Ming-Chi Kuo May Lessen Focus on Apple Following Reported Departure From KGI Securities

Ming-Chi Kuo, widely considered to be one of the best analysts covering Apple, may no longer focus his research on the iPhone maker.

Kuo speaking on behalf of DigiTimes

China Times reports that Kuo resigned from Taiwanese research firm KGI Securities on Friday and, while his next move is uncertain, the publication suggests he will focus less on Apple and more on other emerging industries.

Kuo has been one of the most prolific sources of rumors about Apple's unreleased products and services since as early as 2010, when he was a senior analyst at industry publication DigiTimes. He briefly covered Apple for Concord Securities in 2011, before moving to KGI Securities in early 2012.


Kuo's research notes typically relayed information gathered from Apple's supply chain partners in Taiwan and other Asian countries. This information frequently allowed Kuo to accurately predict upcoming products on Apple's roadmap, although the specific details and release dates were occasionally inaccurate.

While he doesn't have a perfect track record, our archive of Kuo's research notes reveals several high-profile rumors that proved to be accurate. In March 2016, over two years prior to the iPhone X, for example, he said Apple was developing a new iPhone with a 5.8-inch OLED display, glass back, and metal frame.

Later in 2016, he shared a laundry list of predictions about the iPhone 7 and iPhone 7 Plus, including the lack of a 3.5mm headphone jack, a new glossy Jet Black color option, stereo speakers, and improved water resistance.

Kuo also accurately forecasted the 10.5-inch iPad Pro, Apple Watch Series 2 with GPS, iPhone SE, Apple Pencil, 12-inch MacBook, and MacBook Pro models with a Touch Bar and Touch ID, and the MacBook Pro with Retina display. In between, he's shared tidbits about an iPod touch refresh with new colors and white front bezels.

If the news about Kuo is accurate, one has to wonder whether Apple had any involvement with his decision to step down. A few weeks ago, the company distributed an internal memo warning its own employees about the repercussions of leaking insider information, in an effort to maintain its culture of secrecy.

Kuo has yet to publicly comment on the report, and it's possible he may continue to cover Apple to at least some extent in the future.


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Ming-Chi Kuo Says Apple Considering Lower-Priced HomePod After Potentially Lackluster Sales

HomePod shipments "could be far below market expectations" this year, according to reputable KGI Securities analyst Ming-Chi Kuo.


"Our understanding is that the market expects HomePod shipments to arrive at 5-10 million units in the 2018 fiscal year, versus our forecast of only 2.0-2.5 million units," wrote Kuo, in a research note obtained by MacRumors.

Kuo believes the "major miss" in HomePod shipments could be attributable to product design and pricing, among other factors.

For starters, at $349, he said the HomePod's high price "could undermine demand despite excellent sound quality." He added that Siri provides an "uninspiring user experience" compared to competitors, presumably including the Amazon Echo with Alexa and the Google Home with Google Assistant.

Kuo said the HomePod's potentially lackluster sales also highlights "underlying concerns" in Apple's development of artificial intelligence.
It's been six years since Apple introduced Siri to the market, which was way ahead of the firm's major competitors. The massive population of iOS and macOS users is also conducive to the promotion of the voice assistant function. However, we note that for most users worldwide, Siri is not a must-have function, and Apple has not yet become a leading brand in the AI voice assistant market. We also note that HomePod has not added support for new languages in the device since launch, suggesting Apple is facing challenges in AI/voice assistant development spanning the globe; this will cap the shipments momentum of HomePod.
The oft-accurate analyst said Apple is "mulling" a "low-cost version" of the HomePod that may help short-term shipments. However, even if the product materializes, he predicts it will only provide a short-term boost to sales.

More importantly, Kuo believes Apple needs to improve Siri, support more languages, and make other improvements to the HomePod to stay competitive against Amazon and Google in the smart speaker market.

Kuo's research on potentially lower-than-expected HomePod shipments echoes similar reports from Bloomberg News and the China Times earlier this week. Rumors about a lower-priced HomePod have also surfaced a few times in recent months, with one report suggesting a $150-$200 price in the United States.

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Ming-Chi Kuo: Apple’s Biggest Challenge to Innovation in Recent Years Has Been Software

Apple's "biggest challenge in innovation in recent years has been in software, not hardware," according to KGI Securities analyst Ming-Chi Kuo.


"In several cases we have seen Apple lagging in software versus hardware development, which bodes badly for its innovation strategy of software and hardware integration," wrote Kuo, in a research note obtained by MacRumors.

