4 Critical Areas for Universal Display Investors to Watch

The next generation of display technology will be centered upon organic light-emitting diodes, or OLEDs. The technology's viability in mainstream applications continues to ramp up in conjunction with advancements, but its advantages over traditional LEDs and other display technologies are too promising for investors to ignore.

As the dominant supplier of OLED materials and intellectual property, Universal Display  (NASDAQ: OLED  )  has a bright future ahead of it. To break down exactly how investors should understand this company, the Fool recently crafted a premium research on Universal Display, a brief excerpt from which we've included in the text below. Enjoy!

The four areas you must watch

  • Apple: All of the advantages that OLEDs offer are characteristics that Apple places high value on: thinner, lighter, and they're environmentally friendly, among others. The biggest impediment to Apple adopting OLED to date has been the relatively low manufacturing yields, as Apple demands high volumes. In addition, manufacturing remain costs are high, and Apple also likes to maintain its gross margins. As OLEDs progress down the cost curve and yields improve, Apple may eventually adopt the technology. This may not happen for many years, if at all, but it's something to keep an eye on.
  • LG agreement: Samsung has already signed a long-term supply agreement with Universal Display, so revenue from this partnership should be fairly consistent and reliable. If LG similarly inks a long-term contract, that will remove a lot of uncertainty from Universal Display's future and would be a very positive development. Investors need to be on the lookout for a LG agreement.
  • OLED TV prices and adoption: Currently, OLED TV prices remain far too high for mainstream adoption. The TV market in general has remained sluggish, as there have not been any innovations meaningful enough to drive an upgrade cycle. However, as OLED technology increases penetration in the flat-panel TV market, Universal Display will benefit.
  • Smartphones with OLED displays: Many popular smartphones now ship with OLED displays, particularly from Samsung, Universal Display's largest customer. Its current flagship Galaxy S3 that ships in high volumes features an OLED display. As OLED continues to gain traction, investors should monitor for high-profile flagship devices that carry OLED displays.

Universal Display has a powerful patent portfolio behind OLEDs, a technology poised to dominate the displays of the future. Its placement at the center of OLEDs makes the company an underappreciated way to play the enormous sales growth in tablets and smartphones. However, like any new technology, there are plenty of risks to Universal Display. I've authored a new premium report that dives into reasons to buy the company as well as the challenges facing it. For access to this comprehensive report, simply click here now.

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Comments from our Foolish Readers

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  • Report this Comment On January 28, 2013, at 4:36 PM, sidneyleejohnson wrote:

    Were their yields low or their capacity? and by "low" did you mean relatively or it seems that SMD is happy consuming nearly all of its own capacity for itself and its planned increases in capacity are meeting mainly only its expected internal demand. IE is there capacity planning purposefully "low" to block Apple?

    "revenue from this partnership should be fairly consistent and reliable"

    is a flat fee twice per year consistent or lumpy?

    Was rolling out green sales in 2012 to SMD into 2013 reliable? Yes they SHOULD be but they weren't .

    Are you sure prices are holding back oled tv from consumers or quantity. They could have given away the oled tvs free to consumers and it still wouldn't have made a difference. The problem is that oled tvs aren't being mass produced at any price. Once we have a meaningful supply of oled tvs being mass produced then we can question price.

    Generally speaking of course I appreciate the continued bullish coverage of UDC/PANL/OLED but lets try even harder to get the story right. It is a fantastic story of emerging and disruptive technology. One that shouldn't be ignored...but one that shouldn't be misleading either.

  • Report this Comment On January 28, 2013, at 4:40 PM, sidneyleejohnson wrote:

    feel free to test your thoughts vs the yahoo forum crowd, I'm sure we'd be happy to review them before you go to publication to the wider audiences. I hate having to review them after.

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