Q4 2022 Universal Display Corp Earnings Call
Good day, ladies and gentlemen, and welcome to Universal display Corporation fourth quarter and full year 2022 earnings conference call. My name is Sherry and I will be your conference moderator for today's call. At this time all participants are in a listen only mode a question and answer session.
<unk> will follow the formal presentation, if anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded for replay purposes, I would now like to turn the call over to dairy slew senior 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, even president and Chief Executive Officer, and Brian Millard, Vice President and Chief Financial Officer before Steve begins let me remind you that today's call is a puppy of universal display.
We just we shouldn't retransmission or rebroadcast in any portion of this call in any form without the express written consent of Universal display is strictly prohibited.
Further this call is being webcast live and will be made available for a period of time on universal displays website.
Call contains time sensitive information that is accurate only as of the date of the live webcast of this call February 23 2023.
During this call we may make forward looking statements based on current expectations.
Statements are subject to a number of significant with the uncertainty 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.
Now I'd like to turn the call over to Steve Abramson.
Thanks, Dennis and welcome to everyone on today's call. We're pleased to report record results for the fourth quarter and full year 2022.
2022 revenue was $617 million operating income was $267 million and net income was $210 million or $4.40 per diluted share.
Fourth quarter revenue was $169 million operating income a $3 million and net income was $65 million were $1 36 per diluted share.
So as we look to the future we believe that the OLED ecosystem is preparing for a new adoption and investment cycle to begin in 2024. However, we expect current macro headwinds hampered near term growth amidst this temporary backdrop and based on current estimates and expectations. We believe.
Our 2023 revenues will be in the range of $550 million to $600 million.
Brian will provide further details shortly.
Looking back on 2022, it was a year filled with significant milestones from record high financials to new customer agreements to make excellent progress with our phosphorescent Blue program and to ramping our new Shannon production facility.
On the customer front, we announced new long term agreements for Red and Green materials with our partner of more than two decades, Samsung display for an additional five years. In addition, we recently announced an evaluation agreement with Seiko Epson for AR.
Harvey our display applications.
On the global manufacturing front with our foundry partner of more than 20 years PPG, we began ramping our new manufacturing site in Shannon, Ireland, which recently achieved ISO 14001 certification.
With the proliferation of OLED is expected to broaden we are increasing our OLED emitter production capacity to meet our customers' future needs.
2022 was another year of continued recognition for our company. We were named to Forbes list of America's Best Midsized companies. We were recognized by Newsweek for the third year in a row as one of America's most responsible companies. We were awarded a silver rating for corporate social responsibility from each of these.
As a leading provider of business sustainability ratings, we were recognized by the form of executive women as a champion of board diversity for the third year.
And we were recently included in Bloomberg's list of 50 companies to watch in 2023.
From a research and development standpoint, our team of scientists and engineers are continually.
Inventing and commercializing highly efficient and cost effective OLED material solutions and technologies, including New Reds Greens yellows and hosts.
With respect to Blue we continue to make excellent progress in our ongoing development work for a commercial phosphorescent Blue Emissive system as we shared last month, we met our preliminary phosphorescent blue target specifications in 2022.
We continue to believe that we are on track to introduce our all phosphorescent RGB stuck into the commercial market in 'twenty 'twenty four.
We believe that the introduction of our full suite of Red Green and Blue Phosphorescent Emissive materials will unlock a vast array of opportunities for higher energy efficiency and higher performance across a broad range of all of the applications.
On the Ob J P front, we are advancing our groundbreaking manufacturing platform.
The Ob J P team continues to build and improve it out the key sub systems of our Alpha system design well commercial system is still a few years away. We believe that Uzi J P will enable high volume cost effective manufacturing of side by side RGB OLED TV panels and develop into a mall.
<unk> billion dollar market opportunity.
On the OLED consumer market front.
Let's see yes, Samsung display showcases flex hybrid display, which combines both foldable and flexible capabilities into one display and according to the company. It is a prototype for future laptops.