Kuo's sole example is that Apple's first-mover advantage in augmented reality has been significantly narrowed by Chinese smartphone maker OPPO.

He believes that OPPO has caught up with Apple's ARKit platform in only six to nine months, largely based on the fact that the augmented reality version of Honour of Kings will be compatible with both iPhones and OPPO's lower-priced smartphones when it launches next month, despite having high-tech requirements.

"The key is that OPPO is in charge of developing API, integrating hardware and software, and cooperating with SenseTime's algorithm and Tencent's game software development team," said Kuo, referring to the two Chinese companies that developed Honour of Kings, estimated to have over 200 million players.

Kuo adds that, since the debut of ARKit at WWDC 2017, there has been no "heavyweight" augmented reality app for iPhones and iPads.
We think Apple's endeavors in the AR field should have enabled it to offer AR applications popular with the market before the Android camp, including: (1) the announcement of ARKit, an AR development tool, ahead of Google; (2) customization of the SoC (including CPU and GPU); and (3) customization of the rear camera.

However, since the debut of the ARKit nearly a year ago, there has been no heavyweight AR application on iOS. Given that the AR version of Honour of Kings runs not only on the iPhone but also on OPPO's smartphone, Apple's first-mover advantage gap in AR has been significantly narrowed by OPPO.
In terms of software in general, it can be argued that the past year wasn't Apple's greatest. iOS 11 and macOS High Sierra have suffered from several bugs, ranging in severity, including a major root password vulnerability on Macs to iMessages appearing in the wrong order across devices.

Fortunately, in January, multiple reports claimed that Apple plans to increase its focus on the quality of its software platforms, presumably resulting in a greater emphasis on bug fixes, performance improvements, and stability.


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KGI: Samsung to Cancel Under-Display Fingerprint Sensor Plans for This Year’s Galaxy Note 9

Samsung is unlikely to introduce an under-display fingerprint recognition feature in its 2018 flagship smartphone line-up, according to KGI Securities research analyst Ming-Chi Kuo. Kuo had earlier predicted that the South Korean firm was planning to debut an under-screen fingerprint sensor in its Galaxy Note 9, due for release in the third quarter of this year, but Kuo now believes Samsung will cancel the feature because of technical issues. The following quote is taken from a KGI research note obtained by MacRumors and has been edited for clarity.
While we previously predicted that Samsung's new flagship Galaxy Note 9, due out in 3Q18, will come equipped with an under-display fingerprint recognition function, we now believe Samsung will cancel this feature on Note 9 because both ultrasonic (provided by Qualcomm) and optical (provided by Samsung LSI, Goodix, Egis, and Synaptics) solutions cannot meet Samsung's technical requirements.


According to Kuo's understanding of the technologies involved, under-display fingerprint solutions continue to have many technical issues surrounding the use of screen protectors as well as different environments affecting recognition rates and power consumption.

Previous reports suggested Samsung decided not to include a fingerprint scanner under the display of the recently launched Galaxy S9 and Galaxy S9+ smartphones due to similar technical difficulties. The fingerprint scanner remains positioned on the back of each device, just like the previous Galaxy S8 and Galaxy S8+ models. However, despite the ongoing problems, KGI remains "positive" on the outlook for under-display recognition in OLED panels and sees Samsung leading the way in this regard, although he doesn't expect mass-market adoption of the technology until the first quarter of 2019 at the earliest.
We recognize that under-display fingerprint recognition is key for full-screen designs, and we don't think that facial recognition can fully replace fingerprint recognition. For these reasons, we remain positive on this technology over the long term. Also, as under-display fingerprint recognition module has a unit price 4-6 times that of capacitive fingerprint recognition module (or higher), we think that once the former module goes into mass production, the contribution to suppliers' sales and profits will be significant.
Apple was widely rumored to be attempting to integrate Touch ID under the display on the iPhone X, or even on the side or back of the device, but Apple hardware engineering chief Dan Riccio has suggested it ditched any form of fingerprint scanning after hitting "early line of sight" with the company's Face ID depth-sensing facial recognition. Indeed, Apple is said to be so confident in Face ID that it is expected to abandon Touch ID in favor of the TrueDepth system on all of its new iPhone and iPad models released in 2018.

Notwithstanding Samsung's longer-term aims, Kuo believes the launch of iPhone X late last year has tilted general interest in the mobile industry away from under-display fingerprint recognition, and towards camera-based 3D sensing technologies as the ideal user authentication solution. Inquiries by Android smartphone vendors into 3D-sensing technologies are said to have at least tripled since Apple unveiled its TrueDepth camera and Face ID technology.

