Cho Soo-in, right, Samsung Mobile Display chief executive, shakes hands with UDC CEO Steven Abramson at a Seoul hotel, Tuesday, after the companies formed an alliance for OLED screens. / Courtesy of Samsung Mobile Display
By Kim Yoo-chul
Korea's industrial powerhouse Samsung has secured a good springboard for faster growth and development of next-gen displays after its flat-screen affiliate was entering a licensing period over some patents with a U.S.-based company.
On Tuesday, Samsung Mobile Display (SMD) said it has inked a comprehensive patent-licensing deal with Universal Display Corp (UDC). SMD is a joint venture with Samsung Electronics and Samsung SDI.
The agreement is more than crucial for Samsung Mobile Display because the Nasdaq-listed UDC was holding more than 1,000 patents in phosphorescent materials, which are vital for organic LED or OLED screens.
Because the materials could boost the brightness and energy efficiency for OLED screens, which are expected to increasingly supplant LCD displays, Samsung has no choice but to pay royalties to the American company.
"With the technology support from UDC, SMD will develop advanced and quality-improved OLED products further, and it's also been expected for a cost-saving thanks to the deal," said senior SMD spokesman Kim Ho-jeong.
But Kim declined to unveil further financial details, citing the sensitivity of the issue.
OLED screens are regarded as the next-generation displays that will eventually replace the current LCD screens. OLEDs are much brighter and thinner than LCDs, however their higher price is still regarded as the biggest drawback over market expansion.
SMD is the industry's biggest OLED manufacturer that mostly supplies the screens to Samsung Electronics. The Galaxy S smartphone variants are using OLED screens.
Amid the saturation of the current LCD market, Samsung is heavily pushing OLED business as an apparent strategy to enjoy more of a "first-mover advantage" in the growing and very lucrative market.
Although SMD is ideally positioned to boost its OLED business, the joint venture has been paying "millions of dollars" to UDC in return for using UDC-patented PH materials.
"The developments could allow firms based in Asia, such as Samsung and LG, to manufacture OLEDs without having to pay royalties to UDC for materials used," said a fund manager from a U.S.-based top-level investment bank in Seoul.
SMD is expanding its output of OLED screens to meet the rising demand from local and overseas clients. This year's investment projection from SMD was 5.4 trillion won ― a record amount on an annual basis.
The licensing deal comes months after The Korea Times exclusively reported that three UDC patents were invalidated in Japan and that these patents were also being challenged in Korea by Duksan Hi-Metal and in Europe.
Duksan Hi-Metal was still taking legal action as the local materials-producing company has been blocked from manufacturing phosphorescent materials as a result of the patents held by UDC.
In response to the report, UDC CEO Steven Abramson then said that their patents were under challenge in several areas, and they had expected it to remain so in the future, this is part of the game.
"UDC also welcomed the decision," said Kim from SMD.
The global market in OLEDs in terms of total revenue will rise to $13 billion by 2013, from an estimated $4.1 billion, according to data from DisplaySearch, a market research firm. SMD was dominating the market.