Hold onto your hats, Universal Display (OLED -2.42%) investors, because this roller-coaster ride isn't done yet.

Philips Lumiblade OLED lamp. Image source: Philips.

On Tuesday, shares of Universal Display rose 3% after the company announced a new "collaboration and evaluation agreement" with Europe-based Philips Technologie GmbH, the OLED lighting division of Philips Electronics (PHG).

For those of you keeping track, the deal is particularly ironic considering all the worries surrounding Universal Display's recent European patent challenges.

Under the agreement, Universal Display states it will begin supplying Philips with phosphorescent OLED materials for solid-state lighting applications.

Universal Display CEO Steve Abramson weighed in:

We are delighted to announce this partnership with Philips, a global market leader in the lighting industry, to sample our PHOLED materials. As demonstrated through the years, our PHOLED technology has the potential to maximize energy efficiency and contribute to high performance lighting devices.

Answering the critics
But wait, you say, weren't Universal Display's materials already contained in Philips' existing Lumiblade OLED panels?

Well, yes, they were. But those lighting panels were actually developed by the folks over at Japan's Konica Minolta -- another longtime Universal Display partner with a similar agreement in place for the past five years.

Until now, Philips "just" provided the production know-how, but left Konica Minolta to procure the necessary OLED materials. Going forward, that's sure to change thanks to today's agreement.

And while some skeptics are balking at the apparent insignificance implied by the words "evaluation" and "sample" used in Universal Display's press release, note the verbiage used to describe the relationship with Konica Minolta on Universal Display's website:

Konica Minolta has been our licensing partner since 2008.  We have also been supplying our proprietary UniversalPHOLED materials to Konica Minolta for evaluation and we have been supporting Konica Minolta in its efforts to develop OLED lighting products for several years.

Remember, OLED lighting is still in its infancy, so its certainly fair to say the companies involved are "evaluating" how to best utilize the technology.

Here's what's next
So what can we expect from Philips going forward?

As it stands, the panels used in Philips' current Lumiblade lamps are still fairly expensive and operate at an efficiency of around 45 lumens per watt -- decent for a relatively new technology but not great considering a standard 13-watt CFL bulb from GE might offer between 55 and 65 lm/W. Meanwhile, a comparable 9.5 watt traditional LED bulb from Cree currently runs at around 85 lm/W.

That said, only a few months ago Philips suggested its next-gen OLED lighting panels should improve to an efficiency of roughly 55 lm/W, all while providing steady, even light and a thin form factor with endless possibilities for aesthetically pleasing design.

It should come as little surprise, then, that this week's announcement also highlighted the widely cited NanoMarkets report, which estimates the OLED lighting business could exceed $2 billion in revenue by 2020.

Don't get me wrong. Given the relative youth of the OLED lighting market, shareholders shouldn't assume that the new agreement with Philips will significantly impact Universal Display's bottom line in the near future. After all, if that were the case, you can bet Universal Display management wouldn't hesitate to let investors know.

But that also doesn't mean we should ignore the potential for OLED lighting down the road. To the contrary, I still think OLED lighting remains Universal Display's most under-appreciated opportunity. 

In the end, just remember it's going to take time for the technology to evolve to the point of wide scale commercial adoption. Until then, I'll be holding on tight to my shares.