Also at CES, Samsung display announced it was expanding its QD OLED TV portfolio with plants offer 49, eight and 77 inch panels. This year.
Or earlier this month, Samsung electronics introduces new Galaxy S twenty-three smartphones.
In 2023 laptop series the Galaxy book, three where all the models are equipped with a M OLED displays.
Towards the end of their own packing presentation, Samsung announced that it was working with Qualcomm and Google to develop an extended reality XR device.
Reports of since surface, noting that Samsung is working on micro OLED displays and the company is planning to build a micro OLED display line in a song.
LG display CES showcase their whole lives as well LG display Debow did 17 inch foldable OLED that could fold it unfolded have to transform into a tablet a portable monitor.
LGD also showcases eight inch 360 degree foldable OLED that can pull back and forth.
Company also announced that it will broaden its OLED portfolio and start producing 27 inch and 45 inch wood panels for gaming applications.
And according to reports is planning to build a new $250 million OLED module facility in Vietnam for smartphones.
Also reportedly targeting to increase its 2023 OLED shipments by 50% year over year and is focused on expanding its international market share.
We expect 'twenty to 'twenty, three macro economic clouds of uncertainty to weigh on near term growth. Accordingly, we have revised our capacity forecast to reflect shifts in timing of a few select expansion projects.
As a result, our new forecast for year end 2023 installed overcapacity as measured in square meters is to increase by approximately 15% to 20% over year end 2020 on.
This compares to our previous estimate of 20% to 25%.
As we look out we believe these macro headwinds will be short lived and continue to believe the 'twenty 'twenty four will be a pivotal year for the OLED industry and for us.
From an industry perspective, we believe the significant new wave a wand adoption primarily for I T will commence next year and fuel our new multiyear wave of OLED capacity investments. This new wave of capacity build is expected to drive significant growth and momentum in the OLED industry and for <unk>.
Yes.
On the lighting.
Well, we are still in the early commercialization stage, we're seeing advances in OLED lighting for the automotive market.
Last month at CES OLED <unk> showcased its new flexible OLED lighting for automotive applications with the highest density of segments and a flexible OLED panel.
According to the company. This advancement will allow for enhanced communication capabilities and design freedom, while maintaining the key features and benefits of OLED technology.
That note, let me turn the call over to Brian .
Thank you, Steve and again, thank you everyone for joining our call today.
Let me review, our 2022 results before commenting on our guidance for 2023.
2022 revenue was a record $617 million up 11% year over year.
Material sales were $331 million up 4% year over year, and royalty and license revenues were $267 million up 22% year over year.
Odysseus revenues were $18 million up 16% year over year.
Our 2022 revenues include a cumulative catch up adjustment of $30 million.
122, gross margins were 79% flat compared to 2021.
2022 operating expense, excluding cost of sales was $222 million up 5% year over year.
We are continuing to invest in a number of strategic programs, including next generation Red Green yellow and Blue emissive materials and OLED technologies.
Our Trailblazing Ob J P manufacturing platform.
Our global infrastructure, including our new Shannon site and in our people.
Our 2022 operating income was $267 million up 17% year over year, which translates into operating margins of 43%.
122, net income was $210 million or $4 40 per diluted share up 14% year over year.
We ended the year with $826 million in cash cash equivalents and investments or $17.38 per diluted share.
Now moving on to our fourth quarter results revenue for the fourth quarter of 2022 was a record high of $169 million up 16% from $146 million in the fourth quarter of 2021.
Fourth quarter 2022 revenue includes a cumulative catch up adjustment of $13 million compared to $4 million in Q4 of 2021.
Material sales were $88 million in the quarter compared to $86 million in the fourth quarter of 2021.
Green emitter sales, which include our yellow green emitters were $67 million in the fourth quarter of both 2022 and 2021.
Red emitter sales were $22 million, which compares to $19 million in the fourth quarter of 2021.
As we've discussed in the past material buying patterns can vary quarter to quarter.
Fourth quarter royalty and license fees were $76 million compared to the prior year period of $56 million.
A decent revenue for the fourth quarter of 2022 was $5 million up 14% from the comparable period in 2021.
