Ever since Apple, (NASDAQ: AAPL) CEO Tim Cook teased of new products in the pipeline earlier this year, the market has gone wild with speculation for what they could be.
To be sure, with everything from rumors of an iWatch and a low-cost iMac, to confirmation Apple wants the iPhone 6 to have a bigger screen, we've seen plenty of intriguing chatter over the past few months.
But if a recent report from The Korea Herald is any indication, Apple might have its sights set on something much, much larger. -- well, physically larger, anyway.
Enter the OLED iTV
Specifically, the report cites analyst Lee Seung-woo of Seoul-based IBK Securities as stating an "unnamed" South Korean company is "making 65-inch organic light-emitting diode sample panels for Apple's iTV in collaboration with Apple."
But there's a catch: Seung-woo noted Apple is "still running tests," so it's unclear whether these particular OLED iTV units will be used for mass production.
According other sources familiar with the situation, Apple's original plan was to bring roughly 2 million iTVs to market with 65- and 77-inch LCD panels in the second half of 2014. However, Apple visited the unnamed company in October to delay the project launch until 2015 -- partly because Apple hadn't secured adequate digital content, but also because it was unsatisfied with the LCD display quality. As a result, Apple has apparently shifted in favor of embracing the superior color reproduction and unique form factors afforded by OLED technology.
And that makes perfect sense, especially considering in December, Apple applied for a patent aimed at using integrated thermal sensors to fine-tune the colors emitted by OLED displays.
Here's how to play it
So who's this mystery display maker? Seung-woo is likely referring to LG Display (NYSE:LPL), which coincidentally unveiled its own 65- and 77-inch OLED televisions just three months ago at this year's Consumer Electronics Show in Las Vegas. Also in January, LG Display was rumored to have signed an exclusive agreement with Apple to provide 1.52-inch, flexible OLED displays for a presumed late-2014 iWatch launch.
Of course, this is arguably even better for Universal Display Corporation (NASDAQ: OLED), which maintains OLED material supply and IP license agreements agreements not only with LG Display, but also with virtually every other OLED device manufacturer. In short, I'm convinced Universal Display the single greatest beneficiary in the OLED space as its flagship technology is embraced on a broader scale.
Aren't OLED TV's really expensive?
In a word: Yep. And that's primarily because they're notoriously tricky to build, with early manufacturing yields rumored to be as low as 30%.
In fact, LG's curved 55-inch model currently retails for a borderline-ridiculous $6000 online, so it's unsurprising this news has already brought out several skeptics who've used the "expensive" talking point to rationalize an Apple OLED iTV simply won't ever exist.
But there's a problem with this train of thought: As of last week, LG Display had reportedly improved its yields to 70%. If that's true -- and keeping in mind it still leaves plenty of room for improvement -- it means LG could be on pace to lower the price of its OLED TVs to between $2800 and $3800 by the end of 2014. That's still expensive, but the midpoint of that range represents an amazing 78% drop from the same television's $15,000 price tag when it hit stores last August.
What's more, as Universal Display management reminded investors in February, LG Display is set to ramp production later this year at its new $650 million Gen 8 production facility, which will be capable of producing roughly 1.8 million 55-inch units per year at a 100% yield. Even so, if Apple's aforementioned two million unit goal holds true, that means LG Display would need to dedicate nearly all its capacity to meeting Apple's demands.
But that wouldn't preclude Apple from helping LG Display build out its existing infrastructure, and/or recruiting other OLED panel makers to supplement supply -- all of whom, by the way, would also need to have agreements in place with Universal Display to partake in the Apple supplier bonanza. Then again, something tells me LG Display won't be too anxious to share its OLED manufacturing secrets with the competition, so I'm betting the former situation is more likely to pan out.
In any case, I'm a shareholder of both Apple and Universal Display who has long maintained the gap between the two companies is rapidly closing. As a result, I'm partial to believing an OLED iTV is not only possible, but probable over the long-term. That's why I'd love to hear what you think in the comments below. Is an OLED Apple iTV on its way, or is this just another rumor to sweep under the rug?
Steve Symington owns shares of Apple and Universal Display. The Motley Fool recommends Apple and Universal Display. The Motley Fool owns shares of Apple and Universal Display. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.