Q4 2020 Universal Display Corp Earnings Call
[music].
Good day, ladies and gentlemen, and welcome to Universal display is fourth quarter and full year earnings Conference call. My name is Sherry and I will be your conference moderator for today's call if anyone should need operator assistance during the conference. Please press star one.
One on your telephone keypad as a reminder, this conference call is being recorded for replay purposes, I would like to now turn the call over to a diary slew director of Investor Relations. Please proceed.
Thank you and good afternoon, everyone welcome to Universal displays fourth quarter earnings Conference call. Joining me on the call today are Steve Eavenson, President and Chief Executive Officer, and Sid Rosenblatt Executive Vice President and Chief Financial Officer before Steve begins let me remind you that today's call is a property of universal display any redistribution.
Retransmission or rebroadcast of any portion of this call in any form without the expressed written consent of universal display is strictly prohibited.
Further this call is being webcast line and will be made available for a period of time on Universal display is website. This call contains time sensitive information that is accurate only as other date of the live webcast of this call February 18, 2021 day.
During this call we may make forward looking statements based on current expectations. These statements are subject to a number of significant risks and uncertainties and our actual results may differ materially. These risks and uncertainties are discussed in the company's periodic reports filed with the SEC and should be referenced by anyone considering making any investments in the company's securities.
Universal display disclaims any obligation to update any of these statements now I would like to turn the call over to Steve Abramson.
Thanks, John and welcome to everyone on today's call where.
We are pleased to reported our fourth quarter and 2020 results.
'twenty 'twenty revenues were $429 million operating income was $158 million and net income was $133 million were $2.80 per diluted share.
Fourth quarter revenues were $142 million operating income was $66 million and net income was $54 million per.
Dollars 13 per diluted share.
For 2021, we expect to see meaningful growth.
Upon current estimates and expectation of a global health crisis, improving we believe 2021 revenues will be in the range of 530 million to $560 million Sid will provide further details shortly.
Looking back on 2020.
It was a year filled with innovation advancements flexibility and perseverance diligence and safety as well as challenging in this ongoing pandemic.
As a company, we moved swiftly to safely adapt to rapidly changing conditions, we implemented measures to safeguard our employees, while ensuring the safe and efficient operations of our facilities. We also quickly mobilized our business continuity plans to ensure our ability to continue our R&D programs and the manufacturing shipments of our year.
First of all with materials to our customers as a result of the tremendous and commendable agility and execution focus of everyone at UDC and their manufacturing partner PPG. We continue to build upon our first mover advantage in the OLED ecosystem and our positioned to emerge an even stronger company.
When this crisis.
During the year, we announced long term agreements with China Star Optoelectronics, the second largest panel maker in China.
Celebrated the 20 year anniversary of our strategic partnership with TPG.
Established Uzi J P Corp to invest the commercialization of our groundbreaking OLED TV manufacturing technology.
Expanding our community education initiatives with the establishment of the UGC, Inc. Full when scholarship, which aims to support a graduating viewing students pursuing a degree in the stem field on a per.
Partnership with the Smith family Foundation with assist with community programs in Trenton, New Jersey.
And we were recognized by fortune as one of the world's 100 fastest growing companies and by Newsweek as one of America's most responsible companies.
From an R&D standpoint, we remain at the forefront of innovation.
Our team of scientists and engineers are continually discovering developing and designing new emissive material systems and technologies and advancing our R&D roadmap with new milestone achievements.
On the materials for a portfolio of energy efficient high performing phosphorescent materials continues to expand with next generation Reds Greens yellows and hosts to meet our customers ever demanding and ever evolving specification needs of color point efficiency and lifetime with.
As respect to Blue we continue to make excellent progress in our ongoing development work for a commercial blue phosphorescent system.
Regarding Ob J P. We're making advancements with our organic vapor jet printing manufacturing technology for mask was solvent less dry direct printing of large area OLED panels with the formation of moving J P Corp. This past summer the movie J P team is focused on scaling our novel technique.
All of the platform into a commercial equipment system.
Moving J P Corporation's first milestone is.
But alpha system, which is anticipated to be ready during 'twenty to 'twenty two.
And as we had noted last quarter nature published a paper total plasmonic enhancement of stability and brightness and organic light emitting devices, describing udc's fundamental groundbreaking device architecture that may extend the lifetime and enhance the efficiency of OLED panels applicable to both display.
