Some of the world’s biggest electronics makers are trying to sell consumers on a sharper TV screen made from organic light-emitting diodes, or OLEDs. LG has taken the lead in pushing the pricey technology over the dimmer liquid-crystal displays in most sets, and gradually costs have dropped enough for a 55-inch LG OLED TV to go for $1,800 at Best Buy, about the same as a comparable high-end Samsung LCD screen. Now Panasonic and China’s Skyworth are getting into the act, too. The manufacturer that may have the most at stake, however, is one with a market value of $1.9 billion, headquartered not in a tech hot spot, but on the outskirts of Trenton, N.J.
Universal Display Corp. sits a few miles from the Lower Trenton Bridge, with the famous neon letters spelling out TRENTON MAKES THE WORLD TAKES. Since its 1994 founding, UDC has focused primarily on advancing OLED technology and has led the development of more energy-efficient screens. For years it has controlled the patents on some of the most cutting-edge OLED materials. UDC has licensed its technology to Samsung for use in Galaxy smartphones since 2011, and in January it signed a licensing deal with LG through 2022.
Licensing fees make up about a third of UDC’s $191 million in annual revenue, and the rest comes from selling the materials needed to make the screens. On Nov. 5, UDC reported earning $7 million in the third quarter, a 64 percent increase from the same period a year earlier, on sales of $39.4 million. Profit this year should top $48 million and reach $70 million in 2016, according to analyst estimates compiled by Bloomberg. “Our materials are essential” for the big manufacturers, says Chief Executive Officer Steve Abramson. OLED TV prices, he says, “seem to be hitting a sweet spot.”
This year, LG more than doubled capacity at its OLED factory near the Demilitarized Zone on the Korean Peninsula, to 34,000 7.2-foot-by-8.2-foot sheets each month. In July the company announced plans to invest 1 trillion won ($866 million) in a new factory southeast of Seoul and is making screens for brands such as Panasonic and China’s Konka. LG says it expects to ship 1 million OLED TV screens next year, up from about 500,000 in 2015. In the past few months, Samsung has started putting OLEDs in its cheaper phones as well as the Galaxy line, and Apple uses them in its smartwatch. “There is no competition” for UDC’s designs, says Robert Stone, an analyst for Cowen Group.
That may soon change, says Lawrence Gasman, an analyst at N-tech Research, which specializes in analysis of advanced materials. UDC “clearly lives and dies on its intellectual property, and that’s beginning to be challenged,” he says. Most notably, chemical giant DuPont opened a factory in Newark, Del., in September. Avi Avula, DuPont’s global business director for OLEDs, says the company is refining materials that within a few years could make its production process five times as efficient as UDC’s. Manufacturers using UDC’s materials must vaporize them and condense the vapor onto glass to make screens, but DuPont says its materials can eventually be 3D-printed directly onto the glass, Avula says.
Abramson says he’s not worried about competition for now. UDC has formed a partnership with BOE Technology to help the Beijing company develop its own OLED manufacturing. Although Qualcomm, which also relies on licensing fees, has faced difficulty collecting them in China, Abramson says UDC has confidence in the working relationship it’s establishing with local manufacturers. Last year, BOE announced plans to invest $3.5 billion in an OLED factory scheduled to open in 2017.
Understandably, UDC’s shares—up 46 percent this year, to about $41—sharply rise or fall with the fortunes of OLED sellers, whether or not they’re customers. The stock jumped 9.5 percent on Oct. 9 following strong results from Samsung, then plunged 11 percent a week later after Goldman Sachs forecast disappointing demand for OLED TVs this year and next. Korean news outlets reported last month that Apple was considering putting OLEDs in its iPhones, but Abramson declined to speculate on that. “Apple,” he says, “doesn’t make a whole lot of announcements.”
The bottom line: Analysts predict profit will jump almost 50 percent next year at UDC, two decades into its investment in OLEDs.