Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
So what: Samsung is currently producing a small number of large OLED panels at an existing facility in its Tanjeong Industrial Complex, and had previously planned to invest in a more expansive facility to expand production by the end of 2014. According to a report from Nikkei Asian Review today, however, Samsung has decided not to move forward with those plans, primarily because of stubbornly low production yields.
Low yields are preventing Samsung from aggressively reducing prices on its large-screen OLED televisions, the 55-inch version of which currently has a suggested retail price just shy of $10,000.
Now what: So where does this leave Universal Display investors? First, while this does mean Samsung will focus its large-screen efforts on high-quality LCD TVs for now, note the report also states Samsung is instead "thinking about setting up a new facility to make small and midsize OLED panels for" smartphones and tablets. In short, Samsung isn't abandoning OLED altogether, but rather delaying its large OLED display ambitions as it works to improve its production techniques.
Next, keep in mind drastic yield improvements for the large OLED panels built by competitor LG Display (NYSE:LPL) have allowed LG Electronics to lower the price of its own 55-inch model to roughly $6,000, and further price drops are expected by the end of this year. Less than two weeks ago, LG Display also confirmed it will expand its OLED TV production in the second half of 2014 with the ramp of its own gen-8 production line.
As a result, and with OLED television still in its infancy, I don't think Samsung's decision should be considered a long-term problem for Universal Display.