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Apple's OLED iPhone Decision Could Lift These Companies

Apple is rumored to be using an OLED display for the iPhone 8, like the current Samsung Galaxy S7 Edge. (Samsung)

Apple's (AAPL) rumored decision to use organic light-emitting diode (OLED) displays in next year's iPhone could provide a boost to Applied Materials (AMAT), Advanced Energy Industries (AEIS) and MKS Instruments (MKSI), Pacific Crest Securities said Thursday.

OLED display suppliers like Samsung are boosting their production capacity to meet expected demand for OLED smartphones from Apple and others, Pacific Crest analyst Weston Twigg said in a research report.

Pacific Crest views OLED adoption as "a positive trend" for Apple, Applied Materials, Advanced Energy Industries and MKS Instruments. But touch-interface supplier Synaptics (SYNA) faces uncertainty, Twigg said. Its touch controller could be replaced when smartphone makers switch to OLED from today's more prevalent LCD displays.

Last week, semiconductor equipment maker Applied Materials said its Q2 display orders rose a whopping 483%, driven by demand for machines used to manufacture OLED displays.

Applied Materials stock is up 23% since it reported fiscal second-quarter earnings after the market close on May 19. Applied Materials stock rose 3% to 24.44 on the stock market today. That's its highest level in over a year.

Fellow chip gear makers Advanced Energy Industries and MKS Instruments also jumped on the upbeat report from Pacific Crest. Advanced Energy Industries climbed 2% to 37.86 and MKS Instruments surged 2.3% to 40.95. Both stocks are at their highest point since May 2002.

Another company getting a boost from interest in OLED is Universal Display (OLED), a key supplier of technology and materials for OLED displays. Universal Display stock fell a fraction Friday, to 67.78, just below its all-time high of 68.17 touched on Thursday.

Samsung should have four flexible OLED Gen 6.5 production lines running by late next year, up from one now, Twigg said.

Sharp, Japan Display, JOLED, AU Optronics (AUO) and LG Display (LPL) all plan to add either pilot or production capacity in 2017 or 2018, he said. Plus, at least five Chinese companies are preparing for new capacity, with pilot orders beginning, Twigg said.

At this week's Display Week conference in San Francisco, OLED was "front and center," Twigg said.

“Virtually all major display makers including Samsung, LG Display, BOE Technology, JDI and Tianma were exhibiting OLED displays,” he said. “We found the demonstrations of the rollable, foldable and bendable displays most impressive.”

OLED displays offer richer colors, darker blacks and lower power consumption than LCD displays. OLED displays also are super thin and flexible, allowing for new device designs.

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