Fourth quarter cost of sales were $30 million translating into total gross margins of 82%.
This compares to $32 million in total gross margins of 78% in the fourth quarter of 2021.
Fourth quarter gross margins increased due to favorable product mix, partially offset by the cost of our Shannon site, which commence manufacturing in mid 2022.
Fourth quarter operating expenses, excluding cost of sales were $56 million in the fourth quarter of 2021, he was $58 million did.
The decrease is primarily due to the completion of the 10 year amortization period for the acquisition of Fuji films patents as we noted last quarter. The Fujifilm patents became fully amortized last July .
Operating income was $83 million in the fourth quarter of 2022 translating in the operating margin of 49%.
This compares to the prior year period of $56 million and operating margin of 39%.
The increase in margins was primarily due to the cumulative catch up.
During the fourth quarter, we recorded an impairment charge of $7 million for certain minority investments.
Fourth quarter 2022 income tax rate was 19%.
Net income for the fourth quarter was $65 million or $1 36 per diluted share. This compares to the fourth quarter of 2020 ones $46 million or <unk> 96 cents per diluted share.
Now turning to our outlook as we look to 2023, we believe that the macroeconomic uncertainties will weigh on consumer spending in the near term.
Which we expect to result in relatively flat year over year material volume demand in.
In addition, we realized $30 million in cumulative catch up adjustments in 2022, which we do not expect to recur in 2023.
Taking into account. These factors, we expect our 2023 revenues to be in the range of $550 million to $600 million.
We estimate that our 2023 ratio of materials to royalty and licensing revenues will be in the ballpark of 1.5 to one.
2023 overall gross margins are expected to be approximately in the range of 77% to 78%.
Operating expenses are expected to increase by 5% to 10% year over year with R&D estimated to be up by 10% to 15% and SG&A expected to be up by 5% to 10%.
2023 operating margins are expected to be in the range of 35% to 40%.
We expect the effective tax rate for 2023 to be approximately 20%.
And lastly, we are pleased to announce that the board of directors has approved an increase in universal displays quarterly cash dividend.
A dividend payment of 35 per share will be paid on March 31, 2023 to stockholders of record as of the close of business on March 17th 2023.
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'll turn the call back to Steve. Thanks.
Thanks, Brian .
I would like to take a moment to honor the memory of our visionary and founder Sherwin Seligson, who passed away in early December .
Sure Lisa indelible Mark on the display and wireless communication industries.
We're in 1935 sure was immense drive for learning eclipse conventional teaching methods. He would have high school and pursued his life's interests, including the stock market technology and spending time with his family on the Jersey shore.
Sure his desire to get real time stock quotes without having to leave the beach spark the idea of a portable wireless data machine and led Sherwood to form his first multibillion dollar company in 1972 International mobile machines I am now known as interdigital.
After stepping down as chairman of I'm sure. When we began to look for his next venture. He ran about novel organic research work being done by doctors Forest and Thompson and decided to explore this groundbreaking technology with a visit to Princeton University.
There he observed a green dot with a nine volt battery hanging from it light up for a few seconds before it expired.
That tiny green organic light emitting diode sherwin saw the future of OLED that founded Universal display Corporation in June of 1994, with a vision of creating the next generation of displays back when Tvs were still cathode ray tubes.
Fast forward to today and as we approach our 13th anniversary Universal display has grown and evolved from an R&D startup to a global leader in the OLED ecosystem.
On a personal note I had the privilege of working closely with Sherwood for more than 40 years. He was not only my brilliant mentor, but also my wonderful and generous friend with a long term strategic vision Sherwin cultivated and nurtured UDC guiding principles of curiosity respect humility.
And determination is.
His mindset of constantly thinking outside the box and courageous conviction had been embedded into the company's DNA and our key to UDC is remarkable success.
Sure was incredible legacy will continue to drive the company forward on its path of exploration innovation and growth.
Miss him tremendously.
