According to Digitimes Research's latest findings from Taiwan's and China's smartphone/tablet upstream supply chain, in exchange for hardware players to pre-install its software applications such as Office, OneDrive or Skype onto their Android-based devices, Microsoft is offering them discounts on the patent licensing fees it charges their Android devices.On March 23, Microsoft announced it had reached an agreement with 11 hardware players including Samsung Electronics, Dell and Pegatron Technology, for them to pre-install Office programs such as Word, Excel, PowerPoint and OneNote, as well as OneDrive and Skype onto their Android devices.Based on Digitimes Research's understanding, these hardware players have all signed patent licensing agreements with Microsoft for their Android devices and need to pay fees for every Android-based product shipped.With Android devices' shipments rising, Microsoft's incomes from the patent licensing fees have grown to substantial levels. To expand the usage of its applications in mobile devices, Microsoft has now decided to return some of the incomes to hardware players in exchange for their pre-installing its applications onto their Android products.Google may find it difficult to ask its partners to reject the Microsoft policy, since price competition among Android devices is growing fierce, and profits from smartphones and tablets are shrinking gradually with some vendors even operating in losses. The market situation has made Microsoft's licensing fee discount a rather appealing offer for players that have been looking to cut down their costs to boost gross margins and the project is expected to attract more Android product vendors to join.

Semiconductor capital spending by Samsung Electronics is expected to reach an all-time high of US$15 billion in 2015, making the company's capex the world's highest in the semiconductor industry for the sixth straight year since 2010, according to an estimate of Digitimes Research. Meanwhile, SK Hynix's capex is expected to stay flat at US$5.1 billion in 2015 as compared to the previous year.Samsung's capex for system ICs in 2015 will reach US$4 billion compared to US$2.9 billion in the previous year, mainly to finance the commencement of its Line-17 fab in Hwaseong, Gyeonggi Province and a continued build-up of its 14nm production capacity at its plant in Austin, Texas.Samsung's and Hynix's capex for DRAM products will total US$6.4 billion and US$3.8 billion, respectively, in 2015. Samsung will focus on ramping up DRAM capacity at its Line-17 fab, while Hynix is expected to inaugurate its M14 fab in the second half of 2015 for expanding the production capacity of its 20nm chips. DRAM capex of the two Korea-based semiconductor firms will account for 75% of the global DRAM capex in 2015, said Digitimes Research.Additionally, Samsung will spend US$4.7 billion ramping up its NAND flash capacity, mainly the 3D NAND flash parts at its plant in Xian, China. Hynix will allocate US$1.3 billion to develop and produce its 10nm TLC (triple-level cell) NAND flash chips. Combined NAND flash capex by Samsung and Hynix will account for 64% of the global capex in the segment.Meanwhile, Samsung is also expected to begin construction of its semiconductor industry park in Pyeongtaek, Gyeonggi Province in 2015.The park will call for a total investment of up to KRW15.6 trillion (US$14.21billion) and is slated to begin commercial production in the second half of 2017.

Over the next five years the wearables industry will continue to develop applications ranging from smartwatches, smart wristbands and various facial applications, and will primarily rely on AMOLED technology for displays due to its flexible and energy-saving features, according to Digitimes Research.Wearable display shipments are expected to have a CAGR of 25% from 2015-2020 and AMOLED is expected to account for over 70% of displays used in smartwatches in 2015 largely due to Apple's move to incorporate the technology in the Apple Watch.Shipments for microdisplays that use LCoS and AMOLED technologies are also on the rise as headwear devices come down in pricing and are equipped with higher resolution, and because other vendors including Samsung Electronics and Sony move toward releasing new products in 2015.The smartwatch market is expected to reach 20 million units in 2015, up 500% on year, with most units sized between 1.3- to 1.8-inch, added Digitimes Research.

