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JDI buyout of JOLED official and more ?2

13:32 12-Dec-16


Nikkei is reporting that Japan Display, Inc. will purchase a controlling interest in JOLED, as anticipated.  This is causing a 5%+ drop in OLED shares, but I see that as only natural given the recent bump and over-valuation. 

We're also seeing some retreat in LPL, and that could represent an opportunity ahead of CES, in early January.  To my mind, LG Display has played the market exactly right.  Though both Sony and Panasonic have 5% stakes in JOLED, Sony has joined Panasonic in buying WOLED panels from LG Display and both will feature them at CES.  Sony's capitulation is particularly gratifying after some the press it has issued, and it confirms what I've been saying all along about LGD having a 3-5 year window to capitalize on its TV monopoly.  My one concern here is that CES moves often don't have legs, and I'm very worried about a substantial market pullback in January and/or February.  Unfortunately, this Wednesday's FOMC statement will probably be less useful than usual in determining how to frame any such development for the long-term.  I remain cautious to outright pessimistic in the meantime.

Elsewhere in chip and device stocks, the retreat seems more warranted.  Evidence continues to mount that Chinese production is coming in 2017 for both mobile and televisions, with BOE and EverDisplay leading the way, followed by CSOT and Truly.  As they do, the AMOLED space will remain capacity constrained due to increasing demand, but the Koreans are already moving on.  With Samsung that means rushing flexible displays to market over the next year and investing in QLED and new battery types for the long term.  As I've already detailed, LGD is actually ahead in the former area and will leverage its size and know how to play the transition effectively, along with MagnaChip, though it will take longer for that to become obvious in MX. 

For the longer-term, although the new Samsung technology looks compelling, it's still too early to declare it a winner, as there will be motivated government-backed alternative technology from Japan, and perhaps China as well. Regardless of how these technologies develop, I continue to think that the next year or two represent the end of mobile as we've known it, and that we should see a Japan and Korea teaming up against China as interim products progress to market.  All of these developments are line with the technological outlook I've been communicating and they still will take a long time to play out in the market, which tends to reward long investors with patience and discipline. I look forward to CES and the new year while collecting my dividends.