Apple (AAPL): Korea Trip Shows All iPhone OLED Coming From Samsung - UBS (OLED) (AMAT) (LPL)

UBS analyst, Nicolas Gaudois was in Korea last week visiting OLED and Display supply chain companies. It is now clear that 100% of the edge OLED display supply for the first iPhone (NASDAQ: AAPL) adopting it in 2H17 will be from Samsung. LGD has been slower in qualifying. The analyst sees evidence that it remains a potential second source supplier for '18.

He also see growing interest from Chinese smartphones makers for edge-type OLED displays, which will benefit both LGD and Samsung, and contributes to Chinese panel makers prepping capacity. He continues to expect OLED to be the mainstream technology for smartphones displays by '20. TV adoption will be slower, but in spite of Samsung's current indecision, eventually, OLED will prevail in the high end.

Samsung is in the process of placing several gen 6 OLED equipment orders in 2Q, and recent filings suggest upside in the order sizes. More orders are expected in 2H16, and Samsung's A3 fab should reach its maximum capacity (120k spm) by end '17. LGD is prepping the second tranche of orders for E5 fab, with a subsequent decision on capacity allocation for Apple expected by 3Q. Equipment vendors have visibility on coming orders from Tianma and Visionox, after BOE earlier on, and less clarity on Truly and EDO.

The firm continues to favor OLED winners versus LCD legacy. While the firm recently lowered their price target on LG Display (NYSE: LPL), they continue to view the stock as an under-valued OLED play. They also initiated on Wonik IPS in the equipment space with a Buy - while Applied Materials (NASDAQ: AMAT) (Buy) recent results supported their positive stance.

SI NOTE: While not mentioned, the report should be positive for Samsung OLED partner Universal Display Corp. (NASDAQ: OLED).

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