Imagine a light source that's highly efficient, doesn't get hot, and distributes beautiful, even light. One that's also paper thin, flexible, and available in a wide variety of shapes and colors, opaque or transparent.
As it turns out, such a lighting technology already exists in organic LEDs, or OLEDs for short. And yes, this is the same OLED tech already being incorporated into ultra-thin, curved next-gen televisions, as well as smartphones and other mobile displays -- the latter of which most notably includes millions of Samsung's Galaxy series devices.
In fact, German lighting manufacturer OSRAM already envisions using OLED in various innovative applications, including luminescent window glass, mirrors that light up when someone stands in front of them, and entire luminous ceilings rather than strip lighting. And Philips (NYSE:PHG) has employed similar applications, including its own interactive mirror and "living" OLED sculptures and walls with light that shifts naturally with your movement.
But there's a catch: The panels today are still small and, unlike the market for OLED smartphone and tablet applications, the OLED lighting industry is still in its very early stages with no established mass production infrastructure. As a result, OLED lighting currently remains a prohibitively expensive technology.
Fortunately, that could all be changing soon, starting with a new commercial supply agreement between Philips and OLED technologist Universal Display (NASDAQ:OLED). Under the new deal -- which extends the scope of an eight month-old evaluation agreement between the two companies -- Universal Display is now licensing its intellectual property and selling phosphorescent OLED materials to Philips on a commercial scale. In short, this means Philips is most definitely planning to continue increasing its use of Universal Display's tech in its Lumiblade series of OLED lighting panels.
Don't get me wrong: This doesn't mean OLED lighting will suddenly replace all existing lighting technologies in the near-future. Rather, the shift to OLED will likely take years to fully realize given the current substantial infrastructure in place for both CFL bulbs and their most likely imminent replacements, traditional spot LEDs.
Indeed, Universal Display's own press release this week cited a NanoMarkets forecast as stating "the addressable market for OLED lighting panels could reach $1.4 billion in 2019." That's certainly nothing to scoff at, but it's minuscule compared to the at least $140 billion in revenue projected by the same year for the overall global lighting market. Still, it makes sense that Philips' newly appointed marketing chief, Jay Kim, stated in a recent interview that he believed that "by 2018 at the latest, OLEDs are a household product that you and I can afford to buy."
The upside? This means early investors in companies like Universal Display -- which is perfectly positioned to benefit by forging additional commercial agreements with businesses entering the phosphorescent OLED materials market -- can still look forward to staggering growth from OLED lighting down the road.
And remember, Philips and Osram aren't the only companies pouring resources into OLED lighting technology. Konica Minolta -- another Universal Display customer -- recently invested $100 million to construct a new plant for the world's first mass production of flexible, color tunable OLED lighting panels. Construction on Konica Minolta's plant is expected to be complete by the end of this summer, with mass production of approximately 1 million panels per month to commence this fall.
Over the long-term, investments like these serve as fantastic validation for the promise of OLED lighting. Given the advantages OLED lighting enables over its predecessors, the global lighting industry will eventually have no choice but to take notice as the cost for OLED lighting panels continues to fall. When that happens, I think today's patient investors stand to be handsomely rewarded.