He is in lighting applications.
This work is part of our long term R&D roadmap for continued moving to enable the OLED ecosystem with leading edge technologies and best in class materials.
Moving to the OLED industry. The ecosystem continues to grow with new OLED capacity, new OLED products, new OLED customers.
Samsung display is portfolio of OLED products continues to grow.
S D C expects OLED smartphone adoption to increase in 2021 with the expansion of five G as well as further penetration into the mid range market.
Also in the small and medium OLED market Samsung is ramping its efforts in I T. Early last month, Samsung announced its 'twenty 'twenty. One line up of OLED laptop displays will include over 10, new models with sizes ranging from $13 three to 16 inches.
Samsung is also forecasting a 500 per cent increase annual sales routes or I T panels. This year.
With the increased focus on the it market, which has an estimated tam of approximately 450 million units spread across laptops tablets and monitors and only about one per cent of the I T market being or was there were reports that Samsung is planning to build a new OLED production line for notebooks and it's April.
Sure.
Uh huh.
This line is expected to have a production capacity of 30000 substrates per month.
For large area panels, Samsung display is reportedly making progress with its QD OLED program is expected to begin production of its QD OLED panels for Tvs and possibly monitors in the second half of this year.
How would your display continues to ramp up its OLED TV production for 2021, LGD plans to increase its OLED TV shipments to seven to 8 million units up from around $4 5 billion units in 2020.
Oems such as LG electronics, Sony Vizio, Sky worth and more than a dozen others are fueling this tremendous growth.
Stirring LGD shipment target growth is the expansion of its OLED TV portfolio.
During CES LG unveiled its new 42 inches 83 inch OLED TV panels augmenting its existing line up of 48, 50, 565, 70 788 inch models.
On the small and medium front lgd's flexible OLED side ran at full utilization in the second half of 2020, which has been widely attributed to demand for their OLED smartphone panels. Additionally, LGD is focusing on the automotive market with its plastic OLED panels for applications, including infotainment.
Systems Dashboards head up displays side mirror display rear seat entertainment displays.
G display also known as it plans to rollout 20 inch and 30 inch OLED displays in the future towards getting the premium mid sized panel market related to gaming mobility.
According to reports <unk> will use some of this capital raise for its third OLED fab and song too which is the desired monthly output of 48000 flexible Gen. Six panels. The first series of showing sharing is expected to commence by the end of this year.
He is also planning to invest in OLED micro display plant in the southwestern Yunnan province for augmented and virtual reality displays.
The construction of T M, a $6 $8 billion Gen six flexible THAAD and Sherman is reportedly progressing ahead of schedule. When this fab is completed we will have the capability of 48000 substrate starts per month.
In addition to your money is in the midst of ramping its wuhan capacity with an additional 15000 substrate starts per month.
China Star is expanding its gen six flexible OLED capacity and its Wuhan plant. Its first OLED fab that opened at the end of 2019 by.
By the end of this year to other stores fab is expected to have a monthly install capacity of 48000 substrate starts.
Envision arch recently can memory, its new OLED module line in Guangzhou with production expected to commence this month. Additionally, because you're not just working on ramping its new Gen. Six flexible OLED fab in Hefei, which will have the ability to manufacture 30000 plates per months.
The benefits of OLED <unk> continued to drive adoption across the consumer electronics landscape from the white colored gamma and deep color saturation to the 180 degree viewing angle and true contrast ratio to response rates that are more than 10 times faster than <unk>.
DS as well as form factor SMB.
Essentially comprised the film layers all of us are inherently conformable bendable enrolled.
To date, Samsung Huawei way out and Motorola of launch Foldable smartphones that list is expected to expand with reports Oems, including Xiaomi Oppo vivo and Google will jump on the Foldable phone bandwagon this year.
And at CES, LG electronics unveiled the world's first robo smartphone and a day.
The product will launch later this year also at CES.
C L showcase a roller bull smartphone prototype screen that can stretch from $6 seven inches to 7.8 inches and during its recent earnings call. Samsung display noted that it will develop robo and slide of OLED displays.
Another benefit as I am.
Some of you are aware Blue line from electronics has been linked to problems like blurry vision eye strain dry eye and even sleep disorders when people were excessively exposed to it.
Last month, LG display announced it its OLED display became the industry's first T V panel to win the credit day shift from Ics are U S based eye protection certification agency.
