Does Apple Inc. (AAPL) Have OLED Plans?

There’s been no shortage of speculation over the years as to whether or not Apple Inc. (NASDAQ:AAPL) would ever adopt OLED technology. Fellow Fool Steve Symington and I are both separately on record expressing confidence that the Mac maker will someday make this move.

That has potentially important implications for Universal Display Corporation (NASDAQ:PANL) as the predominant OLED IP specialist, which took a temporary beating in February just from Tim Cook criticizing the technology. Is Apple finally preparing to adopt OLED displays?

The latest rumor is that Apple Inc. (NASDAQ:AAPL) is testing 1.5-inch OLED displays for its rumored iWatch. Apple Inc. (NASDAQ:AAPL) reportedly was toying with 1.8-inch displays for a possible smart watch before opting for a smaller display. The relatively small displays are being made by Taiwan’s RiTdisplay, and Foxconn has supposedly received an order for just 1,000 units that would be a trial run.

OLED would be a perfect candidate for an iWatch because it could facilitate a flexible display that could wrap around a user’s wrist. The low power consumption would also boost battery life, while Apple Inc. (NASDAQ:AAPL) could make the device thinner in the absence of a backlight.

However, this possible move doesn’t appear to have much potential upside for Universal Display. A decade ago, Universal Display Corporation (NASDAQ:PANL) sold a second-generation organic vapor phase deposition, or OVPD, system used to manufacture OLEDs to RiTdisplay through Aixtron. Universal Display receives royalties on the equipment sales, and buyers of these systems also have to obtain the rights to use UD’s proprietary OVPD process.

It’s possible that Universal Display may receive some royalties from RiTdisplay’s sales, but the extent of Universal Display Corporation (NASDAQ:PANL)’s benefit is limited by the size of the displays and volumes that an iWatch might fetch. An iWatch has a lot of incremental potential for Apple Inc. (NASDAQ:AAPL), but could also very well prove to be a niche product with modest unit sales.

Adopting OLED in the iPhone would be a huge win for Universal Display, but Tim Cook has made it pretty clear that he doesn’t think OLED is ready for iPhone prime time quite yet.

The article Is Apple Finally Adopting OLED? originally appeared on Fool.com and is written by Evan Niu, CFA.

Fool contributor Evan Niu, CFA, owns shares of Apple and Universal Display . The Motley Fool recommends Apple and Universal Display . The Motley Fool owns shares of Apple and Universal Display .

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