Kuo went on to say he believes the next two to three years will see shipments of 3D sensor-equipped Android devices to exceed those with under-display fingerprint recognition by a factor of two or three or more. This will be mainly due to 3D-sensing's wider compatibility with LCD screens than under-display optical fingerprint recognition, which is exclusive to OLED panels.

Related Roundups: iPhone X, 2018 iPhones
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KGI Expects Intel to Be Exclusive Supplier of Modems in 2018 iPhones

Intel could be the exclusive supplier of LTE modems for all new iPhones launched in 2018, according to KGI Securities analyst Ming-Chi Kuo.



The key takeaway of the research note, obtained by MacRumors:

We expect Intel to be the exclusive supplier of baseband chip for 2H18 new iPhone models, while Qualcomm may not have a share of the orders at all.

Kuo previously expected Intel to supply 70 percent of the modems, with Qualcomm providing the remaining 30 percent of orders, but he now believes Intel will be the sole supplier given several competitive advantages.

First and foremost, Intel’s latest XMM 7560 modem [PDF] supports both GSM and CDMA, meaning that Apple could release a single iPhone model that works across AT&T, Verizon, T-Mobile, and Sprint. Intel modems previously lacked CDMA, meaning Apple could never fully ditch Qualcomm for all iPhone models.

Apple is also embroiled in a major lawsuit with Qualcomm over anticompetitive licensing practices, and Kuo believes the iPhone maker switching to Intel as its exclusive modem supplier will place added pressure on Qualcomm.

Kuo added that it’s too early to tell if Intel will be able to maintain its position of exclusivity in the future, as Apple typically prefers to diversify its supply chain. He adds that Apple may give orders to Qualcomm again in exchange for concessions in the ongoing lawsuit between the two companies.

In order to make up for the lost iPhone business, Kuo expects Qualcomm will be more aggressive in securing orders from Chinese smartphone makers. However, he believes these Chinese companies don’t want a monopolized market, so Qualcomm’s ability to gain market share in the country may be limited.

Kuo also reiterated that LTE transmission speeds will increase significantly in new iPhone models released in the second half of 2018.

In a previous research note from November, Kuo highlighted that Intel’s XMM 7560 modem supports 4×4 MIMO technology, compared to only 2×2 MIMO in the iPhone 8, iPhone 8 Plus, and iPhone X. The faster LTE speeds will also be made possible by an upgraded antenna design in the next iPhones.

Related Roundup: 2018 iPhones

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Ming-Chi Kuo Casts Doubt on iPhone SE 2, Expects Few Changes Should New Model Launch

KGI Securities analyst Ming-Chi Kuo, who has sources within Apple's supply chain in Asia, has issued a research note today that casts doubt on rumors about a second-generation iPhone SE launching in the second half of 2018.


Kuo believes Apple doesn't have enough spare development resources to focus on launching another iPhone this year, with three new models already in the pipeline, including a second-generation iPhone X with a "much different" internal design, a larger 6.5-inch version dubbed iPhone X Plus, and a lower-priced 6.1-inch iPhone with Face ID but design compromises like an LCD screen.

An excerpt from the research note, obtained by MacRumors, edited slightly for clarity:
The announcement of three new iPhone models in the same quarter in the second half of 2017 was the first time Apple made such a major endeavor, and we believe the delay of iPhone X, which had the most complicated design yet, shows that Apple doesn’t have enough resources available for development. […]

With three new models in the pipeline for the second half of 2018, we believe Apple may have used up its development resources. Also, we think the firm will do all it can to avoid repeating the mistake of a shipment delay for the three new models.
If there really is a so-called iPhone SE 2 on Apple's roadmap, Kuo expects it will have few outward-facing changes. He predicts the device would likely have a faster processor and a lower price, rather than iPhone X-like features like a nearly full screen design, 3D sensing for Face ID, or wireless charging.

Related Roundup: iPhone SE
Buyer's Guide: iPhone SE (Don't Buy)

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KGI Shares Latest on 6.1-Inch iPhone, Next iPhone X and iPhone X Plus to Have 4GB of RAM and Two-Cell Batteries

KGI Securities analyst Ming-Chi Kuo, who often relays information gathered from sources within Apple's supply chain in Asia, today shared a trio of new research notes that outline both new and existing predictions about the new iPhone X, iPhone X Plus, and lower-priced 6.1-inch iPhone expected later this year.

iPhone X Plus dummy model versus current iPhone X via Ben Geskin

MacRumors obtained a copy of each research note, and we've rounded up the key points. More details are available in our 2018 iPhones roundup.

