Steve Abramson Is OLEDing the Way

The Fool's Anders Bylund recently interviewed Steve Abramson, president and COO ofRule Breakers recommendation Universal Display (Nasdaq: PANL  ) . The company specializes in the organic light-emitting diode technology appearing in new kinds of display screens. Here, the company's president fills us in on the market for this technology, its customers, solving problems, and more.

Anders Bylund: Can you start us off with a brief description of Universal Display?

Steve Abramson: Universal Display Corporation is a leading technology developer focused principally on developing and commercializing state-of-the-art organic light-emitting device (OLED) technology for use in flat-panel displays and lighting products. Our business model is based on an intellectual-property licensing strategy. Working with many of the leading electronic display and lighting manufacturers today, we also make and sell proprietary OLED materials for their use.

Universal Display has been working in this field for more than a decade. Initially, we funded research at Princeton University and the University of Southern California. Since then, while continuing to fund groundbreaking university research, we have also built our own state-of-the-art research and development facilities in Ewing, N.J.

We have a strong IP position with more than 800 worldwide patents issued and pending. For example, our proprietary PHOLED phosphorescent OLED technology offers up to a 4-to-1 power advantage over conventional OLEDs and comparable LCDs. This power savings potential is key for portable battery-operated devices, such as cell phones and MP3 players, as well as for OLED TVs and lighting products. In addition, we have demonstrated strong technology platforms in TOLED (transparent/top-emission OLED), FOLED (flexible OLED), and WOLED (white OLED) lighting technologies. Today, we are considered a pioneer and technology leader in this field.

Term

Meaning

OLED

Organic light-emitting device

PHOLED

Phosphorescent organic light-emitting device

TOLED

Transparent/top-emission organic light-emitting device

FOLED

Flexible organic light-emitting device

WOLED

White organic light-emitting device

Bylund: How large a global market do you envision for OLED screens, roll-up displays, lighting applications, and more?

Abramson: Today, the flat-panel display market is almost a $100 billion industry, and the total lighting markets combined are about the same. OLED displays under five inches in size are already being commercialized. Current projections are that this will become a $3.5 billion market by 2010. A number of major display manufacturers have also demonstrated OLED TVs. If they are successful in introducing these products before 2010, the market has the potential to expand faster than anticipated.

Continued advances in OLED technology may also increase the size of those markets. For example, flexible OLED displays may give rise to novel product opportunities and markets that do not exist today. These include wrist-worn and "wearable" communication devices and PDAs, as well as our concept "Universal Communication Device." With a flexible OLED screen that could roll up into a small pen-like cylinder, this device could provide large-screen connectivity anytime and anywhere and be put into your pocket when not in use.

Bylund: What's a real-world usable lifetime for those finicky blue OLED elements, and how far from that goal are you today?

Abramson: Emission from the blue part of the spectrum has always been a challenge for electronic devices, whether LEDs, lasers, or OLEDs. With our world-class team of scientists diligently working in this area, we have been making steady strides toward our commercial targets. In 2006, we tripled the lifetime of our blue PHOLED materials and demonstrated a deeper PHOLED blue color, as compared to what we had achieved the prior year. To meet initial commercial targets, we still need to obtain a deeper blue color and longer lifetime.

The lifetime performance requirements for blue vary by application. For example, initial portable electronic products demand at least 20,000 hours of operational lifetime, while the targets for TVs are closer to the 50,000-hour mark. Requirements for general lighting products are even more demanding, with manufacturers seeking 20,000 hours of lifetime at a much brighter luminance. In the meantime, we believe that there will be a number of niche lighting products developed with less demanding requirements.

Last year, we increased the size of the team committed to this challenge and also expanded our R&D facilities. We are confident that our continued development activities will lead to full-color (blue, green, and red) PHOLEDs for a variety of electronic displays and lighting products.

Bylund: Who are your largest customers today? Who's most committed to your technologies?

Abramson: Today, we are working with many of the major manufacturers of displays and lighting products. For example, we have signed commercial agreements with Samsung SDI, Chi Mei EL, and LG.Philips LCD (NYSE: LPL). Samsung SDI, a leading OLED manufacturer, was the first to announce a major investment in AMOLED manufacturing capacity (approximately $500 million) and commenced AMOLED production using our PHOLED technology earlier this year. Their 2.4-inch AMOLEDs can today be found in the iRiver Clix2 multimedia player and a Kyocera (NYSE: KYO) KDDI cell phone. Industry reports indicate that Samsung SDI will be ramping up their production capacity in the second half of this year.

Chi Mei EL of Taiwan, another leading display manufacturer, has reported that it is currently sampling customers and expects to increase product shipments later this year. We also have a strong relationship with LG.Philips LCD. In addition to establishing a commercial supply relationship for our PHOLED materials, we are working together to develop and demonstrate AMOLEDs on flexible metal foil. We already demonstrated an initial prototype in May of this year. With LG.Philips LCD, we believe that this program can accelerate the commercialization of flexible OLEDs.

We are also working on pre-commercial agreements with a number of manufacturers. For example, we have been working with Sony (NYSE: SNE) since 2001. We are also working with Seiko Epson, a world leader in ink-jet printing technology, to combine our PHOLED technology and materials with their proprietary ink-jet printing technology to develop a new cost-effective manufacturing process for high-performance OLEDs. Konica Minolta is developing white OLEDs, and we jointly announced a highly efficient and bright light source with them at the end of 2006. Konica Minolta has discussed the potential for introducing white lighting products into the marketplace by 2010.

In addition, the U.S. Department of Defense and U.S. Department of Energy are important customers, supporting the development of our next-generation OLED technologies. With the U.S. DOD, we are developing our FOLED technology for portable communications devices for the military and commercial applications. We are also focused on energy-efficient white OLEDs to support the U.S. DOE's solid-state lighting initiative.

Bylund: Where do you see Universal Display in three to five years?

Abramson: Our goal is to build on our position as a pioneer in OLED technology, our already extensive IP portfolio, and our work with leading display and lighting manufacturers. With this work, we hope to make our proprietary OLED technologies the foundation for flat panel display and lighting products for years to come.

With a strong and experienced management team, Universal Display combines leadership with technical excellence. We have a world-class research team and state-of-the-art facilities in place to achieve both our internal goals and those of our partners. Universal Display will continue to develop next-generation OLED technologies to provide value-added performance enhancements and new product opportunities to our manufacturing customers and partners.

We believe that our investments in research and development have built, and will continue to build, shareholder value as we work with our customers and partners to accelerate the commercialization of OLED products.

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