Lastly, I would like to thank each of our employees for their drive desire dedication and heart in elevating and shaping universal displays accomplishments and advancements we are committed to being a leader in the OLED ecosystem, achieving superior long term growth and delivering cutting edge technologies and materials.
Sales for the industry for our customers and for our shareholders.
And with that operator, let's start the Q&A.
Thank you Mr. Amos and if he would like to ask a question. Please press star one on your telephone keypad.
<unk> tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue and for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star kids.
Our first question is from Brian Lee with Goldman Sachs. Please proceed.
Hey, guys. Good afternoon, thanks for taking the questions.
I had.
One maybe to start off on just the guidance for you Brian .
550 to 600 million a little bit of a wider range than you typically.
Start the year out with.
Maybe walk us through your thought process on the other $50 million.
Low to high end versus maybe 30% to 20 in past years and.
Where's the biggest sort of uncertainties as it is it by product category smartphones versus Tvs or is it specific geos, where the swing factor is a little bit wider this year than in the past.
Yeah, Hi, Brian Thanks for the question.
It's yeah in terms of the range I think it just reflects what we're seeing in the market more broadly with the macroeconomic factors that are at play.
It's not any one specific area or any one specific customer or unnecessarily. It's really a abroad. You know macroeconomic situation that just based on the situation in the world. There is a wider range of outcomes that could come to play this year and so that informed us determining that a wider range was more appropriate for this year.
Okay Fair enough and then on the.
Revenue range.
Are you embedding any even if you know pretty nominal.
Revenue contribution this year from although even kind of wing.
Okay.
Yes. There is there is an element of blue I mean, it's not a significant contributing factor to our guidance. This year, but it is an element of our guidance isn't incorporated but it's not materially more than it's been on the development level in prior periods.
Okay. So we won't necessarily be a separate line item.
You're disclosing what it just show up in that Green number you provide on a quarterly basis as it right now.
Yes, so it will at the point that it's material and well certainly determine separate disclosure for it but we're not at that stage right now.
Okay Fair enough last one it would be it would it would be separate disclosure it would not be included in green.
Got it okay, Okay makes sense.
And then just one on gross margin and then I'll pass it on so you said, 77% to 78% gross margin at the consolidated level just given you know what what Youre doing at quarterly I guess I'm back Monday, you're implying 65% gross margin plus or minus for the materials again for this year.
That's correct.
Okay.
Alright, I'll pass it on thanks, a lot guys.
Thanks.
Our next question is from Krish Shankar with Cowen and company. Please proceed.
Hi, Thanks for taking my question and sorry to hear about sharing with you the provisionary.
My first question is on the smartphone opportunity and the sharp.
The China smartphone can recover.
Does that impact you and also longer term what do you think about your opportunity lots.
Smartphone unit growth actually and then I had a follow up.
So as the economy recovers all ledger or are approximately 50% of the smartphone market right now.
And we expect that percentage to continue to grow because everybody really wants to know what it is there's a lot of oil pricing issues right. Now so that's what I think what we'd be looking for I think it depends.
A lot on the on the macro we're sure we're starting to see Chinese Oems adopt.
Oh, that's for both the high end and mid range smartphones.
Got it got it. Thank you for that and then a question for Brian .
Guidance in siding.
Yes.
Competitor by 'twenty, one, but he had like $553 million in revenue in the 87 in EPS.
Clearly the earnings power and spend it on is going to be lower.
You get 6 billion revenue range.
How much of that is coming from the Shannon systems.
Renovation, but is there any other things that are impacting the earnings call and thank you.
Yes. So we've we've previously said that Shannon and the Underutilization is about a million a month in terms of expense that we're carrying to operate the site.
We expect the utilization of the site to continue to improve as we go through the course of 2023 and into 2024.
But nonetheless still carrying the cost of the facility. So that's that's the contribution of Shannon.
But I think shannon's a critical site, having it as part of our network is.
Certainly part of our long term strategic plan as we look to where the industry is going and making sure we have the volumes to support our customers' growth.
Got it thanks, Brian .
Thank you our next.
Our next question is from Sidney Ho with Deutsche Bank. Please proceed.