China panel makers BOE and Tianma Microelectronics are aiming to mass produce Full HD displays with in-cell LTPS TFT LCDs and TDDI (touch with display driver) technology for handsets but are currently unable to do so beyond displays equipped with HD resolution, according to Digitimes Research.The two makers have been cooperating with Synaptics to develop the technology and aim to mass produce it for major handset vendors in China. However, due to production issues both makers are currently halted at production for HD displays using the new touch technology and will resort to using two ICs instead of a single unit.Digitimes Research believes this will cause the makers to lose some of their competitive edge in the market and certain top-five ranked handset vendors in China are expected to seek other suppliers as a result.In terms of Full HD displays without touch panels, Tianma has an upper hand over BOE due to its LTPS TFT LCD technology and is also expected to supply 5-inch HD panels with in-cell technology to Motorola Mobility. Tianma and BOE are also aiming to reclaim orders for panels used in Xiaomi high-end handsets that were previously supplied from Korea and Japan makers, but there have yet to be finalized decisions. Tianma is a likely contender, however, which Digitimes Research said could greatly influence its position in the panel market as Tianma is pushing forth its LTPS Full HD displays to major customers, including Huawei Device, ZTE and Asustek.BOE meanwhile is expected to provide Xiaomi with displays equipped with a-Si TFT technology for use in mid-range Hongmi units as the maker's LTPS TFT LCD fab yields are still less than ideal, added Digitimes Research.

Lenovo's smartphone shipments in first-quarter 2015 reached only 8-9 million units, lower than the volume that Digitimes Research had previously estimated and about the same as the level a year ago due to high inventory built up during the fourth quarter of 2014. Lenovo brand image is relatively weak in the smartphone market and the fact that it has two smartphone brands - Lenovo and Motorola Mobility - is not helping its marketing. The two brands overlap in their targeting market segments and pricing ranges.Lenovo started pushing its 4G smartphone shipments at the end of the third quarter 2014 and achieved shipments of around 15 million units in the fourth quarter of 2014. Judging from Lenovo's component orders placed with the upstream supply chain in early 2015, Digitimes Research originally had expected Lenovo to ship at least 10 million smartphones in the first quarter.However, the China-based vendor's smartphone sales have been heavily relying on telecom carriers, and it shipments were greatly affected by quickly rising inventory in the fourth quarter of 2014 as China's telecom carriers had significantly adjusted their subsidization plans for handsets, weakening sales of smartphones bundled with telecom services.Meanwhile, Lenovo has been finding it difficult to build up a strong brand image in the local smartphone market. After launching the Lemon series product line for online marketing in December 2014, Lenovo has adjusted its smartphone lineup and is offering its Vibe series devices for the CNY1,500 and above price segment, the A series products for the sub-CNY1,000 price segment and the telecom channel, and the Lemon series for the sub-CNY1,000 price segment and the online market. But the China-base vendor's moves have so far been unable to improve its brand recognition.Lenovo originally expected the dual-brand lineup after its acquisition of Motorola Mobility would benefit its operation in overseas markets; however, the strategy instead is causing the two brands to compete against each other. The Motorola brand has seen stable demand in North America, and has also achieved significant results for its recently launched inexpensive smartphones in emerging markets such as Latin America and India. Against such a background, the China-based vendor introduced the inexpensive Motorola smartphone models to China in the first quarter, and the sales results were impressive. But Lenovo did not expect that such impressive results would come at a price: its Lenovo-branded phones were cannibalized by the Motorola devices.

Microsoft launched its latest Windows licensing fee subsidy program for Windows 8.1 in March which expanded the coverage of notebook models, adjusted subsidies, canceled the previous project's US$249 end-price ceiling, and made eMMC a standard specification for entry-level products, according to Digitimes Research's new report about Microsoft licensing. Vendors are able to place orders for the program before the end of June and notebooks adopting the operating system under the program can still be sold sell in the channel in the second half of 2015 despite the fact that Windows 10 will become available during that time. Digitimes Research believes the new subsidies should help boost consumer notebook ASPs, which have been weak since early second-half 2014, and prompt entry-level notebooks to adopt an ultra-thin form factor. Because of factors such as Microsoft already planning to release a new program for Windows 10 in July, brand vendors still have inexpensive notebook inventories accumulated from the fourth quarter of 2014, and specifications of Windows 8.1 notebooks may not be able support new functions in Windows 10, such as face recognition, despite these notebooks' eligibility to be upgraded to Windows 10 for free, Digitimes Research expects notebook vendors to take a conservative attitude about launching new inexpensive products using the Windows 8.1 program and will place their focuses on the Windows 10 one.

