSINESS & TECHNOLOGY INNOVATION REPORT

Week 30

2014

Prepared by

Ferhat Ünlükal

7/27/2014

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BUSINESS & TECHNOLOGY INNOVATION REPORT Week 30

Headlines

Consumer Electronics (CE)

• Samsung is reported to be in talks to by home automation company SmartThings.

• Samsung Electronics is planning to make a $375 million investment in the Dube TradePort special economic zone.

• LG said operating profit rose 26.5 percent to 589.04 million in April-June.

• 2014 global Ultra HD TV shipments will reach 20 million units.

ICT

• Apple may introduce a new mobile-payment system.

• Apple has acquired BookLamp. • Cisco and Barcelona City Council

announced plans to open a Cisco Global IoE Innovation Center in Barcelona.

• The Global HD STB market will grow at a CAGR of 2.38 percent over the period 2014-2018.

• Apple remained the largest single vendor but its market share fell to 26.9 percent from 33 percent last year.

• Global LCD monitor shipments in 2014 may drop 5-10% on year.

• Taiwan-based server ODMs may obtain orders arising from the beginning of Project Scorpio 2.0, the second version of a project to boost low-cost and highly scalable data center infrastructure.

• The IoT will account for an increasingly huge number of connections: 1.9 billion devices today, and 9 billion by 2018.

• The IT market in Turkey to grow at a CAGR of 8.43 percent over the period 2013-2018.

Flat Panel Industry

• Japan Display (JDI) has started production of IPS-NEO.

• For April-June, LG Display reported a 55.4 percent fall in operating profit to $159.23 million.

• Innolux and AU Optronics (AUO) face strong competition from South Korea-based makers.

• CSOT has become the largest supplier of 32-inch panels worldwide.

• Pricing for 32-inch open cell TV panels has increased from about US$85 in mid-June 2014.

• Pricing for 32-inch open cell TV panels has increased from about US$85 in mid-June 2014.

• The market for ultra high definition panel globally is estimated to reach USD 30,404.6 million by 2020.

• The market for plastic and flexible AMOLED displays will rise to $16bn by 2020.

Semiconductor Industry

• Broadcom will downsize employees, affecting 2,500 individuals.

• STMicroelectronics announced it has opened a new MEMS Microphone Lab (Anechoic Chamber) in Taiwan.

• The market for LED drivers, MCUs, sensors and other chips used in smart lighting will grow from around $67 million in 2014 to $1.05 billion in 2019.

Software Industry

• Google has purchased Helsinki-based 3D graphics start-up DrawElements.

• Oculus VR which Facebook finished purchasing for $2 billion, is working with Samsung Electronics on a headset that uses mobile devices to create a VR experience.


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• LinkedIn has purchased marketing-platform startup Bizo in a deal worth $175 million.

Service Industry

• The total pay-TV subscriber base is expected to surpass 936.4 million at the end of 2014, generating $280.4 billion in service revenue

Consumer Electronics (CE)

Samsung

Negotiation with SmartThings

• Korean electronics conglomerate Samsung is reported to be in talks to by home automation company SmartThings. The deal is said to be around $200 million, though it isn't yet a done deal. Samsung buying up SmartThings follows Google's $3.2 billion acquisition of Nest back in January and Apple's introduction of HomeKit at WWDC 2014 just last month. Buying up SmartThings would give Samsung a big leg up in the home automation space (their smart appliances haven't exactly taken off as they would have hoped), and for a fraction of the cost of Nest.

Samsung’s stock performance

Investment in South Africa

• Samsung Electronics is planning to make a $375 million investment in the Dube TradePort special economic zone, located near the city of Durban, South Africa, to construct a TV plant.

LG

Financial

• LG Electronics Inc (066570.KS) signalled further improvement in its mobile business after record smartphone sales propelled the South Korean manufacturer to its highest


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quarterly profit in more than three years.

• Chief Financial Officer Jung Do-hyun said mobile income should improve again in the current quarter with the help of LG's flagship G3 smartphone, which has been well-received by critics since its late-May launch.