All-New 6.1-inch iPhone with LCD


New:
• Taiwanese manufacturers Pegatron, Foxconn, and Wistron will be the key assemblers of the 6.1-inch iPhone, with 60 percent, 30 percent, and 10 percent allocation of EMS respectively
• Japan Display will supply around 70 percent of LCD panels for the 6.1-inch iPhone. Rumors suggest Apple will use Japan Display's six-inch Full Active LCDs that only require ultra-slim 0.5mm bezels on all four sides

Reiterated:
• Nearly full screen design with no home button and notch for TrueDepth sensors
• 3D sensing for Face ID and Animoji
• Rectangular-shaped, one-cell battery with 2,850-2,950 mAh, up to 8.5 percent larger than current iPhone X. The increased capacity will be the result of a smaller logic board given manufacturing advancements
• Lower price point: starting at between $700 and $800 in the United States

The rumored 6.1-inch iPhone is shaping up to be a lower-priced iPhone X with some design compromises, which Kuo previously said will include an aluminum frame, a lack of 3D Touch, a single rather than dual lens rear camera, and 3GB of RAM, which will be less memory than other new 2018 iPhones have.

Next-Generation iPhone X and iPhone X Plus


According to Kuo, the second-generation iPhone X and a larger 6.5-inch version we're calling iPhone X Plus will each have an increased 4GB of RAM. Unsurprisingly, given its larger physical size, the iPhone X Plus is also expected to have up to a 25 percent larger battery capacity of 3,300-3,400 mAh vs. iPhone X.

Kuo adds that Apple has settled on a two-cell, L-shaped design for the second-generation iPhone X and iPhone X Plus battery, compared to a single-cell, L-shaped design that could have yielded up to 10 percent additional capacity.

By the sounds of it, the new iPhone X and iPhone X Plus, beyond the latter's larger screen size, won't be significant upgrades. Kuo doesn't expect improvements to be made to the TrueDepth camera system until 2019. Nevertheless, he expects the devices to sell well, especially the lower-priced 6.1-inch iPhone.

Related Roundup: 2018 iPhones

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KGI: 6.1″ iPhone to Have Single-Lens Rear Camera, Aluminum Frame, 3GB RAM, and No 3D Touch, Cost $700-$800

KGI Securities analyst Ming-Chi Kuo today shared additional details about the rumored 6.1-inch iPhone that he expects to launch in the second half of 2018.

Note: KGI's image has a slight error. iPhone 8 Plus has 3GB of RAM.

We already know the device is said to have some iPhone X features, including Face ID, but with some design compromises to achieve a cheaper price point. That will include an LCD screen, as known, and now Kuo says the device will have an aluminum frame, single-lens rear camera, and no 3D Touch.

In a research note obtained by MacRumors on Tuesday, Kuo added that the 6.1-inch iPhone also won't adopt the iPhone X's stacked logic board and L-shaped battery pack. Instead, he said the device will have a standard non-stacked logic board and rectangular battery pack like the iPhone 8 and iPhone 8 Plus.

Kuo believes the 6.1-inch iPhone will be a mid-range device priced between $700 and $800 in the United States, up from his previous $650 to $750 estimate. The device is expected to be announced around September-October as usual alongside a new 5.8-inch iPhone X and a larger 6.5-inch version dubbed iPhone X Plus.

The research note reads in part:
Development schedule of new 6.1" LCD iPhone slightly behind 6.5" and 5.8" OLED models, but it may enjoy extended longevity into 1H19F, boosting slow season outlook: We predict the 6.1" LCD iPhone will differ from the 6.5" and 5.8" OLED models in terms of certain specs, for reasons of cost/price and product segmentation. However, this shouldn’t have any effect on key user experience. We revise up our price projection for the 6.1" model from $650-$750 to $700-$800, and remain positive on shipments momentum.
KGI Securities expects the 6.1-inch iPhone to account for around 50 percent of the new iPhone lineup's shipments, with sales remaining strong into 2019.

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KGI: Larger-Sized iPhones Coming This Year Will Offset Weakening Demand for iPhone X in China

Weaker-than-expected demand for iPhone X in China has led market analysts to revise down shipments for the first half of 2018, but larger-sized iPhone models in the pipeline should see Apple grow its overall worldwide shipments year-on-year, according to KGI Securities analyst Ming-Chi Kuo, who shared the information in a new research report obtained by MacRumors.


