Universal Display (OLED)

Company website 2020 Financial Report Stock Analysis

5000

Patents

owned by Universal Display worldwide for organic OLEDs

Times More Efficient

Universal Display’s OLED technology 4x more energy efficient than conventional fluorescent LEDs

16.6^%

CAGR

in Universal Display’s total revenue between 2016 - 2020

View Our Analysis

The Path to Drawdown: LEDs

Invented in 1994, Light-emitting diodes (LEDs) are designed as high-brightness, high-efficiency light bulbs. LEDs work like solar panels in reverse, converting electrons to photons rather than the other way around. LEDs use 90% less energy than incandescent bulbs and half as much as compact fluorescents for the same amount of light. While other lighting technologies convert energy into heat (and most of it wasted), LEDs turn 80% of their energy use into light.

LED lighting has many environmental advantages. Its efficiency in converting energy into light helps reduce electricity consumption and air-conditioning usage. For people without access to ample energy, LEDs can be powered with small solar cells and can replace costly kerosene lamps and their noxious fumes and emissions. Where LEDs are used in streetlights, they can save up to 70% of energy and significantly reduce maintenance costs.

Project Drawdown predicts that if LED lighting becomes widely used in the residential and commercial lighting markets, it can help avoid between 10.2 - 10.8 gigatons of CO2 emissions in housing, and between 5.9 - 6.7 gigatons in commercial buildings. To achieve this, the global market share of LEDs needs to scale fast:

<::marker> In 2018, LEDs comprised 3% of the total commercial lighting market and 2% of the residential lighting market
<::marker> By 2050, LEDs should account for 95% and 90% of the residential and commercial markets, respectively
<::marker> That’s 12.82% CAGR for residential LED, and 11.21% CAGR for commercial LED lighting between 2018 - 2050.

About

Universal Display Corporation (stock ticker: OLED) is a developer and manufacturer of organic LED technologies and materials, as well as provider of services to the display and lighting industries. Headquartered in Ewing, New Jersey, it has offices in Ireland, South Korea, Hong Kong, Japan and Taiwan.

OLED's Role in Drawdown

Universal Display’s primary technological specialization is organic LEDs, or OLEDs, which consist of a series of organic thin films sandwiched between a conducting anode and a conducting cathode. OLEDs tend to emit light that’s bright, but less bright than conventional LEDs which require diffusers so that the light can be viewed directly. OLEDs have many other advantages that Universal Display is exploring, including its flexibility and transparency, uniform white color quality, color tunability and dimmability.

Universal Display derives revenue from many activities (p. 6):

<::marker> sales of OLED materials for evaluation, development and commercial manufacturing
<::marker> intellectual property and technology licensing
<::marker> technology development & support, including 3rd party collaboration efforts and providing support to 3rd parties for commercialization of their OLED products
<::marker> contract research services in areas of chemical materials synthesis research, development and commercialization of non-OLED applications

Of these, material sales account for ~53.6% of Universal Display’s total revenues, and these sales have grown by 18.3% annually between 2016 and 2020.

Their OLED products and technology are applicable to the display and lighting industries. The display market consists of a wide variety of consumer electronics like mobile phone, wearables, IT and TVs as well as virtually reality, automotive and signage. OLEDs’ thinness, lightness, fast response times, wide viewing angles, high contrast ratios and brilliant colors give them an edge over conventional LEDs in these applications.

In the lighting markets, OLEDs can be used in applications currently addressed by incandescent bulbs and fluorescent lamps. There are also new applications, like tail lights and signal lights in the automobile and aerospace industries. In all of these applications, OLED lights require low operating temperatures and so are cool to the touch, require low drive voltage, and enjoy long lifetimes.

