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Universal Display rides higher on hopes of OLED TV ramp

28 Feb 2013

Organic LED materials specialist reports 'best ever' financial year, and is excited by investments at LG and Samsung.

Shares in the organic LED (OLED) materials developer Universal Display Corporation (UDC) rose 10% in value after the Ewing, New Jersey, company reported a 36% increase in sales in its latest financial year – and said that it had “only scratched the surface” of the OLED market’s potential.

At $83.2 million, the firm’s fiscal 2012 sales compared with $61.3 million the year before. UDC has a key licensing agreement with Samsung – the world’s leading producer of OLED displays by far – and licensing revenues were responsible for most of the sales increase, more than doubling from $15.3 million in 2011 to $31.7 million in 2012.

Despite that sharp uptick, the expansion in sales last year was not as rapid as UDC had initially envisaged. The company received two lump-sum payments of $15 million from Samsung, in the second and fourth quarters, and had previously set its target for 2012 sales to between $90 million and $110 million.

The fact that the final figure came in well short of that prior guidance range reflects slower-than-expected uptake of its green-emitting materials, and sales currently remain dominated by red emitters.

Major OLED investment
However, recent developments in the OLED display sector indicate that rapid growth could be expected before long. Earlier this month, Korea’s LG Display announced that it would be investing KRW706 billion (approximately $650 million) in a new 8th-generation OLED panel manufacturing line, to make 55-inch televisions based on the technology.

Investment in the white-RGB evaporation process is slated to begin this quarter, with mass production following in the first half of 2014 at a monthly capacity of 26,000 input sheets, each measuring 2.2 x 2.5 m2.

With Samsung reportedly set to pump more than $5 billion of investment into OLED manufacturing, it looks certain that although 2013 will only see modest shipments of OLED TVs, 2014 should represent a huge opportunity for key suppliers such as UDC.

In an investor conference call, CEO Steve Abramson highlighted the TV potential and said that he was “anxiously awaiting details about the new Galaxy 4S” product launch expected from Samsung in March, but would not be drawn on whether or not UDC’s technology would feature in it.

“TV represented the next great OLED frontier,” Abramson added. “Both [Samsung and LG] planned product introductions in the first half of this year, although it is not clear how quickly they will ramp production. For our various business planning purposes, we are assuming production will initially be modest, with volume production more likely ramping in 2014.”

LG Display’s investment alone suggests a monthly run-rate of some 156,000 55-inch TVs once production is ramped, with the likelihood that Samsung would match or exceed that level. With another LG company, this time materials-focused LG Chem, also stating publicly that it was now preparing for the commercialization of OLED lighting and would launch a high-efficiency panel this summer, Abramson observed:

“You can understand why we believe we have only scratched the surface of the market’s potential.”

Patent play
Referring to last year’s major acquisition of Fujifilm’s intellectual property on OLEDs, the CEO added: “We are expanding our patent portfolio, expanding the number of products, expanding our employee headcount, expanding our customer base, expanding our commercial research partnerships and expanding geographically.

“We are transitioning from a New Jersey company that does business in foreign markets to an international company that’s headquartered in Ewing, New Jersey.”

With Samsung set to pay UDC a licence fee of $40 million this year, CFO Sid Rosenblatt said that 2013 revenues should end up somewhere between $110 million and $125 million. But for the step-change rate of growth that the OLED market has long promised, it looks like 2014 could be the year to look out for.

• In early trading on the Nasdaq stock exchange following UDC’s results announcement, shares in the company’s stock were up 10%, adding approximately $140 million to the firm’s market capitalization.

In November, UDC had shed one-third of its market value when the company revised down its 2012 sales guidance after OLED TV launches by Samsung and LG were put back.

AlluxaMad City Labs, Inc.Iridian Spectral TechnologiesUniverse Kogaku America Inc.Berkeley Nucleonics CorporationHÜBNER PhotonicsSPECTROGON AB
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