Apple Reportedly Producing MicroLED Screen, OLED Stocks Fall

Apple (NASDAQ:AAPL) is reportedly developing next-generation MicroLED screens for its own use in a secret manufacturing facility near the company’s California headquarters. Per Bloomberg, the company is currently making small number of screens for testing purposes.

Apple’s foray into MicroLED display manufacturing has taken the market by surprise. However, we believe that the company has been planning the venture into MicroLED display technology for quite some time. The company had acquired LuxVue technology, a developer of MicroLED screen technology way back in 2014.

The news is likely to hurt major OLED screen providers like Universal Display Corporation (NASDAQ:OLED) , LG, Panasonic, Philips and Sony (NYSE:SNE) . Shares of Universal Display and Sony were down more than 7% and almost 4%, respectively, in pre-market trading on Mar 19.

Apple shares were also down 1.40% in pre-market trading. The shares have returned 25.8% in the past year, significantly better than 16.2% rally of the S&P 500 index.

MicroLED Outshines OLED

MicroLED is a flat-panel display technology that comprises several microscopic LEDs, which self-illuminate per display pixel. Unlike Organic Light Emitting Diode (OLED), MicroLED technology uses inorganic material, which helps it to offer darker blacks and brighter whites.

Reportedly, MicroLED can illuminate far brighter than OLED, with a contrast ratio of 1,000,000:1, which is more than 30 times brighter than comparable OLED TVs. Apart from superior brightness, MicroLED makes devices slimmer and consumes less power.

However, MicroLED screens are difficult to produce than current OLED screens, which can hurt mass production possibilities at least in the near term.

Apple to Bring Display In-House?

The rumor-mills have now started buzzing on whether Apple will bring display manufacturing in-house, which makes sense, as it will no longer be dependent on Asia-based manufacturers for supply of display screens.

Reportedly, Apple had to delay the launch of iPhone X due to the lack of adequate number of OLED screens from suppliers like Samsung.

According to CNBC report, shares of Apple display suppliers like Samsung Electronics (KS:005930), Japan Display, Sharp Corp and LG Display declined in Asia following the news. We believe Apple’s foray into MicroLED display manufacturing presents significant threat to growth potential of these suppliers in the long haul.

Per Bloomberg, chip-screen interface providers like Synaptics (NASDAQ:SYNA) are also expected lose business, if Apple finally decides to produce its own displays, in the long haul.

Currently, Apple carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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