Samsung Electronics Co. Ltd. (SSNLF) and its sister company Samsung SDI will be the main beneficiaries of a surge in organic light-emitting diode, or OLED, screens on mobile devices and televisions, according to analysts at JPMorgan.
At tech titan Apple Inc.’s (AAPL) much-anticipated launch event this week, the firm introduced its first OLED-based phone, the iPhone X. Days later, LG Display Co. Ltd. (LPL) presented an OLED Partners Day in Beijing. On Friday, Samsung’s very own OLED-equipped Note 8 hit stores for $930, a notch below the iPhone X’s $999 price tag. (See also: Apple Poised to Surpass $1 Trillion in Market Cap.)
Higher Demand, Higher Prices
JPMorgan’s Jay Kwon indicates that as Apple is set to get all of its OLED supply from Samsung, the South Korean electronics giant will see a boost from higher-than-expected average OLED panel prices.
Regarding the debut of the iPhone X, JPM indicates that most specifications came in line with expectations, as pricing “seems to be at a reasonable range with availability of model pushed back to early November.” Kwon suggests “higher-than-expected OLED panel ASP (JPMe: ~US$100)” will “well offset” a delay in the overall production schedule. “With rising OLED penetration (minimum two models), we estimate blended margin to expand and view profit contribution from OLED to rise moving into 2018E,” wrote the analyst, noting that Samsung and SDI will benefit the most. Samsung Electronics is the top shareholder in Samsung SDI, owning about 20% of the company.
Kwon also highlights the LG Display presentation on Thursday as reflecting an “upbeat TV OLED production outlook,” which “could be a positive catalyst to LGD share price.” Due to a surge in OLED activity, the JPM analyst suggests that it is no surprise “we have seen higher-than-expected capex spend” at Samsung, which he expects will “normalize” in 2018. As for LG Display, Kwon says the firm’s OLED capex should “gradually move up” year-over-year (YOY) throughout 2019. (See also: Samsung Galaxy Note 8 Pre-Orders More Than Twice Predecessor.)