LGD 65 inch OLED TV panels portion of harmful Blue light is only 34%.
Our lowest among TV panels and about half of that is LCD TV panels and.
And last year, Samsung display unveiled an optimized OLED display per five G smartphones that emits only six 5% of harmful blue light and earn certification of eye care display from SGS Society Generale, the surveillance of Europeans Eye Protection certification agency.
So that's non display noted that its OLED products also have about 70% less harmful blue light admissions than most current LCD smartphone displays.
On the lighting front, while we are still in the early commercialization stage, we believe that the benefits of OLED lighting, which include high power efficiency novel and innovative form factors beautiful natural colors and cool operating temperatures are all quite compelling.
We look forward to enjoying those benefits in our new conference rooms, which will have OLED lighting fixtures.
That note, let me turn the call over to sit.
Thank you, Steve and again, thank you everyone for joining our call today, Let me review, our 2020 results before commenting on our 2021 guidance.
2020 revenues were $429 million up 6% year over year <unk>.
Material sales were $230 million down six.
6% year over year, and royalty and license revenues were $185 million up 23% year over year.
2020 operating expense, excluding cost of materials was $186 million up 8% from $171 million in 2019.
Operating income was $158 million in both 2020 and 2019.
2020, net income was $133 million or $2.80 per diluted share compared to 2019, net income of $138 million or $2.92 per diluted share.
We ended the year with $730 million in cash cash equivalents and short term investments.
Or $15 and 45 of cash per diluted share.
Now moving on to our fourth quarter results.
Revenue for the fourth quarter of 2020 was a record $141.5 million.
Up 21% from last quarters $117 $1 million.
And up 39% from fourth quarter 2019 revenue of $101.7 million.
Our total material sales were $62 $5 million in the fourth quarter down 9% sequentially from last quarter, $68 $7 million and up 3% from the comparable year over year's quarter $68 million.
Green emitter sales, which include our yellow green emitters were $48 $2 million down 9% sequentially from the third quarter's $52 $9 million and up 1% from the comparable year over years quarter $47.5 million.
Red emitter sales were $14 $3 million into the fourth quarter down 6% from the third quarter was $15 $2 million and up 10% from the comparable year over years quarter $13 million.
As we have discussed in the past material buying patterns can vary quarter to quarter. Some other contributing factors include COVID-19 issues as well as consumer demand cycles capacity ramp schedules production loading rates device recipes product mix.
Material ordering patterns customer inventory levels and customer production efficiency gains sinter.
Since a number of these factors are moving variables for our customers. They are also moving variables for us.
Fourth quarter, 2020 royalty and license fees were $75 million up 68% from the third quarter of 2000 Twenty's $44.6 million.
And up 99% from the comparable year over years quarter of $37.8 million.
The increase was due to the strength of our customer sales of royalty bearing OLED licensed products in the latter half of 2020.
In addition, there was an ASC 606 cumulative catch up that was recognized in the fourth quarter due to the impact of the pandemic.
Fourth quarter 2020, a decent revenues were $4 million. This compares to $3 $8 million in the third quarter of 2020 and $3 $2 million in the fourth quarter of 2019.
Cost of sales for the fourth quarter 2020 were $27 million. This compares to $23 $4 million in the third quarter of 2020.
<unk> 18 point $10 million in the fourth quarter of 2019.
Cost of OLED material sales were $24 $6 million.
Translating into material gross margins of 61%.
This compares to 70% in the third quarter of 2020, and a comparable year over years quarter's material gross margins of 73%.
For the year, our material gross margins were 67%.
Primary driver of our material gross margins as product mix.
As OLED demand continues to grow our developmental materials pipeline is also growing and that has impacted our total material gross margins.
As we invent and develop next generation phosphorescent emitters. They are increasingly more complex and as a result have higher initial costs.
With the expected continued growth and complexity of our phosphorescent materials portfolio.
And <unk>.
The increase in raw material costs, we estimate that our average annual material gross margins will be in the range of 65% to 70% going forward.
Fourth quarter operating expense, excluding cost of sales was $48 $8 million up from last quarter's $45 $3 million and essentially flat from the comparable year over year's quarter of $49 million.
Operating income was $65 $8 million in the fourth quarter of 2020.
This compares to last quarter's $48 $4 million in the year over year comparable year's quarter $34.5 million.
Net income per the first quarter of 2020 was $53 $9 million or $1 13 per diluted share.
