Will Apple Switch To OLED Screens?

Summary

• Apple is reportedly planning on switching to OLED technology for its iPhones for the 2018 7s, which would make the phone flexible and brighter.
• We think the rumors are more likely true than not given their widespread nature and Apple's need to catch up to Samsung's and LG's flexible/curved phone technology.
• TVs are starting to ramp, and we think the binary scenario outcome of the shares is unlikely to be the case given that manufacturing costs are likely to come down.

We highlighted Universal Display Corporation (NASDAQ:OLED) just a few months ago as a value play that was sold off due to customer concentration and slow adoption of the technology. Since then, the shares are up 48%, as rumors are now swirling that Apple (AAPL) will use the technology in its iPhones and move away from LCD technology. Many believe the shares are likely to see a binary result of widespread adoption or complete failure of the technology in favor of other avenues. We do not think that will be the case, as we think manufacturing costs will come down and make OLED used more as a mass product like LCD is today.

Apple Rumor Mill Causes A Stir

According to many sources, some of which have just materialized in the last several days, Apple is reportedly working on Banana iPhones for the market by 2018. One of the changes that would be made would be to use different display technology than the LCDs used today. Several influential websites are reporting that top Apple executives are "serious" about moving away from LCD to phones equipped with organic light-emitting diode screens, i.e., OLED.

Our article three months ago noted the new deal with LG Display (LPL) signed earlier this year. LG (LGEAF) would be a key factor in Apple's move towards OLED technology. Other rumors confirm the connection, with BusinessKorea reporting that LG plans to shift one of its LCD lines in South Korea to an OLED line, with mass production aimed at starting sometime in 2017. It was also rumored that Apple has contracted with Foxconn (OTCPK:FXCOF) and Innolux to build a new plant that would manufacture OLED displays for the Apple Watch. This could actually be a prelude to them manufacturing OLED displays for the phone as well.

The current

Analyst’s Disclosure:I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.