• LG said operating profit rose 26.5 percent to 606 billion won ($589.04 million) in April-June, versus a 524 billion won mean estimate of 39 analysts polled by Thomson Reuters I/B/E/S.

LG’s stock performance

CE Market

Ultra HD TV Shipments

• The makers said TV vendors estimate 2014 global Ultra HD TV shipments will reach 20 million units while TV ODMs expect 16 million units.

ICT Industry

Apple

Mobile Payment

• Apple may introduce a new mobile-payment system as soon as the fall, which would add yet another tech giant to a particularly hot trend in mobile.

• Conversations between Apple and payments-industry companies have heated up in recent months, with several people briefed on the talks saying that Apple executives have discussed launching a mobile “wallet” as soon as this fall for people to use their iPhones to pay for goods in physical stores.

• Apple has long been expected to make such a move, but it’s been cautious so far amid failed efforts by Google and others to enable payments and other transactions by phone. Now, though, the company’s plans are coming into greater focus.

Apple’s stock performance

Acquisition of BookLamp

• Apple has acquired BookLamp, a site that used “book DNA” and computer algorithms to yield better book recommendations. BookLamp had seemingly shut down earlier this year, but Apple confirmed that it’s acquired the Boise, Idaho-based company.


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Cisco

IoE Innovation Center

• Cisco (NASDAQ: CSCO) and Barcelona City Council announced plans to open a Cisco Global IoE Innovation Center in Barcelona. The Innovation Center will provide a platform for research, technological development and new market opportunities related to the Internet of Everything for smart cities.

Cisco’s stock performance

ICT Market

Global HD STB Market

• The Global HD STB market will grow at a CAGR of 2.38 percent over the period 2014-2018.

• STBs are devices that are connected to televisions at home. They connect a TV to an external signal source and transform the transmitted signal into video content, which is then displayed on the screen. The source may be cable, satellite, broadband, telephone line, or DSL connection. There are primarily two types of STBs, namely SD DTB and HD STB. HD STB has the ability to show both SD and HD channels as well as providing better sound and picture quality and greater viewing experience. HD STBs are further classified into four types: cable, satellite, IPTV, and hybrid STB. HD STBs also provide interactive services such as VOD, video conferencing, high-

speed internet television, and/or home networking.

Tablet Market

• Apple and Samsung have lost ground in the tablet computer market as growth cools in the once-hot segment, the research firm IDC said Thursday (July 24). An IDC survey said sales of tablets in the March-June period were 49.3 million, up a modest 11 percent from a year ago but down 1.5 percent from the previous quarter.

• Apple, which popularised tablets with its iPad, remained the largest single vendor but its market share fell to 26.9 percent from 33 percent last year. IDC's survey showed Apple shipped 13.3 million iPads, above Apple's own report this week showing 12.3 million sold. South Korean Samsung saw essentially flat sales in the period of 8.5 million units, while its market share slipped to 17.2 percent from 18.8 percent a year ago.

LCD Monitor Shipments

• Global LCD monitor shipments in 2014 may drop 5-10% on year due to competition from tablets and notebooks and the tight supply may affect shipments as well.

• Amid the declining monitor market, vendors are looking to niche markers with value-added, high profit products in order to maintain profits. Higher resolutions and larger sizes are also a focus for vendors, the makers noted.

Project Scorpio 2.0 Datacenter Project

• Taiwan-based server ODMs including Quanta Computer, Wistron and Inventec may obtain orders arising from the beginning of Project Scorpio 2.0, the second version of a project to boost low-cost and highly scalable data center infrastructure jointly by China-based Internet service operators Baidu, Alibaba and Tencent through collaboration with Intel, in September


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2014, according to Taiwan-based supply chain makers.

• Established in 2011 and similar to Facebook's Open Compute Project, Project Scorpio is intended to specify hardware standards on rack modules, network modules, power supply modules, servers, cooling modules of data centers as well as standard centralized operational management, the sources said.

• Since the release of Project Scorpio 1.0 in 2012, development of standard specification has progressed slowly mainly because Baidu, Alibaba and Tencent have had differing hardware needs and coordination has taken much time, the sources noted. However, development of Project Scorpio 2.0 is expected to proceed faster as the parties concerned have reached a consensus.