This compares to last quarter's $45 million or <unk> 85 cents per diluted share in the comparable year over year's quarter of $26 $4 million or <unk> 56 per diluted share.
Now to our outlook, we expect 2021 revenue to be in a range of 530 million to $560 million.
We believed a 2021 ratio of material to royalty license revenues will be in the ballpark of 1.5 to one.
Moving along to margins, we expect our 'twenty 'twenty, one material gross margins to be in the 65 to 70 per cent range.
Our annual overall gross margins for the year are expected to be approximately 80%.
121 operating margins are expected to be approximately 40% to 45%.
Operating expenses of SG&A, R&D and patent costs any aggregate are expected to increase in the range of 20% to 25% year over year.
With R&D up about 25% and SG&A up about 15%.
Increased spending in 2021 includes a significant investment in Ob J P development.
We expect the effective tax rate to be approximately 19% give or take a few basis points.
As Steve mentioned earlier, we expect meaningful growth. This year. This is being driven by new OLED capacity, which translates into new OLED revenue opportunities for us.
As we reiterated last quarter, we expect the installed base of OLED capacity to increase by approximately 50% at the end of this year over the installed capacity base at the end of 2019 as measured in square meters.
And lastly, we.
We are pleased to announce that the board of directors has approved an increase in universal displays cash dividend a.
A dividend payment of <unk> 20 per share will be paid on March 31, 2021 to stockholders of record as of the close of business on March 16th 2021.
The dividend increase reflects the confidence in our robust future growth opportunities expected continued positive cash flow generation and commitment to return capital to our shareholders.
With that I will turn the call back to Steve.
Thanks Sid.
Our outlook for 2021 reflects another year of strong growth and performance. While also continuing to invest in near term and long term opportunities to fortify our leadership position well into the future.
With a long and vast runway of forecasted growth of the OLED industry and therefore for US we are investing in our people our infrastructure and our innovation to advance our first mover advantage and to further enable our customers and the OLED ecosystem.
We have and continue to strategically increase our head count around the world to meet the growing long term needs of the company and our customers in Asia, Our recently expanded footprint and increased local technical support, including new corporate and laboratory facilities in Korea and Hong Kong.
With Steven on the yard full and application centers per device fabrication and testing.
Play a critical role during the pandemic for on the ground customer support.
In the U S. We are renovating two buildings across the street from our current site to accommodate our growth and are expected to move into the new expanded site. This year when we plan to retrofit our existing site into a dedicated R&D innovation Center.
Regarding innovation in addition to expanding our core competencies and OLED technologies and materials, we're seeing strong interest from customers and potential partners for Ob J P. Technology, we are ramping or Ob JP efforts in Silicon Valley to scale, a novel manufacturing platform with the first milestone being alpha system in 'twenty.
'twenty two.
In closing I would like to take this opportunity to thank each of our employees for their drive desire dedication and heart in L.
Anything in shaping universal displays accomplishments and advances we are committed to being a leader in the OLED ecosystem, achieving superior long term growth delivering cutting edge technologies and materials for the industry for our customers and for our shareholders.
And with that operator, let's start the Q&A.
Mr. Abramson, if he would like to ask a question. Please press star one on your telephone keypad.
Tone will indicate your line is in the question queue you.
You May press star two if he would like to remove your question from the queue for participants using speaker equipment. It may be.
Sorry to pick up your handset before pressing the star. He is our first question is from Brian Lee with Goldman Sachs.
You May proceed.
Hey, guys. Thanks for taking the questions kudos on the nice.
And to the year here.
And then maybe just I know you're going to get a bunch of questions. On this so I'll I'll get it out of the way here on the Sid on the ASC 606 catch up you saw in the quarter can you quantify that to any degree and then you know maybe importantly, also what actually triggered it if he could elaborate a little bit so we understand what happened there.
And then related to that is is it one customer or is it several customers in question as to why that that got triggered and then is there the potential it comes up again in <unk> of 2021 or 2022 ahead of the contracts with some of your Big Korean customer is coming to a close on their terms.
Thank you, Brian and obviously there is a lot of questions in that one question, but I.
I do know that the focus is on ASC 606.
Our fourth quarter revenues came in higher than expected due to increased strength in the latter half.
In the quarter from our Korean customers and obviously, an additional $17 million of cumulative catch up from Asa's ASC 606 adjustments due to the pandemic contribute to our fourth quarter revenues.
