Source: Apple.
Apple (AAPL 0.01%) sure had a jam-packed media event on Tuesday, unveiling a slew of new products and services. Behind the scenes, there are several companies that could stand to win and lose from what the Mac maker showed off. Heading into the event, there were expectations that Apple would adopt 2 major technologies.
One of those storylines played out entirely as expected, but the other remains a mystery.
NXP Semiconductor: Winner
Apple has indeed adopted near-field communications (NFC) in its upcoming devices, and expectations of the move have been priced into shares of NXP Semiconductor (NXPI 0.73%). NFC chips will be used within both iPhone 6 models as well as the Apple Watch.
Apple Pay. Source: Apple.
Apple is sure to sell a record number of iPhone 6 units in the coming quarters, and this is very much a volume game for NXP. The Apple Watch is much less certain though. The device doesn't ship until 2015, but even then it's unclear what kind of attach rates it may put up, or if Apple will face some type of manufacturing challenge that bottlenecks production. Still, NXP will be selling an awful lot of NFC chips to the Mac maker.
Another possible tailwind for NXP is that Apple has upgraded the motion co-processor in the iPhone 6 to the M8, which will perform similar functions to its predecessor M7. NXP supplied the M7 last year, and it's quite possible that it's doing the same with the M8 this year, although investors will have to wait for teardowns for more clarity.
Universal Display: Unclear
Universal Display (OLED +4.02%) Investors have been expecting Apple to finally adopt OLED displays in the Apple Watch. Shares had been trending higher as those expectations were priced in. When the Apple Watch was unveiled, there was no mention of using an OLED display. That troubling omission was enough to send Universal Display shares lower to the tune of 7%.
Here's the thing though: Apple did note that the Apple Watch uses a "flexible Retina display." That's important because flexibility is one of the key benefits of OLED displays. Flexibility is a unique feature of OLED displays, one that is not possible with traditional LCD displays.
"Flexible Retina display" mentioned at 3:12. Source: YouTube.
LCD displays can be curved, but the process is challenging and less effective than OLED displays. Additionally, curved does not equal flexible, since LCD displays are made out of two sheets of glass with a backlight. The fact that Apple used the word "flexible" has some very important implications for Universal Display investors, since it suggests that OLED is still a possibility even though Apple didn't discuss the technology specifically.
Plenty of questions remain about the Apple Watch, including the underlying display technology. Universal Display could emerge yet as a winner, but at this point it remains unclear.
Only time will tell
NXP will be a definite winner from Apple's adoption of NFC. Not only in direct NFC chip shipments, but also because Apple tends to catalyze broader trends. NFC adoption has been modest for years, but Apple getting onboard could incentivize merchants to jump in too. The Apple Watch effects remain unclear, but that's just gravy on top.
The jury is still out on Universal Display. We do know that Apple isn't shipping the Apple Watch until 2015, presumably because there are still kinks to work out. Possible hurdles to overcome could be related to battery life, manufacturing processes, or maybe even addressing OLED display performance concerns that Tim Cook has previously expressed.
