If Apple Adopts OLED It Could Benefit These Stocks, Says HSBC

HSBC said SAMSUNG ELECTRONIC KRW5000 SSNLF, SFA Engineering, and Duksan Neolux would be key beneficiaries if Apple Inc. AAPL decides to adopt OLED displays for its iPhones. According to a report on Korea Herald, via MacRumors, Samsung will begin supplying Apple with OLED display panels starting in 2017 under $2.59 billion deal. The report says Samsung will provide Apple with 100 million units of 5.5-inch OLED panels on an annual basis. http://www.macrumors.com/2016/04/14/apple-samsung-oled-panels-2017/ "From the above report, potential for Apple's OLED adoption appears to be increasing from the new phone in 2H17, and Samsung would likely be the major supplier based on capacity readiness," analyst Ricky Seo wrote in a note to clients. The potential adoption of OLED benefits Apple, which has been struggling to make product differentiation versus Chinese and Korean rivals. The OLED adoption offers Apple the much-needed flexibility in design and form factor. "Flexible OLED will be an advantage as it could enable zero bezel or a foldable/rollable design. We expect OLED penetration in smartphone to accelerate to 32%/41% in 2017e/2018e from 26%/31% respectively, factoring in Apple upside," Seo noted. Seo expects that Apple's 100 million units of OLED smartphone in 2017 would require additional 50K panel per month capacity in 6G LTPS, leading to stronger orders flow to equipment makers during 2H16-1H17. The analyst now sees net flexible OLED capacity increase to 108k (from 63k) panel per month capacity in 2017. Seo reiterated his Buy ratings on OLED equipment and material suppliers SFA and Duksan as they are the near-term beneficiaries of his bullish capacity outlook. Seo is also positive on Samsung as a leading OLED smartphone panel maker. Shares of Apple closed Monday's trading 2.16 percent lower at $107.48.