-All indicators are excellent compared to LCD, but compared to LCD, high cost and low lifespan are a problem, but conversely, if the price is eventually lowered and the lifespan characteristics are increased, there is a possibility that the penetration rate of OLED will rise steeply. So investors need to pay attention to OLED-related companies.
- There are two companies in the world with 100% OLED sales. Duksan Neolux of Korea and UDC of the US are companies whose sales are 100% generated from OLED. Among them, today we will look at UDC in the United States.
-UDC is a fabless company that holds more than 5,000 patents related to OLED. Fabless does not have a production plant, but consigns production to 'PPG Industry'. It mainly entrusts "Red, Green dopant" that goes into the OLED light emitting layer.
-The sales of these materials are 60% of the total sales, and the remaining 40% of the sales is generated by using about 5,000 patents to generate royalties or license revenue.
-In a nutshell, as the OLED market grows, material sales increase and royalties and license income also increase, so it can be seen as a company that can benefit greatly.
Question: If so, is there any possibility of breaking the monopoly structure in the Red/Green Dopant market?
- Investors have been concerned about this since 2013, but as a result, UDC is still an overwhelming monopoly.
- It maintains its monopoly position mainly through three strategies.
1. When the patent expires, UDC quickly releases more granular patents.
In 2014, for example, UDC's phosphorescent dopant patent was canceled in Europe because competitors filed patent lawsuits too much.
In the end, as the patent for "a phosphorescent dopant made of iridium" expired, UDC applied for two or three patents on how to make iridium's molecular structure and kept its monopoly structure.
2. In material technology, experience is more important than capital.
UDC is the company that has developed phosphorescent dopant products for the longest time, so it can be said that it maintains an overwhelming position.
For example, a company called Merk boasts a large capital force that is almost 70 times higher in terms of operating cash flow than UDC, but they have not yet entered the market for products made by UDC. The reason for this is that experience is an overwhelmingly important factor because it is a game that continuously searches for a recipe for a suitable molecular structure for the material.
3. Mass production technology is very difficult.
The light emitting material is made of a 'rare earth' called iridium, which has a very high melting point, so it is very difficult to construct a molecular structure.
Since this production experience has been accumulated for almost 20 years in 'PPG Industry and UDC Partnership', even if other companies start, they cannot keep up with mass production.
Two investment points of UDC
1. Commercialization of phosphorescent blue dopant
Because blue is the shortest in terms of the wavelength of light (more energy is required => lifespan decreases rapidly during device charging and discharging)
The root cause is identified. At an event called Display WEEK in May, Samsung Display announced a thesis to commercialize blue dopant using udc material. Considering the impact on UDC, it is an issue where sales almost doubled.
Of course, the sales volume of the red green blue dopant itself would be similar, but the selling price is much higher as the technical difficulty becomes more difficult from red to blue.
Green is more than twice as expensive as red. Even if the blue records the same sales, the selling price is likely to be more than double that of the green.
If commercialized, sales could more than double.
2. OVJP is a game changer for the display deposition process.
Current vacuum thermal evaporation has the disadvantage of consuming a lot of material, and inkjet printing has an issue that wears out the life of the material quickly.
OVJP can be seen as a technology to improve these two.
Although there is no fundamental business risk, the stock price of tech stocks may fluctuate due to the recent tapering issue, as the stock is overvalued at a PER of 50x.
So when investors invest in udc, it would be good to invest from a long-term perspective.