Exclusive Update

Following Universal Display's healthy fourth quarter earnings, shares have continued trending higher, in part on the news that Samsung has indeed decided to utilize an AMOLED display in its new flagship Galaxy S4.

Ahead of the debut, it had been rumored that Samsung was preparing to use a different display technology due to manufacturing challenges, and the presence of the a 5-inch AMOLED display is a welcome relief for UDC. Samsung is also including a new Adapt Display feature for display calibration, which will help address some criticisms of its AMOLED displays regarding color saturation, among others.

Importantly, the Galaxy S4 seemingly utilizes green PHOLEDs in its display in order to achieve its 25% gains in power efficiency as well as improve brightness. Since UDC owns the patents surrounding its green PHOLED technology, its use in the Galaxy S4 would be an important catalyst. A large contributor to the company's guidance miss and swelling inventory balance last year was that green emitters and host materials were not being deployed as expected since Samsung pushed out its purchase commitments into 2013.

If the Galaxy S4 proves to pack green PHOLEDs, then that will help UDC to clear out some of its green emitter and host material inventories and boost material sales. Management had previously expected green PHOLED adoption in 2012; this didn't materialize but the company expects meaningful adoption to happen in 2013, but the rate of adoption remains to be seen.

Fool contributor Evan Niu, CFA, owns shares of Universal Display.

The Motley Fool recommends Universal Display. The Motley Fool owns shares of Universal Display.