As part of our ASC 606 review at the end of 2020, we look into COVID-19 impact to our business and the OLED market forecasts.
With a reduction in 2020 in 2021 market forecast, we are now estimated lower material shipments in our ASC 606 estimates.
This standard. This then results in higher license and royalty fees per material shipment.
This this is work was reflected in the cumulative catch up adjustment of $17 million in 2020, most of it most of it was recognized in the fourth quarter.
And.
Realistically it was the COVID-19 issues that caused this catch up in the fourth quarter.
And.
If things continue along and expected path then we should not see these large catch ups again, unless there is something that causes a major hiccup.
Either the market estimates or our <unk> or our sales compared to our estimated sales.
So that was a long winded answer, but I hope it helped.
That clarifies a bit and I think you've been clear about that in the past that barring a shift in kind of the outlook.
You wouldn't necessarily see these big catch up so thats good to understand.
Maybe on <unk>.
Mix of revenue I know, you said 17 million of ASC 606 catch up in <unk>.
In Q4, that's helpful in terms of the.
The additional detail, but when I when I look at it.
Samsung revenue it was up a lot in Q4 versus Q3.
I know they did well with with some other product cycle stuff in the back half and I assume that part of the catch up but.
Can you give us a sense if that revenue for them on the materials side was higher in Q4 versus Q3 about the same or lower just trying to understand how much of that big bump in Samsung was the catch up versus just organic materials revenue growth.
Yeah.
To be honest, Brian with it.
606 amounts.
It's multiple customers.
Or it's every material and it is.
Between materials and license fees, and we really don't break it out between one versus the other but it was stronger for them in our quarter.
Okay.
And maybe last one I'll pass it on here.
With with.
Total gross margins I think you had said.
80% gross margin income.
Save a thesis in 2021, that's the guidance here. So if I look at the 65% to 70 and then I.
I assume some contribution for a day since it seems like the thesis has been running at a pretty high gross margin call. It $35 40.
The past three quarters or so is that this is that the right range to get you to the 80 blended four.
For 'twenty, one just trying to understand the moving pieces in the margins just given the blend there.
Yes.
Overall, 80% margin, obviously applies to our license fees and royalties.
And that concludes the Dcs and the thesis as margins have been consistently getting better. So it's all built into that to get to the 80% that we expect.
Moving forward.
Okay Fair enough I'll pass it on thanks, guys.
Thank you Brian.
Our next question is from Krish Shankar with Cowen and company. Please proceed.
Hi, This is Robert Mertens on behalf of Krish first congrats on the quarter and thanks for taking my questions. One of your large TV customers have spoken out about.
Ramping the number of units this year relative to the.
Last year, how should we think about the demand.
Quarterly and how that might impact.
Our revenues for the year.
And then I have one follow up.
Sure well, we're happy to take your questions.
The second half, we believe will be better than the first half.
It's particularly talking about TV applications.
You have holiday buildup, but.
LG has talked about going from $4 5 million to seven to 8 million units.
In 2021, so we're very excited about debt because we think OLED Tvs are great they've been rated the best TV ever.
We continue to be so we're very we're very pleased with that and we'll do everything we can to support our customer.
Great. Thank you and then.
As you look at the ramp at some of your Chinese customers have you seen more localization efforts.
Is there any sort of developing competition within China for our OLED materials or new developments with.
Local customers there.
To work with different materials.
The landscape there.
And developing.
No we were working obviously with a number of Chinese manufacturers and Chinese manufacturers debt.
We're very happy that we continue to do that.
China is the second largest revenue reason region.
And it's a huge opportunity for us so we work with all the major Chinese panel manufacturers and we're very excited no matter what category.
Growing in.
Okay. Thank you that's all for me and I'll pass it to the next question.
Thank you.
Our next question is from Jim Ricchiuti with Needham <unk> Company. Please proceed.
Hi, excuse me good afternoon.
Yes.
Then customer breakdown that I have is correct and it may not be day. It looks like there was a fairly large increase in in revenues from.
From your second customer on the TV side in Korea, LG and I'm, just wondering if share any color you could provide on that whether it's.
Potentially the their scale up debt has been going on in China, or just any kind of timing issues around.
Some of the.
Neither material sales.
As it relates to when do you recognize the license revenue.
Well, yes.
It's clearly LG noted on their conference call that day or if there are second fab is up and running and that was.
