| | | Could someone give me a synopsis of why OLED might be a good investment.
Do they have patents like Qualcomm. Are LEDs that much worse? Etc.
I'm going to try and do this without writing pages so I will necessarily be just skimming the highlights.
The fundamental opportunity that Universal Display provides is that is the only pure play way to invest into OLED's. Over the last 8 years or so, OLED's have grown from virtually zero in revenues to a roughly $24 billion industry today. The expectation is that they will continue to displace LCD's going forward as well as expand the roughly $125 billion display industry.
The major advantage that OLED's currently provide is that they have better image quality than LCD's. That has meant that OLED's have taken over the high-end of the television market as well as most of the high-end smartphone market with Apple a late comer to the trend. As prices for OLED panels fall, they will continue to grab share in both the television and smartphone markets.
Going forward, bendable OLED's will hopefully drive further differentiation from LCD's and drive a new upgrade cycle in the high-end smartphone market. Further out, OLED lighting may become a 2nd major market. The major issue with OLED lighting is still cost and there are some major technical hurdles to overcome but OLED lighting has a substantial market potential even if it is only used as a complementary solution to LED lighting.
As for how UDC operates, they generate revenues in two related ways.
1) UDC has patents that cover all commercial phoshorescent OLED emitters so they have licensed every OLED vendor selling displays. Samsung has a fixed license agreement but it is believed that the rest all have royalty licenses that are around 1% of revenues.
2) An OLED display contains three colors that emit light. UDC sells a phosphorescent red and green emitter to display vendors (at ~80% margins) but has yet to develop a viable phosphorescent blue so a much less efficient fluorescent blue is used instead.
In total UDC generated ~$335m in revenues last year from a total OLED market of around $24 billion.
The development of a phosphorescent blue is considered UDC's holy grail. It would mean increased revenues from existing applications, extend UDC's patent protection, and substantially increase the total addressable market. Currently, OLED's are more power efficient than LCD's when displaying movies and other images that dont have much white. However, a laptop screen displaying an excel spreadsheet or silicon investor has a substantially higher power consumtion than a comparable LCD display. A phosphorescent blue would allow OLED's to have better image quality and lower power consumption which would mean make the transition to OLED displays even faster than is currently expected. UDC will only say that they are working heavily on blue (a third of the company) and that they have made significant progress.
There are some long-term risks to UDC. One is that a competing display solution like microLED's makes it to market and starts to displace OLED's. The history of displays though is that most new display technologies fail and even when successful, things generally take longer than expected. The second is the expiration of UDC's base patents that allow them to have a monopoly on all commercial phosphorescent emitters. The key date is the end of 2022 when LG and Samsung's patent licenses expire. Management states that they have a broad swath of patents that will allow them to continue to collect royalties past that date but we'll have to see how that plays out.
There are some near-term issues due to oversupply of the market. We need to see OLED prices come down, particularly in mobile, to absorb the capacity that is scheduled to come on-line over the next 18 months. The progress of the Chinese vendors in increasing yields will be key to UDC's 2019.
I'll stop there, but welcome to the thread and feel free to ask questions (even if you think that they are basic).
Slacker |
|
