Applied Materials, Apple 'Display' a Tech Trend
Here's why we see the long-term outlook for organic light-emitting diode displays as shining brightly.
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One segment inside of Applied Materials AMAT that is accelerating notably in the current quarter is its display business, which is expected to deliver $250 million in revenue in the current quarter compared to $183 million in the January one and $179 million in the April 2024 one. Granted in the overall scale of Applied’s revenue, it is a small business. Inside that industry, however, Applied is a sizable player and that means it is one worth watching, given the Portfolio’s position in Universal Display OLED.
We suspect this reflects two things. First, incremental organic light emitting diode capacity additions like the one we are seeing at LG Display LPL and Samsung Display. Second, Applied announced its MAX OLED product that allows organic light-emitting diode displays to be fabed on larger glass substrates. Alongside that announcement, Applied noted Samsung Display as a customer for this new display equipment.
Apple’s iPhone SE changes display technologies
Next week Apple AAPL is expected to reveal its revamped lower-tier iPhone SE, which will shift to an organic light-emitting diode display. That move has been widely telegraphed and it follows Apple’s growing adoption across its product lineup that includes iPhone and now iPad Pro. This latest move should accelerate the adoption of the display technology amid low and mid-tier smartphone models, driving another leg of demand for Universal Display OLED in the coming quarters.
Apple is also testing MacBook Pro models with organic light-emitting diode displays and is expected to introduce that model in 2026. The lead time for that puts some context around Applied naming Samsung Display as a MAX OLED customer. But as it tends to do, Apple is not leading the pack on this. Asus, Lenovo, Dell DELL, and HP HPQ have introduced laptops with the display technology. The tipping point for that display technology in the PC notebook market is slotted for next year, which matches Apple’s timing. As a company, Apple has been rather good at timing market inflection points with new technology.
Outside of the PC notebook market, organic light-emitting diode displays have captured 22% of the PC gaming market exiting 2024, surpassing the market penetration of that technology in the TV market (~18% exiting 2024).
These and other data point to the ongoing adoption of organic light-emitting diode displays, which sits at the heart of our owning OLED shares in the Portfolio.
Universal’s Earnings: Next Week
As we get ready for Universal’s earnings report next week, let’s remember industry fourth-quarter 2024 smartphone shipments rose 4.9% compared to third quarter 2024, with Apple’s iPhone shipment soaring 33% higher. Comments from suppliers about the continued mix shift toward premium smartphones suggest a higher attach rate with organic light-emitting diode displays, and that goes for Apple as well.
As we see it, those smartphone figures and adoption in other end markets call into question Universal’s late October guidance for flat-to-down December quarter revenue. And it’s not lost on us that consensus earnings per share expectations for Universal have not budged in over two months, despite the IDC and others giving their Q4 2024 smartphone shipment figures. For reference, IDC published its figures on Jan. 13, roughly one month ago.
During Universal’s earnings call after the market close on Feb. 20, we’ll also be looking for an update on its blue materials. Why blue? Much like the light-emitting diode world, blue is the key to white light, and the commercialization of Universal’s blue materials would be a nice catalyst for the shares. That commercialization would also likely lead to a new IP license with Samsung, which is one of its largest customers.
The Street Pro Portfolio is long AAPL, AMAT, OLED.