And we've seen a big increase obviously in Q4 with customer B. So OLED sales or sales were very strong in the quarter, but I think it was across the board.
Okay.
So is there any weighted to I think you may have mentioned that just in response to the last question just with respect to how we should think about seasonality.
The TV related revenue is that changing more.
Becoming more heavily concentrated in the back half than it has been in the past.
Well you know this year it was I think debt.
Obviously TV sales are weighted towards the holiday season.
And I think it could be debt this year.
It was also impacted by a lot of people being home around the world and buying new Tvs I don't have a specific answer for you, but it does appear that there is our second half of the year for the best for last year and this year has been historically better.
And final question I'll jump back in the queue is I think you gave some.
Information as to the.
The increased investment and as it relates to Ob J P is besides getting that Alpha unit.
Going and I think you talked about 'twenty two I'm not sure if you gave any.
Further color as to when.
Are there any milestones, we should be paying attention to as it relates to <unk> and 'twenty one.
Or is it going to be fairly quiet until we start.
Getting more concrete.
Information.
With respect to the southwest system.
Tim I think the next day.
Milestone is the Alpha system I think we're hiring the team right now in California, where we're improving the technology, but the big milestone I think you guys would be looking for would be the.
<unk> system sometime in 2022.
Okay.
If I could slip one more in just with respect to the increase in R&D.
That that being one of the big factors is there any.
Whether you could talk to.
Some of the other R&D initiatives as it relates to.
As it relates to Blue is that stepped up in Europe.
Your plans for 'twenty, one as well.
More so than sitting in 2020.
Well as we.
We are doing a number of things, which obviously would include work on blue, which.
As one of our major efforts that will be J P is another one but we're continuing to work on new and next generation materials, because as we stated we're having more and more customers. Each one of our customers has more and more specific needs and we are continuing to.
To do everything we can to meet our customers' needs.
Across the board and they are different so the more customers. We have the more materials, we're going to develop and the more time, we are going to spend on R&D to ensure that we support them.
Okay. Thanks, a lot.
Thank you.
Our next question is from Matthew Prisco with Evercore ISI. Please proceed.
Hey, guys I just wanted to kick off maybe you could talk about some of the assumptions around the new calendar 'twenty one top line guide specifically, how you're thinking about growth.
And mobile relative to Tvs, and how should we be thinking about revenue from the it market is all in penetration kind of purchasing across all verticals now.
Well thanks for the question in terms of the guidance I mean, we do think debt.
We're going to see some recovery in 2021 over 2020.
And as I think we noted on our prepared remarks, we're talking about Samsung having 10, new products in that market is really small.
But smartphones and Tvs will still be the driver for us.
It is.
450 million units, but it's really very small so when you when you talk about the growth. It is something that we're in the very early stages.
Late stages of but it is a huge opportunity for us when you were talking about a tam of 450 million units.
And then how should we think about growth in smartphones relative to TV next year, where you can see revenues.
Yes.
All of them are built in to where we think we're going to grow and obviously, we talked about LG growing and I think the smartphone market is going to grow.
Got it Okay, and then just as a quick follow up it seems like domestic China sales. So once you back out LG has gone to outspend.
We're down pretty meaningfully quarter over quarter is that some type of inventory burn, that's continuing or or Huawei dynamic or something else, we should be thinking about.
Well as you can see debt.
Customers see.
<unk> is down significantly.
And they have debt that customer historically has been lumpy I don't think it's anything specific from one quarter to the other it's difficult, but they historically have been one of our lumpiness customers.
Okay, great. Thanks.
Thank you.
As a reminder, this star one on your telephone keypad, if he would like to ask a question. Our next question is from Shannon Cross with Cross Research you May proceed.
Hi, This is patrik Jackson on for Shannon I first wanted to ask what dynamics, you're seeing in terms of OLED penetration in the low and mid range smartphone market as retail man retail demand grows.
And you mentioned LG display showed its ability to increase some capacity in China, but I was wondering if there's any other near term catalysts that you see contributing to increase share specific line of that market. Thank you.
I think that a number of arkoma. Thank you for the question I think Samsung.
<unk> mentioned on their call that.
They are they are penetrating the mid range and have.
Talked about this for a while and there are a number of mid range phones that are that are in the marketplace. I think it's expected to increase this year because.
When you need to make the market grow and.
The premium end of the smartphone market is pretty much all OLED.