Thanks for taking my question I also have a question on the full year guide you talked about the flattening charity demand and maybe absence of some catch up revenue adjustments, but what are some of the underlying assumptions for the market that you are baking into your full year guidance and cash off maybe by end market smartphone television.
And maybe content per unit whatever you can quantify and maybe you also talked about second half higher than the first half, but that's kind of typical for you guys can you maybe help us quantify a little bit more of that in an alpha hydropower.
Sure.
So I think it's you know not the flat guidance assumption in terms of unit volume demand is really across the customer base and across the end markets. So we're really not seeing any particular one area.
Softness across the board in terms of in the flat material guidance that we put out there.
And in terms of the first half second half I mean, I think your point is well taken I think part of the dynamic historically has also been as we've grown in the second half has been.
Higher than the first I think this year, it's a little bit due to the fact that.
There's just the macroeconomic factors, which are weighing in the near term.
Okay.
And the follow up question is on the sensor licenses get to see that the extension was done early at this time.
I assume you won't get into the details of the financial terms that at a high level.
You talk about what are there any meaningful changes to the licensing part of the agreement for a sustained last extension any any one time step function change that we should be thinking about when we started modeling for 2023.
Yes, the structure of the agreement is really very consistent with the prior agreements that we had over the last five years. So nothing nothing significantly different the one thing to note is that we do think that the timing of our cash collection under the license agreement at our revenue recognition will be more closely correlated in this contract. So we shouldn't see as much of an.
Pact of deferred revenue as we had in the prior contracts.
Okay, great. Thanks.
Thanks.
Our next question is fine now.
D Hussaini with FHA. Please proceed.
Yes.
Two follow ups.
And I'm sorry, the question has already been asked but when the boys available for your customer.
What's the assumption underlying assumption for your customers customer too.
Evaluate the new material.
Oh, maybe I'm not quite sure I understood I understand the question.
Yeah, well, what we are doing.
And that was just crazy.
This would this would be a new material and I'm just trying to understand if your customers customer, let the handset OEM would have to go through.
Re qualification.
The new panels that has.
The three steps of the emitter firm supplied by UDC.
Well, we're working with our customers as you know.
There is interest in blue for its efficiency, both with our customers and with our customers customers exactly how that's going to evolve over time, I think we're going to have to wait and see how how the how the introduction into the marketplace occurs.
Got it okay. Thank you for clarification and Darren.
Just a one quick item on the cash flow.
How should I think about your operating cash flow, especially I think your inventory went up as you prepare for.
23.
How is it going to trend throughout the year and whats the capex guidance for 'twenty three.
Okay.
Yeah. So good question I'll take the inventory piece first I think we have been building a supply of raw material inventory, we have certain raw materials that we.
You know, we keep a strategic supply of I think we're now feeling like that's at a fairly comfortable level. So we shouldn't necessarily see in 2023 the level of increase we've seen the last few years.
And on Capex. We're currently thinking that it's going to be in roughly the $40 million to $50 million range. This year.
Just on what we know as of now obviously, we're always looking at our global footprint and where we can expand and grow but based on our current plans and it's expected to be in the 40 to 50 range.
Got it thank you.
Our next question is from James Ricchiuti with Needham and company. Please proceed.
Hi, Thank you good afternoon.
A couple of questions first on <unk>.
On Blue.
I'm wondering if you could talk about the next milestones that we should be looking for.
And maybe.
Related to that.
When would you anticipate having some visibility into it.
When bill of material.
Material might be incorporated in some of the.
Lead production capacity.
It's going to be coming on and whether thats existing just trying to get a sense as to how this is going to play out because you guys had talked about anticipating revenue in 'twenty 'twenty, four and I'm, just I'd like to get a better understanding of how this is going to begin to scale up.
Sure Jim all good questions and.
Oh I see.
Things evolve, but when we have the opportunity to do.
Give you further insight into the process. We certainly will right now we're doing a lot of engineering work supply chain work and other type of work to prepare for the introduction of our commercial molecules in 2024. So Unfortunately I can't give you any specific guidance right.