The global 10 largest EMS providers generated total revenues of US$319.2 billion in 2014, increasing 2.5% on year, according to Digitimes Research.Seven of the ten were Taiwan-based companies: Foxconn Electronics with US$135.5 billion, Pegatron US$38.5 billion, Quanta Computer US$29.8 billion, Compal Electronics US$27.2 billion, Wistron US$19 billion, Inventec US$14 billion and FIH Mobile US$6.8 billion, Digitimes Research indicated.The other three were US-based enterprises: Flextronics International ranking 5th with US$26.4 billion, Jabil Circuit ranking 7th with US$15.8 billion and Sanmina-SCI ranking 10th with US$6.2 billion.

March average retail pricing for 7W LED light bulbs (equivalent to 40W incandescents) in the China market decreased 21.4% on month to CNY29.10 (US$4.70), while 9W models (equivalent to 60W incandescents) slipped 11.6% to CNY38.80, according to Digitimes Research.Average retail prices for 40W- and 60W-equivalent LED bulbs in Japan in March stood at JPY1,740 (US$14) and JPY3,206 respectively, with falling 2.4% and 3.3%, Digitimes Research indicated.March average retail prices in other markets were: KRW9,883 (US$8.9, flat on month) and KRW13,889 (down 1.4%) in South Korea; US$20.70 (down 2.4%) and US$19.80 (up 2.1%) in the US; and EUR8.60 (US$9.40, down 10.4%) and EUR14.50 (up 2.1%) in Europe.Philips 40W-equivalent LED bulbs and Osram 60W-equivalent models in South Korea had the highest average lumen-price ratios of 95.2lm/US$ and 101.4lm/US$ respectively in March. In terms of luminous efficiency, Toshiba 40W- and 60-equivalent bulbs available in Japan had the highest average levels at 81.1lm/W and 105.1lm/W.

China's smartphone shipments are expected to have dropped over 30% sequentially in the first quarter due to decreased export shipment. China's first- and second-tier brand vendors were still digesting inventories for the domestic market from the previous quarter and China's small regional brand vendors posted results far weaker than expected performances.Digitimes Research originally estimated in January that China-based smartphone players' shipments in the first quarter would decline by about 20% sequentially. However, during visits to China in March, Digitimes Research's researchers found that the country's independent design houses (IDHs) and ODMs located in Shenzhen and Shanghai that mainly supply products to small regional vendors and white-box vendors nationwide were seeing sharps falls in shipments and orders compared to the previous quarter and a year a ago.The dismal situation has persisted since the end of the Lunar New Year holidays and has so far shown no sign of recovery.China's small regional brand vendors mainly target rural areas. Their products have been mostly in two price ranges, CNY700-1,000 (US$113-161) and around CNY1,500, in the past two years.In 2014, with first- and second-tier brand vendors aggressively pushing into both price segments, these regional vendors were left with little room in the market.China had a total of 600-700 small regional vendors during the peak of the first half of 2013, but in 2014, over 150 of them quit. Around the Lunar New Year holidays in February 2015, the industry saw another wave of company closures.Struggling for survival, those remaining players are focusing on models priced between CNY300-500, mostly using Spreadtrum's cheap 4G 3-mode TD-LTE solution; however, some of these players are pessimistic, and expect about 200 more of the small regional vendors to quit in 2015.

Lenovo is expected to ship less than 10 million smartphones in the first quarter of 2015 due to high inventories left over from the previous quarter as well as its marketing strategy and pricing for Lenovo- and Motorola-brand products, according to Digitimes Research.Lenovo managed to ship 15 million smartphones in the fourth quarter of 2014 thanks to increasing shipments of 4G models. It was expected to maintain its shipment momentum by shipping over 10 million units in the first quarter of 2015.However, affected by adjustments in subsidy policy at China-based telecom operators, which has weakened contract sales of smartphones, Lenovo may see its smartphone shipments decline to 8-9 million units in the first quarter, Digitimes Research estimated.Lenovo believed previously that its two brands would complement to each other in the global market. But sales of Motorola smartphones in the US have been steady recently, and the introduction of some entry-level models in emerging markets including India, Latin America and China has been successful. Thus, sales of Lenovo-brand smartphones have been squeezed by its sister brand, Digitimes Research commented.