Your line that youre going to see more and more penetration into the mid range and there's even some low end ones.
Thank you I also wanted to ask about your your outlook and material sales through 2021 are there any changes in the key drivers you see in the medium term.
No I think that in terms of winter, obviously, we don't break out between the license fees and material sales, but we do we do we expect growth across the board whether it's in smartphones.
And.
In fact, I know in Tvs, we do think debt the ratio.
We'll go back to about one five to one of license fees and royalties.
Okay. Thank you.
Frank.
With Oppenheimer and company.
Oh Hi, Thank you for taking my question. My first question is can.
Can you maybe provide us with an update on your long term capacity outlook.
Next couple of years.
Well as we have done in the past, we talk about installed base and we've talked about the installed base from the end of.
We've actually done it since 2015 to 17 17 to 19 and now we're talking about 19, the end of <unk> 19 to the end of 'twenty, one and the installed base.
Capacity based upon square meters growing by 50%.
And we do believe that so we really only go that far.
So right.
Right now we think debt is intact in terms of installed capacity.
However, as.
We've discussed in the past, we don't start seeing any revenue until whatever installed base has actually turned on.
Got it okay.
And the next question is on your host material developments I know, it's not a meaningful source of revenue but are.
As host material and more meaningful revenue contributor in 2021.
Is that more.
More tied to whether or not that's tied to your Chinese customer shrinking.
We've talked about.
Having some partnerships on development on hosts and.
We are continuing to work with a number of our partners. However, as of now we have not had any.
Wins.
And so theres really nothing to talk about and.
I mean host would not be a big part of our business for.
For 2021.
Got it thanks, I'll jump passenger cash thanks Martin.
Our next question is from Andrew de Gasperi with <unk> capital markets. Please proceed.
Hi, Thanks for taking my question just had one in terms of what we've been hearing and with some of the Oems out there that the debt chip shortage out there could that impact some of the production.
Across the board are you hearing the same thing on display industry or is it still relatively untouched.
And we've obviously you heard about the same the chip shortages and right now we have not heard anything from our customers or even from market data that talked about the chip shortage impacting smartphones at this point per Tvs.
That's helpful. And then secondly on the under gross margin for materials. I think you mentioned that day is gonna be higher costs tied to that to all of our development.
It is just the day recipes for your Red and Green at this stage award.
Fact, you do ship some blue along the way with that signal a hit to gross margin as well.
Well the gross margin hit is based upon developmental materials and as we have stated developmental materials before they come commercial are more expensive.
This includes all of our colors, there's not just one specific color. This is red Green yellows and blues. So developmental materials are ones that were just either scaling up are working on to see whether eventually we will scale them up and they are more expensive to make.
Got it thank you.
Thank you.
As a reminder, just star one on your telephone keypad, if he would like to ask a question. We do have a follow up question from Christian Carr with Cowen and company. Please proceed.
Yeah, Hi, Thanks for taking my question.
So I just wanted to follow up you know add strong spoke about will be PD.
Two qualification of couple of months ago, and then Youll all be JP. It seems like as soon as I can.
The other two O b I'm just wondering like some of your main customers look at moving PV and even arguably many micro OLED is the window for the industrialization of Ob GP technology clothing.
Oh, the Ob PD Adobe J P technology are very different technologies.
<unk> technology is a mass was dry printing process.
It is it is very different than the technology.
That we license to <unk> 20 years ago. So they are very different.
So you don't think that has any impact on Ob G. The opportunity down the road.
We do not.
Got it that's let me just ask one quick follow up I don't know if this question came up earlier.
Oh, you know what.
What is your view on you know all of the mini and micro OLED technologies display talking about do you think.
You know those technologies can peacefully coexist with OLED or do you think they could potentially replace OLED down the road.
Well I think micro OLED technology is really still.
It's very early stage and.
Any new technologies are still a number of unanswered questions. When you deal with particularly micro Leds. It we've heard it for a long time, we didn't know that Samsung did launch a 110 inch micro Leds TV, which reportedly has a price tag of 156.
<unk> thousand dollars so.
It is very early and I don't think the jewelry knows what the answer is going to day.
Got it. Thank you very much thank you.
This does conclude our question and answer session I would like to turn the conference back over to Sid Rosenblatt for closing comments.
Thank you all very much for joining our call Tonight, and we wish you all a good evening and please stay safe and Sane. Thank you.
Thank you. This does conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.