But once we have a better feel for when we will start talking about those types of things.
Okay and as far as that goes Stephen again, I understand you're not going to be able to comment further but.
Would you would you know more than by say mid year or is this something that we're just going to learn more toward the end of the year.
Where we're going to learn more as it occurs I mean, there's no okay.
You got it thank you.
Alright listen savvy another follow up I'm, sorry go ahead.
No go ahead Jim.
I was just going to ask I.
I mean the.
Sequential increase in materials gross margins.
Yes.
Several factors I Wonder if you could just elaborate on the main factors that contributed to that sequential increase and the materials gross margins in the quarter.
Yes. So we did have some favorable product mix in Q4 that was around $4 million to $5 million, so pretty significant impact in the quarter alone just on product mix that was the favorable item that was offset by some of the Shannon costs. So those were really the factors that that drove the improvement that we saw in Q4.
Okay and just last question because of the guide that you gave as has been pointed out being wider than normal I'm. Just wondering how you would characterize.
Characterize the business as you went through Q4, and thus far through the first two months.
This year.
Yeah, I think Q4 came out a little stronger than we had expected. So we were.
With that and I think we're expecting this year.
As we said the first half to be a little lighter than the second nuts.
The plan. So you know Q1 is going to be probably slightly softer than what we saw in Q4, but that's that's what we're seeing as of right now.
Okay. Thanks, a lot.
Thanks.
As a reminder, it is star one on your telephone keypad, if he would like to ask a question. Our next question is from at teeth Malik with Citi. Please proceed.
Thank you for taking my questions I have a question on do you talked about.
Blue meeting preliminary internal target.
These targets on reliability and lifetime and I missed it I missed it but all of that.
Similar to the.
The specs that you have on on Green and Red.
Well, yes, the targets were development spec space upon.
Lifetime color point and deficiency, so basically it is.
We've talked in the past.
We've got we've gotten the blue materials to a point, where we felt the rest of it was a lot more engineering work and we had gone through this before so we could figure we can basically figure out where the commercial material should comment.
Now the reliability of the molecule does not necessarily reliability in the in the full up device.
Understand and then you have lowered your installed capacity.
I look over the last two years 2021 'twenty three problem.
The 20% to 25% to 15% to 20% and.
So my question is.
Your optimism on our quaint any call being a pivotal year for OLED is that primarily based on the.
The new materials like Blue or are you seeing any green shoots in terms of.
New projects because I.
Basically I'm trying to.
No I can kind of extrapolate your lowest capacity this year into next year, because there's not enough capacity then they probably would have been up.
Particularly as well is that a fair way to look into next year that the majority of your optimism on next year is based on Blue.
Well two of 'twenty 'twenty four we've seen what we will see the the beginning of blue the new wave of investments are going to begin. We're also going to expect to see a better macro environment. So when you put all of those things together, including.
Beginning of some new products, that's where we see the beginning of this wave to start.
And then Steve that you the optimism.
I think any four is based on the book key the Galaxy book key tablet.
OLED.
So the optimism is based on deep.
Tablet market.
Adopting OLED displays.
Right Okay.
I'm sorry, there is a piece of the tablet market. That's in there I'm not I don't want to get into any specifics on which tablets it might be but we do see the market or the tablet market starting to take off at that point in time.
Okay.
Got it thanks.
Our next question is from Martin Yang with Oppenheimer and company. Please proceed.
And please check and see if your line that go ahead.
Yes.
Thank you for taking my question can you first remind us of the margin impact assuming Shannon gets to full capacity.
Yeah. So.
I think it's a little bit of a tricky wanted me we have the roughly million dollars a month of cost right now that we're bearing on Shannon.
We have said that in adding Shannon to our network work, we've effectively doubled our capacity for production across the the business. So we have a lot of capacity and as we continue to utilize Shannon to a greater degree, we'll see that overhead absorbed over a larger number of units. So there's incremental improvement from there, but we're not in a position necessarily to set a target.
Once it's out.
100% capacity necessarily.