• While Taiwan-based ODMs stand a good chance of landing orders for data center servers, they are expected to face competition from China-based fellow makers in 2-3 years mainly because the China government has been actively helping local industries, the sources indicated.

IoT Market

• The Internet Of Things represents a major departure in the history of the Internet, as connections move beyond computing devices, and begin to power billions of everyday devices, from parking meters to home thermostats.

• Estimates for Internet of Things or IoT market value are massive, since by definition the IoT will be a diffuse layer of devices, sensors, and computing power that overlays entire consumer, business-to-business, and government industries. The IoT will account for an increasingly huge number of connections: 1.9 billion devices today, and 9 billion by 2018. That year, it will be roughly equal to the number of smartphones, smart TVs, tablets, wearable computers, and PCs combined.

• In a new report from BI Intelligence, we look at the transition of once-inert

objects into sensor-laden intelligent devices that can communicate with the other gadgets in our lives. In the consumer space, many products and services have already crossed over into the IoT, including kitchen and home appliances, lighting and heating products, and insurance company-issued car monitoring devices that allow motorists to pay insurance only for the amount of driving they do.

• Connected advertising and marketing. Cisco believes that this category (think Internet-connected billboards) will be one of the top three IoT categories, along with smart factories, and telecommuting support systems.

• Intelligent traffic management systems. Machina research, in a paper prepared for the GSM Association, sees $100 billion in revenue by 2020 for applications such as toll-taking and congestion penalties. A related revenue source will be smart parking-space management, expected to drive $30 billion in revenue.

• Waste management systems. In Cincinnati, residential waste volume fell 17% and recycling volume grew by 49% through use of a “pay as you throw” program that used IoT technology to monitor those who exceed waste limits.

• Smart electricity grids that adjust rates for peak energy usage. These will represent savings of $200 billion to $500 billion per year by 2025, according to the McKinsey Global Institute.


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• Smart water systems and meters. The cities of Doha, São Paulo, and Beijing have reduced leaks by 40 to 50% by putting sensors on pumps and other water infrastructure.

• Industrial uses including Internet-managed assembly lines, connected factories, and warehouses, etc.

Turkish IT Market

• The analysts forecast the IT market in Turkey to grow at a CAGR of 8.43 percent over the period 2013-2018.

Flat Panel Industry

Japan Display

IPS-NEO Panel Production

• Japan-based TFT-LCD panel maker Japan Display (JDI) has started production of IPS-NEO, high-contrast technology evolved from IPS, panels at its 6G LTPS factory in Japan.

• In a bid to compete for orders from smartphone vendors with products offering a better price and performance ratio in addition to improved viewing fuctions, JDI has been developing the technology on its 6G (1,500 x 1,850mm glass substrate) LTPS line in its Mobara Plant and has begun mass producing the IPS-NEO technology as of July, said industry sources.

• LCD panel manufacturing requires an orientation process that aligns liquid crystal molecules in a uniform direction. In this process, an orientation membrane is rubbed in a fixed direction with a rubbing roller with cloth wound on it. With this method, unevenness of the circuit pattern formed on the glass substrate could impede proper orientation and the involvement of foreign particles in the rubbing process may affect the production yield. Adopting JDI's unique photo alignment method, IPS-NEO is free from these issues and achieves a higher contrast, improved viewing angle characteristics and an improved production yield, the company said.

LG Display

Financial

• LG Display Co Ltd said quarterly profit fell more than 50 percent for the second time in three quarters, pulled down by a stronger South Korean won and subdued demand for personal computers (PC) and tablet devices.


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• The world's No.1 maker of liquid crystal displays (LCD) had forecast a pickup in panel shipments during April-June, while analysts were expecting stronger second-half earnings as TV demand in key markets improved.

• LG Display, which counts affiliate LG Electronics Inc and Apple Inc as major customers, on Wednesday said shipments volume improved from a year earlier but that the average sales price of panels slipped further from January-March.

• For April-June, LG Display reported a 55.4 percent fall in operating profit to 163 billion won ($159.23 million), compared with a 184 billion won mean estimate of 37 analysts polled by Thomson Reuters I/B/E/S. Revenue fell 9 percent on year to 6 trillion won.

