Digital display manufacturer LG Display (LPL -1.95%) announced a new technology platform and branding message for its high-end TV sets on Wednesday. The stock jumped more than 5% as investors embraced LG Display's upgraded televisions featuring organic light-emitting diode (OLED) technologies.
Mr. Market appears to have missed the fact that LG Display's heavy focus on OLED screens is great news for technology partner Universal Display (OLED 1.08%), whose shares rose only 3% on the news.
In next week's CES trade show, LG Display will introduce a better take on OLED screens under the name of OLED EX. These screens will offer 30% higher brightness than the last generation of OLED screens, and the more-efficient technology also allows LG to shrink the TV sets' edge bezels by 33%. The underlying technical wizardry involves the application of stable deuterium compounds and more-advanced image control systems that optimize the image with machine-learning tools.
LG Display promises a more-immersive viewing experience in a more-elegant design package, and the OLED EX platform's screens should also last longer. All OLED screens from LG Display's big-screen OLED factories in Paju, South Korea, and Guangzhou, China, will come with this new design starting in the second quarter of 2022.
That's a big deal. The company has invested many billions of dollars in these specific OLED plants over the last five years. I don't want to call the CES announcement the culmination of a multiyear OLED strategy, because LG Display will continue to develop and market its screen-making technology for years to come. It is, however, a robust upgrade over existing technologies that should support the surging popularity of OLED televisions around the world.
The company sold 10 million OLED television sets in seven years, followed by another 10 million sets in two years. The screens also keep growing larger over time.
Now you see it, now you don't
Furthermore, LG Display is unwrapping new product lines using transparent OLED screens in unexpected ways:
- The OLED Shelf concept adds two OLED screens underneath a simple black wall shelf. These transparent screens can show full-color content when you want it, or fade into the background when you prefer an uncluttered view.
- Another example is the Smart Window, replacing the ordinary windows in a conference room with transparent OLED screens. These panels are ready for presentations or videoconferencing at the drop of a hat, going back to being a simple see-through glass pane at the end of the conference.
- The company also has several ideas on how retailers can use transparent OLED screens to boost their in-store displays and advertising efforts.
LG Display cited a report from the Boston Consulting Group, claiming that the transparent OLED market should offer global sales of roughly $2.7 billion in 2025 and $10 billion in 2030. The addressable market is more than doubling every year, and LG Display is a first-mover in this field.
Don't forget about Universal Display!
OLED technology developer Universal Display is a longtime partner of LG Display. Without Universal Display's patented technology and OLED materials supply, LG Display wouldn't be making OLED screens at all. And Universal Display's contracts come with royalty rates based on the surface area of the screens, which means that the company's top-line take will grow much faster in this era of big-screen OLED TVs than it did with the last generation's reliance on smaller smartphone and tablet computer displays.
So any good news from LG Display's OLED manufacturing and commercialization efforts is also great for Universal Display and its shareholders. Going beyond this market-leading partnership, Universal Display has a similar hand in the OLED operations of other screen builders. However, traders appear to view Universal Display as a risky investment, despite its ample supply of long-term growth opportunities.
The market largely shrugged off the impact that LG Display's new products will have on Universal Display's business results -- as usual. The Korean screen maker has kept up with the broader market over the last two years, generating a 44% stock return versus a 48% gain in the S&P 500 (^GSPC 1.30%) market index. But Universal Display's shares fell 21% over the same period, including a 25% plunge in the last six months alone.
I think that's a downright silly disconnect between Universal Display's booming business and its plunging stock. I'm tempted to add a few more shares to my own Universal Display position at these prices, and you should consider taking a closer look as well. This stock has been very good to me over the last decade, but the OLED market is still only getting started.