OLED: What We Like

Universal Display has been expanding fast over the last few years, both in terms of manufacturing capacity and intellectual property:

<::marker> They opened a new, expansive headquartered in Korea in 2015
<::marker> Acquisition of BASF’s IP assets consisting of over 500 issued and pending patents around the world in 2016
<::marker> Same year, acquired Adesis, Inc, that specializes in organometallic synthetic research development and commercialization
<::marker> 2017 saw a $15 million capacity expansion in their Ohio facility for UniversalPHOLED materials production
<::marker> Universal Display opened a new corporate and laboratory facility in Hong Kong in 2019

What We Want to See Improve

Track Sustainability Metrics

We are dismayed that there are no mentions of sustainability or climate change on Universal Display’s website, reports and presentations. As a company that produces energy efficient lighting and display technology, we would like to see Universal Display leading the way toward a decarbonized future. This begins by tracking their own direct and indirect GHG emissions, setting targets to reduce these emissions, and publishing these metrics and targets in an annual ESG report.

Diversify Suppliers

Universal Display notes (p. 23) that they rely solely on PPG to manufacture the OLED materials they use and sell to product manufactures. Their agreement rolls over every year, and Universal Display acknowledges that if this relationship is disrupted, it would have an outside negative impact on their revenue. We urge Universal Display to broaden their supplier base so as to make their supply chain more resilient to potential shocks.

Clean Up Supply Chain

We appreciate that Universal Display provides some information about their suppliers and makes their supplier code of conduct available on their website. We also commend them for pushing suppliers to adhere to environmental protection and resource conservation. But we would like Universal Display to go further and require suppliers to reduce their GHG emissions by a concrete amount in the short-term. A company with the purchasing power of Universal Display can and should put strong pressure on their suppliers to reduce their carbon footprint.

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Allocated	Company	Description
5.00%	Applied Materials (AMAT)	Applied Materials supplies equipment, services and software for LED manufacturing. LEDs help conserve energy and cut emissions
0.56%	Universal Display (OLED)	Universal Display makes organic LEDs, replacing fluorescent and incandescent lighting and improving building energy efficiency
0.47%	Acuity Brands (AYI)	Acuity makes LEDs, smart lighting and building technology solutions that can improve energy efficiency and emissions from buildings
0.40%	Power Integrations, Inc. (POWI)	POWI makes energy-efficiency products like AC-DC power converters and LED drivers. These solutions help buildings conserve energy and cut emissions
0.28%	Diodes Incorporated (DIOD)	Diodes makes a range of semiconductor products for LCD display, LED monitors and lighting. LED lighting is a key solution for cutting building emissions
0.07%	Veeco Instruments Inc. (VECO)	Veeco makes equipment and processing systems used in making high-tech LEDs. Energy-efficient LEDs help buildings cut energy use and emissions
0.05%	Magnachip Semiconductor Corp. (MX)	Magnachip Semiconductor derives its revenue in part from the promotion of LEDs and solar PVs, through the sale of LED products and products used with solar PVs. It creates no products specifically for the fossil fuel industry.
0.02%	Agrify Corporation (AGFY)	Agrify provides LED lighting and other products for high-yield indoor agriculture. Efficient LEDs are an energy-saving alternative to conventional lights
0.02%	Amtech Systems, Inc. (ASYS)	Amtech Systems makes semiconductor equipment for LED and power device applications. LED lighting helps buildings cut emissions
0.02%	AXT, Inc. (AXTI)	AXT sells semiconductor substrates used in LEDs, thermal imaging, and autonomous vehicles. It makes no products specifically for the fossil fuel industry, thus passing our revenue filter.
0.02%	Energy Focus (EFOI)	Energy Focus makes LEDs for the Navy, federal, state and local governments, and big organizations, helping them save energy and cut building emissions
0.02%	Highway Holdings Limited (HIHO)	HIHO makes electronic components, some of which are used in making LEDs. LEDs are energy-efficient lighting that can cut emissions from buildings
0.02%	SemiLEDs Corporation (LEDS)	SemiLEDs makes LED components for lighting and other applications. LEDs are an energy-efficient lighting alternative that can cut building emissions
0.02%	LSI Industries Inc. (LYTS)	LSI Industries makes LEDs for automotive, restaurant, retail and grocery store customers. Energy-efficient LEDs help buildings cut emissions
0.02%	Orion Energy Systems, Inc (OESX)	Orion offers LED lighting and custom-made energy management systems for big organizations - a solution that cuts energy use and emissions from buildings
0.02%	O2Micro International Limited (OIIM)	O2Micro International makes LED products and lighting. LEDs are an energy-efficient lighting alternative that can cut emissions