LG Display’s stock performance

AUO

Strong competition in Ultra HD TV Panels

• While still being the main suppliers of Ultra HD TV panels to China-based TV vendors, Innolux and AU Optronics (AUO) face strong competition from South Korea-based makers which have offered low-cost RGBW models to cater to the growing demand for inexpensive Ultra HD TVs in the China market, according to Taiwan-based supply chain makers.

• Korea makers were previously focused primarily on high-end Ultra HD TV panel production but have now shifted to production of entry-level and mid-range units as well in order to tackle orders from China vendors.

AUO’s stock performance

CSOT

AMOLED

• Following its aggressive investments in 8.5G production lines, China Star Optoelectronics Technology (CSOT) has become the largest supplier of 32-inch panels worldwide. The company has also established a joint venture with the government of Wuhan, China, through which CSOT will officially enter the small-to-medium-size panel application market using the joint venture's 6G LTPS/AMOLED production lines.

• CSOT has already begun trial production of AMOLED panels, and by 2016 is expected to start mass producing the technology. The company's AMOLED production facilities will contribute to a total of 10 overall AMOLED production lines in China that will go into production or have already begun production from 2014-2016.

• China panel makers continue to receive financial assistance both from the central government in China as well as from many local governments to develop AMOLED panel facilities. The makers are also receiving various bank loans, subsidies and plentiful access to state property in China, and are making efforts to use talent from Taiwan and Korea to develop the AMOLED panel industry.

• Despite China makers' efforts to establish AMOLED facilities through 2016, Digitimes Research believes they will face high production costs and low yields, making the technology less


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competitive in terms of pricing compared to TFT LCD technology, and limiting the influence China makers will have in the segment in the short term.

Flat Panel Market

Open Cell TV panel Prices

• Pricing for 32-inch open cell TV panels has increased from about US$85 in mid-June 2014 to US$87 in mid-July, up from about US$79 in mid-April, according to DisplaySearch.

• Pricing for 40- and 42-inch 60Hz open cell TV panels meanwhile has remained between US$128-142 in July, flat on month, while 48- and 50-inch Full HD TV panels have also shown flat pricing between US$186-206.

Ultra HD TV Panel Shipments

• Ultra HD TV panel shipments reached 4.47 million units in second-quarter 2014 for a total of 6.27 million in the first half of 2014. The penetration rate for Ultra HD TVs witnessed an increase from 3.2% in the first quarter to 7.2% in the second quarter for an overall 5.3% growth during the first half of 2014, according to WitsView.

• Taiwan panel makers held a 76% market share in overall Ultra HD TV panel shipments during 2013 but that percentage dropped to 54% in the first quarter of 2014 and further to 43% in the second quarter due to increased competition from Korea panel makers, the firm added.

Ultra HD TV Panel Market

• The market for ultra high definition panel globally is estimated to reach USD 30,404.6 million by 2020. In terms of volume sale, the market for UHD panel is expected to reach 5,704.5 thousand units by 2020, at a CAGR of 9.2% from 2014 to 2020. Factors such as increasing use of UHD displays in commercial sector and proliferating use of UHD TVs in media and broadcasting

industry are supporting the growth of ultra high definition panel market.

Plastic and Flexible AMOLED Display

• The next evolution is plastic displays and flexible displays. IDTechEx expects the first flagship phone with a flexible display to ship in 2017. Based on this scenario, the market for plastic and flexible AMOLED displays will rise to $16bn by 2020.

• Glass-based displays will remain an important technology, especially in TV applications where scale-up and cost reduction are still big challenges. Flat and curved OLED TVs were recently launched by Samsung and LG. While the market for OLED TV panels will be relatively small in 2014, it will experience strong growth in the next ten years, with a projected 42% CAGR.


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Semiconductor Industry

Broadcom

Cost Cutting

• Broadcom will downsize employees, affecting 2,500 individuals, after the company failed to sell its cellular base band business. It recently reported neither profits nor revenue growth for its latest quarter.

