Shares of Universal Display Corporation (NASDAQ:OLED) were down 14.1% as of 2:00 p.m. EDT Monday following reports that Apple (NASDAQ:AAPL) is quietly developing its own displays using competing technology.
According to a report late yesterday from Bloomberg, Apple is "making a significant investment" in designing and producing its own device displays featuring next-gen MicroLED screens.
Bloomberg noted that Apple's MicroLED displays are currently "far more difficult to produce than OLED displays," nearly causing Apple to kill the project last year. And while Apple engineers have made significant progress since then, it will likely be "a few years" before consumers see anything close to a commercialized product.
The project is moving forward at a small facility near Apple's California headquarters, with near-term plans involving manufacturing small numbers of the MicroLED displays for testing purposes. But if successful, Apple believes the new technology -- which uses different emitter materials than OLED displays require -- could result in even slimmer, brighter, and more power-efficient displays for its various electronic devices.
To be fair, Apple only uses OLED displays in two products: its high-end iPhone X and the Apple Watch. The company is also widely expected to expand its use of OLED in other products -- most notably including its lower-end iPhone models -- as it continues to move away from LCD technology over the next few years. The prospect of Apple developing a next-generation product to supplant OLED in its own product lines, then, rightly makes Universal Display investors nervous.
But even if Apple sees its vision for MicroLED forward, we should keep in mind that the folks in Cupertino would almost certainly keep the technology to themselves in an effort to differentiate its products. Meanwhile, Samsung Display and LG Display (Universal Display's two largest customers) continue to pour billions of dollars into ramping their own OLED manufacturing capabilities to keep up with demand for new OLED TVs, smartphones, and tablets used in both their own product lines and those from dozens of smaller brands.
That's also not to mention the promise of OLED lighting, a market that's still in its early stages but could grow to be worth hundreds of billions of dollars in the coming decades.
In short, you can bet Universal Display would vote to keep Apple among its list of long-term OLED adopters given the choice. But even if MicroLED is Apple's next big thing -- and while it's certainly a trend worth watching -- Universal Display's long-term growth story is much bigger than that.