We revise down 1Q18 and 2Q18 shipments of iPhone X to 18mn units and 13mn units, respectively, lower than market consensus of 20-30mn and 15-20mn units. We expect iPhone X will go to end of life (EOL) around mid-2018 and that total life cycle shipments will be around 62mn units, lower than our previous forecast of 80mn units.
Two main reasons are given for the weaker-than-expected demand for iPhone X in China. First, in Q4 2017, consumers were willing to wait on average 10 months longer before replacing their existing phones, compared to shorter replacement cycles in the year-ago quarter. In Q4 2016, smartphone users upgraded after between 14 and 16 months of ownership, compared to between 24 and 26 months in Q4 2017. The numbers are said to be reflected in lower shipment forecasts by Chinese phone makers for the second half of last year.

The second big factor is said to be Chinese consumers' penchant for larger displays. According to Kuo, the notched design on the iPhone X isn't yet compatible with many popular Chinese apps, leading many customers to see it as offering less usable screen space than 5.5-inch iPhone Plus models. This confusion, coupled with the high price of iPhone X, is thought to have undercut replacement demand.

Despite the downward revisions in shipments for the first half of this year – and Kuo's moot point that Apple might end iPhone X sales in the summer – Kuo believes overall iPhone shipments will maintain year-on-year growth of 0-5 percent over the first half of 2018, mainly thanks to Apple's corrected supply chain share. However, Kuo thinks Apple's next product line-up will significantly improve competitiveness in the second half of the year, when Apple's "real super cycle" will kick in.

Kuo has previously predicted Apple will introduce three iPhones in 2018: an OLED model that measures in at 5.8 inches like the current iPhone X, an OLED model that measures in at 6.5 inches that will serve as a sort of "iPhone X Plus," and a 6.1-inch model that features an LCD display. Kuo believes all three models will be equipped with a full-screen notched design and TrueDepth camera system like the iPhone X.
We believe the addition of 6.5-inch OLED and 6.1-inch LCD iPhone models will boost Apple's market share in China, and that the US$650-750 6.1-inch LCD iPhone will make it easier for users worldwide to own a 3D sensing and full-screen design iPhone which offers an innovative user experience.
For these reasons, Kuo believes iPhone shipments will grow 5-10 percent year on year over 2018. Kuo's estimate is better than the market consensus of overall smartphone shipment growth worldwide, which is expected to experience between a 5 percent decline and 5 percent growth. As a result, KGI retains a positive outlook for the iPhone supply chain in the second half of 2018.

Related Roundup: iPhone X
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Apple’s Upgraded TrueDepth Camera System in Future iPhones Will Necessitate Larger Batteries

iPhone models released in 2019 and later will likely feature an upgraded TrueDepth camera system that will consume more power, resulting in a need for larger-capacity batteries, according to KGI Securities analyst Ming-Chi Kuo.


In a research note obtained by MacRumors, Kuo said Apple has technologies at its disposal to develop larger-capacity batteries.
Apple capable of designing new system for large-capacity batteries: We believe the adoption of TrueDepth camera for 3D sensing in 2017-18 will create demand for larger-capacity batteries. From 2019, we predict iPhone may adopt upgraded 3D-sensing and AR-related functions, and it will consume more power, further increasing demand for large-capacity batteries. We believe Apple's key technologies, including semiconductor manufacturing processes, system-in-package (SIP), and substrate-like PCB (SLP), will create the required space for larger batteries.
Kuo unsurprisingly expects Apple will use these technologies to continue increasing iPhone battery capacities in 2019 and 2020, as it routinely does, which should result in even longer battery life for future models.

Kuo reiterated that TrueDepth will be expanded to a trio of iPhone models next year, including a new 5.8-inch iPhone X, a larger 6.5-inch model we're calling iPhone X Plus, and a new 6.1-inch mid-range model with an LCD display, but it sounds like the camera system will remain unchanged in 2018.

As far as next year is concerned, Kuo previously said the second-generation iPhone X could have a one-cell L-shaped battery that would provide up to 10 percent additional capacity compared to the two-cell battery in the current iPhone X, which of course could result in slightly longer battery life.

He added that next year's so-called "iPhone X Plus" is likely to retain a two-cell battery design, but the larger size of the 6.5-inch device will still allow it to have a higher capacity in the range of 3,300 to 3,400 mAh.

Apple is expected to release the new iPhone X and iPhone X Plus in its usual timeframe of September to October next year.

Related Roundup: iPhone X
Buyer's Guide: iPhone X (Buy Now)

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