I, for One, Welcome Our New OLED Overlords

The next generation of big-screen TV sets is coming fast. There are investor profits to be made in this revolution.

In a fresh market report, IT researcher iSupplisees OLED TV screens rising from a paltry $10 million of worldwide revenue this year to an eye-popping $1.8 billion in 2015. It's an exponential growth curve that started when Sony (NYSE: SNE  ) sold its first 11-inch OLED television. In six years, those big and expensive TV screens will edge out small-screen phone displays as the largest OLED market when you count by revenue.

Even so, OLED screens will make up a vanishingly small portion of the total TV market in six years. The manufacturing facilities for OLED displays we have today are not designed to crank out enormous screens suitable for your living room. OLED is a fairly new technology with a few technical limitations of its own, and it will take years to build out a reliable large-scale manufacturing infrastructure. And the incumbent LCD display technology won't stand still while OLED matures, so the competition will be stronger. All told, iSuppli expects that only a couple percent of all TVs sold in 2015 will be built around OLED technology.

But the investing opportunity remains enormous. OLED technologist Universal Display (Nasdaq: PANL  ) is on pace to collect around $5 million in commercial sales in 2009 from licensing its patents to device makers like Samsung and AU Optronics (NYSE: AUO  ) . When you consider iSuppli's $10 million estimate for TV screen sales, it's easy to see that Universal Display takes home a large portion of those sales. Keep in mind that most OLED sales come from small-screen gadgets like Nokia (NYSE: NOK  ) cell phones and SanDisk (Nasdaq: SNDK  ) MP3 players, and that we don't know how much revenue Universal Display collects from each bleeding-edge TV sold.

Still, the company obviously has a big finger in this pie and is set to ride the TV revolution to astounding riches. And the main competition comes from multinational giants like Eastman Kodak (NYSE: EK  ) and Sumitomo Chemical. Universal Display is small and obscure, and can easily multiply your investment many times over when catalysts like the TV revolution kick in.

Universal Display is a Motley Fool Rule Breakers pick. Nokia is a Motley Fool Inside Value selection. Try any of our Foolish newsletters today, free for 30 days.

Fool contributor Anders Bylund is a longtime Universal Display shareholder, but he holds no other position in any of the companies discussed here. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.


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  • Report this Comment On October 05, 2009, at 4:51 PM, rocket22man wrote:

    The way large-screen OLED displays will be made is on a continuous, flexible roll-to-roll process being developed by GE. They've worked for several years with a team from Energy Conversion Devices, who developed a similar process used to make ECD's Uni-Solar flexible solar materials.

    As you say, a few years off. But not too many.

  • Report this Comment On October 05, 2009, at 10:13 PM, wrayce wrote:

    There are still durability problems to be worked out with OLEDs for large displays, and yes, it may take awhile. Nearer term, the large potential is probably in lighting. Imagine putting up a wall paper or ceiling coating that gave your room a uniform, pleasant, energy efficient light. What if everybody did it?

    EK is very much a pioneer in OLEDs. They were also a pioneer in digital cameras, but look what happened. Shot in the back with their own arrow... I would like to see them put more emphasis on this technology.

  • Report this Comment On October 06, 2009, at 10:19 AM, expatriot08 wrote:

    PANL and OLED have arrived but my understanding of the patent royalties is they get a small cut 1% of the display cost or something like that. It Doesn't seem like they will be making money for several quarters. I hope I am wrong and would love to be corrected as I am Long PANL.

  • Report this Comment On October 07, 2009, at 3:52 PM, cooolbabu wrote:

    Buyer be aware. Universal Display has not received a single patent in 2009 and only 2 in 2008.

    However, with it's partners 6 in 2009 and 6 in 2008.

    It's probably prudent to wait until revenues start to grow.

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