It's time to brace yourselves, Universal Display (OLED 1.65%) investors, because the Apple (AAPL 1.27%) OLED rumor mill is back in full force.
This time, it's the folks over at DisplaySearch speculating Apple could be working on building a flexible AMOLED screen for its widely anticipated iWatch, which they think could be pegged for launch late next year.
Specifically, the DisplaySearch report states that, based on their supply chain research, they think Apple is planning to revamp almost all of the displays in its products over the next year, with the list culminating in either a 1.3- or 1.63-inch 320x320 pixel flexible AMOLED display for its iWatch.
Universal Display, for its part, boasts a massive portfolio of more than 2,700 OLED-centric patents, so an OLED iWatch from Apple would almost certainly require a licensing and material supply arrangement with everybody's favorite OLED technologist.
This wasn't the first clue
That said, those of you who've kept tabs on the industry also likely know the Apple OLED rumors aren't particularly new.
Remember, I took note way back in February when Apple quietly poached a senior member of LG Display's (LPL 1.00%) OLED research and development efforts.
Then, in April, I dissected comments from Apple CEO Tim Cook on the topic, which made me wonder if he would eventually integrate OLED tech into his iPhone lineup.
Heck, when Universal Display released its first quarter results in May, I was also surprised when Universal Display CEO Steve Abramson felt the need to point out the fact Apple had recently filed a patent for a flexible AMOLED wrist-worn display.
If DisplaySearch's supply chain research proves accurate, Apple could be closer than ever to making that product a reality.
Here's how the deal would work
In LG Display's case, Universal Display currently relies on successive short-term licensing and material supply arrangements to pull in revenue -- that is, at least until LG Display's large-screen OLED manufacturing efforts grow enough to merit a longer-term deal, similar to the one Universal Display has had in place with Samsung since August 2011.
And that may not take long when we consider LG Display reiterated plans in April to spend more than 50% of its 2014 capital expenditures budget to further its own OLED development and manufacturing capabilities. Don't be surprised if LG and UDC announce a longer-term contract before then.
So what would a contract between Apple and Universal Display look like?
I'd be willing to bet an Apple agreement would probably resemble the current, shorter-term LG deal. Why? In short, the iWatch display by definition will not only be tiny, but also shouldn't be expected to command anywhere near the same unit volumes that today's smartphones enjoy.
As a result, unless Apple somehow shocks the industry by decking out its iPhone and iPad lineups with OLED screens, don't expect the iWatch to move Universal Display's revenue needle anytime soon.
But that's not to say such an agreement would be all bad. At the very least, Apple embracing OLED in any product it makes would both validate the technology and spur broader consumer adoption as other electronics manufacturers take note.
If that happens, it's safe to expect Universal Display shareholders will be handsomely rewarded.
