Last I checked Samsung has a major deal with Apple right now on IPhone X. If no deal is signed UDC is certainly in a position to withhold orders, thus hurting 2 major companies and a new launch. Who exactly has the leverage?
It is certainly worth speculating about the upcoming Samsung contract and exploring possible scenarios.
That said, I am of the opinion that a contract is all but signed. Samsung would never have committed so much capital into current manufacturing capacity with more coming online shortly thinking they might discard it all in a few years after the end of the this 5 year contract.
Apple would have never decided to go OLED without assurance, probably extremely costly to Samsung if not supplied, that a supply of Oled screens would be available to them which means UDC was certainly considered.
Sid has stated many times and as a lawyer he knows that litigation is expensive and time consuming. UDC has never been sued nor have they sued another company. From the beginning, UDC has negotiated with customers with the healthy attitude of a Win-Win for both parties.
I have stated that my guess is that Samsung and UDC have in place what could be considered a 5 year "extension" of the current contract. Sure, a few caveats, incentives will be considered but both companies are doing very well with OLED and neither party needs to rock the boat at this time.
I agree with all of what you said except the part about lawsuits. UDC as you have stated has never been on either side of a suit but they are now entering a whole new world where they will negotiating and renegotiating a boatload of new contracts. They also will no longer be under the radar as the industry explodes and the big boys see an opportunity to make money in their space. UDC alluded to this in their filings and stated they want to have a stash of cash in the event of future suits. I hope they don’t need it but, like them, I wouldn’t count on it.
handyman, anybody and everybody in the display screen business has been aware of UDC for a long time and therefore not under the radar.
In case you are unaware, Samsung has been the 900lb gorilla in displays for years.
Yes, UDC has stated they want an ample cash stash to use should it be needed. Cash available for litigation discourages lawsuits. If you were to study UDC history you might discover that many years ago UDC did a secondary offering with this in mind.
You see, when you are an Intellectual Property company Mgmt knows that being able to defend it's patents is critical the reason they hired Mario.
Samsung would never have committed so much capital into current manufacturing capacity with more coming online shortly thinking they might discard it all in a few years after the end of the this 5 year contract.
Litigation, and the threat of litigation, is about leverage in negotiations. It is very very rarely ever as black and white as sign the contract or we are going to have to close the fab.
UDC's greatest strength versus other patent holders is the quality of their emitter materials.
If I was Samsung's management, I would need the answers to a series of questions before I signed a contract that was going to cost me billions.
First and foremost, are there commercially viable substitutes to UDC's emitter materials that dont use the identical molecule? If yes, then how many of the layers of UDC's patent pyramid do they violate? Is it only the ligands patent which begins to expire in sometime early in 2020?
If I have a commercially viable substitute, what is the probability that I would be able to win a court case in the US. What is the downside to litigation? How long would litigation take and would we be close to the expiration of the patents that we would be violating? Would the ITC actually ban all smartphones using OLED's. Would the President sign off an such an injunction?
If we go to litigation, will I be able to sign a better contract just prior to a judgement? How much money would Samsung save over the life of the contract by going this route? Would TADF materials be commercially viable before the end of the litigation?
UDC has to answer many similar questions before they decide on the lowest rate that they are willing to accept. If it really was a case of sign this contract or you are going to have to shut down your fabs, then UDC's royalty rate should be at least an order of magnitude higher. I would start negotiations at something like 15%.
Lawsuits: Actually, UDC has been involved in several lawsuits about 5 years ago both in Europe and in Japan. The companies that challenged their patents included some major players (i.e. Merck). UDC won almost all of the lawsuits including the bendable OLED substrate challenge. Now, UDC have NEVER been challenged in the US since that would be a silly attempt given the source of the patents (UM, SIU etc..). With that said, Samsung LG or any company that challenges UDC patents would have to sue in the US.
Future (5 years) contract: I agree with the previous post that Apple or Samsung have probably taken the plunge (together) with the blessing that UDC patents remaining in place for at least 5 to 6 years.
How about the patent cliff? I believe that UDC is in the forefront of material development and if Samsung or others wish to jump ship in 5 years they might find that their competitors are not... their material mix might suck compared to more recent developments (i.e., Blue).
Samsung Current and Future standing in the phone market: As it stands, Samsung or LG phones don';t compare with the Pixel or Apple. They suck as they are loaded with bloatware (who really wants a Samsung voice search engine?) . I feel that Pixel will rule the android world in the not so distant future. The Pixel 2 shows that Google is developing hardware specific software and upgrades and is leaving Samsung behind (Samsung f the first generation of pixels by holding screens, a good reason the screw them back).
What will drive the future? Form factor plays only one role in the purchase of phones. The OS even more important (that is why my kids refuse to shift to Android with an OLED screen). I don't see Samsung holding a sizable market for more then a few years. As the Chinese start making OLED screens and Google moving toward hardware at reasonable prices (Pixel II = $650 with OLED) Samsung will be out. Maybe they can come out with a Tizen phone???? ;-) Just kidding.
Mekopelet. Well aware of those early litigation's mostly in Europe. Just wanted to add that one player involved was BASF---we know their fate.
It is also worth mentioning that part of the Samsung agreement and LG's is that if either buy chemicals from another source that violates UDC patents UDC can completely stop selling to them. This would also mean that any patents UDC owns involving architecture or manufacturing methods would also be revoked. A nice insurance policy.
In my mind UDC has greater leverage in getting the sweetheart deal this time.
At the get-go when Samsung was the only play in town, there's not much leverage.
But today it's different. As handyman pointed out (and actually I do like the pick and shovel description because it's easy to understand), folks are lined up at the door to get a piece of the action.
And the UDC strategy of maintaining a large cash stockpile will help in achieving a happy ending for the negotiation story.
Why? If things truly come to a stall, which I don't think it will and UDC is 'forced' to play hardball which again is a low probability event, which company has more to lose by digging its heel in the ground?
UDC can go without Samsung for a year with its cash and revenue from LG. How long can Samsung hold out not being able to sell phones and screens given all it's capital expenditure? And if Samsung can't deliver to Apple, Apple will sue.
There are other girls on the dance floor now. UDC can pick and choose. Of course being the respectful business folks that work at UDC, UDC team will seek to achieve amicable terms without Samsung feeling that it's been cornered into the terms and conditions because after all, who doesn't want a long-lasting mutually beneficial business relationship?
Samsung management on the other hand, should learn from its LG brethren (they missed the first lesson on how to build OLED TV and here's an opportunity to not fumble on a major decision) and be wise about signing on to reasonable terms so that it doesn't end up on the dance floor, alone.
The only thing I'd ask UDC mgmt team to remember is follow Teddy Roosevelt's style of diplomacy where one "speaks softly, but carry a big stick".