• Broadcom will take a $417 million charge, about $150 million of it this quarter, for the restructuring which will include closing or consolidating 18 offices. "The decision to exit the cellular base band business puts Broadcom on a path to being a stronger company," said Broadcom's chief executive Scott McGregor.

• The decision underscores the significance of the smartphone market and how it is consolidating into the hands of fewer, larger system and chipmakers. The layoffs represent about 20 per cent of Broadcom's 12,400 employees.

Broadcom’s stock performance

STMicroelectronics

MEMS Microphone Lab in Taiwan

• STMicroelectronics (NYSE:STM), a global semiconductor leader serving customers across the spectrum of electronics applications, announced it has opened a new MEMS Microphone Lab (Anechoic Chamber) in Taiwan to test and analyze high-performance

audio applications built with ST's MEMS microphones.

STMicroelectronics’s stock performance

Semiconductor Market

Driver and Sensor Market in Smart Lighting

• The market for LED drivers, MCUs, sensors and other chips used in smart lighting will grow from around $67 million in 2014 to $1.05 billion in 2019. This is according to a new report from industry analyst firm NanoMarkets titled, "The Markets for Smart Lighting Drivers, Controllers and Sensor Chips – 2014."


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Software Industry

Google

Acquisition of DrawElements

• Google has purchased Helsinki-based 3D graphics start-up DrawElements, the company confirmed on its web-site.

• While finan-cial terms of the deal were not disclosed, Arcticstart-up reports that the sale price was over $10 million.

Google’s stock performance

Facebook

Cooperation with Samsung for VR

• Oculus VR made its name building high-end virtual reality headsets for the living room, but it's leaving mobile to the other guys.

• The virtual reality pioneer, which Facebook finished purchasing for $2 billion earlier this week, is working with Samsung Electronics on a headset that uses mobile devices to create a VR experience, people familiar with the matter say.

• Both companies stand to benefit widely from working together: Samsung gains access to Oculus's software and specialized hardware to help build its own virtual reality headset for mobile devices. Meanwhile, Oculus gains access to Samsung's manufacturing expertise and help as it develops a headset for consumers. In addition, working with the Korean titan will allow

Oculus to introduce virtual reality to many more consumers than it otherwise would be able to reach.

• The current prototypes are being shipped by Samsung to developers, people familiar with the matter say, and so far it appears they can't make enough to meet demand. Financial considerations between the two companies, how the final product will be unveiled and marketed, which company's names will appear on them, and in what order, are still unclear.

Facebook’s stock performance

LinkedIn

Acquisition of Bizo

• Pro social network LinkedIn has purchased marketing-platform startup Bizo in a deal worth $175 million, the company announced.

• Bizo produces B2B marketing products that measures display and social advertising campaigns for specific audiences. Recently, the company launched a marketing automation product called Multi-Channel Nurturing, as VentureBeat previously reported.

• The $175 million acquisition will see LinkedIn paying 90 percent in cash; the remaining 10 percent is in stock.


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Service Industry

Servis Market

Pay TV Market

• The worldwide pay-TV market continues to grow in Q1 2014. According to ABI Research’s Market Data, the total pay-TV subscriber base is expected to surpass 936.4 million at the end of 2014, generating $280.4 billion in service revenue.

• Although the global cable TV market grew in 2013, the North American cable TV market lost around 4% subscriber base in 2013. High subscription cost and other pay-TV alternatives are blamed for the declining subscriber base; however, cable TV operators experienced slower subscriber loss rate in the past two quarters. In Q1 2014, subscriber net loss of major cable operators in the United States was around 7k compared to over 200k subscriber loss in 4Q 2013. “Innovative services such as Comcast’s cloud based X1 system which allows customers to store and watch TV Shows on different devices has helped to reduce churn,” commented Jake Saunders, VP and practice director of core forecasting. “The North American pay-TV subscriber base is expected to reach 113.2 million in 2014.”

• ABI Research anticipates that the worldwide pay-TV subscriber base will reach 1.1 billion subscribers in 2019. “Emerging markets such as Asia-Pacific and Latin America will have a higher growth rate than mature markets in the years to come. The global pay-TV market is expected to generate $331 billion in 2019,” says Khin Sandi Lynn, industry analyst.

References

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