Got it and do a follow up on that is that what I'm getting at the bottle cost does it.
Perhaps partially goes away.
As the capacity rights to let's say, 50%, 70% or 80%.
Yeah, I think the way of thinking about nature.
Yeah. It doesn't necessarily go away it just would get absorbed into the cost of those units. So you would be able to make additional product without having additional overhead costs because the overhead wouldn't be underutilization cost it would actually be utilized in and be absorbed into the cost of the product.
Understood. Thank you.
Final question is on new problems.
Earlier today, <unk> announced that they are there.
In tandem.
And then the structure of our smartphones are flexible OLED <unk>.
Do you feel that is going to be a mainstream adoption do you have a view on adoption of tandem structure.
More devices like smartphones.
We really focus on being a material manufacturer and technology developer and providing those materials and technologies.
To our customers you know tandem has been has been around for a while because it can increase the efficiency and lifetime of a display of and.
So to that extent, we think it came to the extent it can grow the business, we think it's valuable.
But those are decisions our customers make.
Thank you.
Our final question is from Scott Searle with Roth Capital. Please proceed.
Hey, good afternoon. Thanks for taking my questions, Hey, Steve maybe to follow up on Blue I know you're reluctant to give any detailed estimates on that front, but I was wondering if you could talk a little bit about the adoption cycle or the number of customers that youre engaged with us of how we should think about that as we get into 'twenty five 'twenty six.
What percentage of your customers do you think are looking for a full RGB stack, where may be provide us with some historical perspective in terms of Green you know how long it took customers to ramp up in terms of design cycles and wrapping into commercial production.
So good good sets of questions.
We've noted that we've been working with multiple customers on blue.
And we have also noted that.
Our customers all want blue exactly how they're going to introduce the product into the marketplace.
It's something that we will see as it evolves.
The Green analogy back when we introduced Green there was only one customer the.
And the market that was Samsung.
I'm not sure of the analogy.
Can really.
Apply but the interest for blue is across the board for all different sizes of displays and applications and as we get closer we may be able to share more information or that may be information that is specific to our customers and they're the ones that may have to share.
Sure.
Okay fair enough and if I could on the excitement around 24 and capacity additions coming online I know historically when you've given two year forecast. We've typically seen these big step functions up 50% plus capacity additions in 'twenty. Four are we entering one of those similar type cycles I'm not sure if you're prepared to put a person.
<unk> of growth in the capacity on that.
But there are a lot of the Gen 10 facilities that kind of got pushed out or had kind of fluid timelines. If you will it sounds like you're feeling more comfortable that those go in to production in 'twenty four and beyond just wonder if you could kind of frame how youre thinking about.
24, plus.
Okay.
Yeah, I think we're seeing a number of things one in terms of the capacity.
Investments that we expect to be made for I T.
Specifically Gen eight six capacity, that's going to be needed to meet the market and where that's going to be heading so that's one thing as well as the.
The macro factors in the broader economy, picking up which will improve utilization of existing fabs and other factors.
Got you fair enough and last if I could just to follow up on the comment.
It's one of the areas that that's really been.
Under adopted at this point in time, but the market forecasts out there are pretty large.
It sounds like with some of this other capacity coming online that that's going to start to ramp into 'twenty four and beyond.
Is there a point, where you see the square meters of square acreage of it starting to rival that of smartphones and Tvs over the next several years or is it just you know.
Too too far out on the time horizon, we think about things like that thanks, so much.
Yeah, I think it's hard to predict exactly at which point you know the square meters May may hit the smartphone square meters. I think one thing it is a very broad market and covering you know tablets laptops monitors and other applications. So there's a lot of different use cases for OLED and the broader it landscape as well as the fact that the display size is larger.
Other than smartphones.
The board across all those applications. So we see a huge opportunity there.
As OLED get adopted into various products.
Great. Thank you.
Thank you.
Thank you. This concludes the question and answer session I would like to turn the program back over to Brian Miller for any additional or closing remarks.
Thank you for your time today, we appreciate your interest and support have a good evening.
Thank you. This does conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.