Universal Display Corporation (OLED) Earnings Call Transcript & Summary

My name is Atif Malik. I cover U.S. semiconductor, semiconductor equipment and communications equipment stock here at Citi. It is my pleasure to welcome Brian Millard, VP, CFO, Treasurer at Universal Display. We also have Darice Liu, in the audience, the friendly neighborhood IR. I am going to kick it off with my questions first and then I will ask the audience to ask their question. [Operator Instructions]. Welcome Brian.

Thanks, great to be here.

Brian, to just start off, if you can just touch on where we are in terms of OLED adoption for TVs, for IT, for smartphone end markets, both near term into second half, you guys raise your -- you raised your number for second quarter, but full year outlook was -- is the same and also longer term?

Sure. Yes. So I think taking each of those individually. So the smartphone market currently is roughly approaching 50% penetration in terms of OLED adoption. And I think what you've seen is, over the number of years, the OLED TVs -- or sorry, OLED displays have been adopted into the premium segment of the smartphone market and then continue to penetrate the mid-tier models. And I think that's what continues to have room to continue to increase penetration rates in the mid-tier with the lower tiers remaining LCD technologies to date. Moving to the IT market, which is really one that we see as having a lot of growth opportunity in the next few years. And that -- IT we broadly define as tablets, laptops and monitors. And there's expected to be adoption of tablets next year in terms of one of the leading consumer electronics company is expected to adopt on OLED tablet into OLED tablet series next year. So we see that as being a key growth driver. And I think a lot of folks are going to start to follow that, and we should see additional penetration there. Currently, the IT penetration is roughly in the 2% to 3% range. So there's a lot of room to grow there in terms of additional OLEDs being adopted. The TV market is one that is also roughly in the 2% to 3% penetration today. That's one that's been a little bit challenging in the last few years in terms of increasing that adoption, but it's one that we see a lot of long-term potential for OLEDs to continue to have an increased penetration in the TV market, specifically the premium TV market.

And then on the smartphones, are we past 50%, 60% adoption on LED for smartphones?

It's approaching 50%. So I think it's right around the 50% mark at this point.

Okay. And then kind of despite the strength in the second quarter, you guys kept the full year outlook the same. Is that due to macro or what are some of the puts and takes?

Yes. So we've continued to have really consistent information coming from our field teams and our customers in terms of what the full year looks like. So as we sat down to update guidance for second quarter earnings, we felt like we kind of had a better sense of where things were going to go being 7 months into the year at that point, having some sense of what orders look like for the third quarter and felt like kind of bringing up the bottom end by $10 million made sense just based on what we knew at that point in time. And I think it's really just a reflection of we've continued to have really consistent information on a total basis. Some customers are up, some are down for the full year, but on a total basis in terms of the volumes we expect this year, we've continued to have consistent messaging from our customers.

And then just in terms of regionally, I'm curious what you're seeing in terms of different regions, particularly China in terms of OLED demand.

Yes. So our Chinese customers have been growing at a significant rate over the last few years. We have a number of customers who are growing and continuing to expand their OLED business. So our Korean customers are also growing, but the Chinese customers, the rate of growth there seems to be greater in the last few years. We know that the Chinese market has continued to adopt OLED into a number of smartphone models, and it's continued to move down and start to penetrate the mid-tier models in the Chinese market as well.

Good. You mentioned broadly, we're seeing strength in kind of display panel pricing this year and if any of that is resulting in incremental OLED demand for you guys?

Yes. I think from our perspective, it's really based on kind of the square area of demand and sell-through. So the price that our customers are able to realize in their sales to their customers doesn't have a direct impact on us. Certainly, if they sell more material or more displays, that's beneficial to us. But we haven't seen any direct impact because of the pricing dynamics for displays that you just mentioned.

Great. Then you talked about IT adoption for OLED as being kind of a catalyst, and 2024 investors are excited about it. And Apple is expected or speculated to launch first OLED-based iPads next year. How significant will that event be in terms of OLED adoption in tablets? And just talk more about the IT growth.

Sure. Yes, I think certainly, Apple being a leader in the industry as they are, I think as folks adopt -- as they adopt OLED into their tablet series, you would expect that others are going to need to do so as well to remain competitive with that just based on that's going to be a significant milestone. And there's also expected, in the next few years, additional models of various notebooks and other applications that are expected to go OLED. So we think there's a lot of momentum behind it. There's also new fabs coming online in the next few years of our customers to meet the expected demand in the IT market, which we think is also very important and needed to fuel as we see the industry growing. So all signs are pointing to a lot of adoption of OLED into the IT market in the coming years.

Okay. The cost of adoption of OLED in tablets. Obviously, the surface area is larger, does the technology need to change from what it is for smartphone manufacturing screens when we move towards tablets?

Yes. I think the manufacturing for tablets, so the -- right now, we have -- for smartphones, we use a red -- there's a red green and blue side-by-side architecture that our customers use to produce smartphone displays. And I think that architecture is going to be the same that will be used or expected to be used for IT applications as well. And so there's some new fabs that are coming online that -- Samsung has announced -- Samsung Display has announced a Gen 8.6 investment that they're making in an OLED fab for the IT market, and that's expected to be a red, green and blue, RGB side-by-side architecture as well. So I think there shouldn't be fundamental structural changes in the manufacturing process. But certainly, as they scale that to larger gen sizes, there will be things that our customers and their equipment partners will need to sort through from an engineering perspective to make sure that that's scalable to larger gen sizes.

Brian, the reason I asked that question is because the reports that a tandem OLED structure may be implemented for IT devices. And that has been speculated for a long time, but phosphorescence has been dominating in terms of manufacturing. So can you just comment on likelihood of a tandem structure and the progress tandem structures are making against phosphorescence?

Yes. So I guess one thing to clarify is the tandem structure uses phosphorescent materials. So it's not a different thing, but a tandem structure is expected to be adopted into a number of the IT models. And the reason for tandem or the use case for tandem and that really is 2 layers or 2 emissive layers in a display is to make sure that the display -- if it's used in an IT application, can have sufficient lifetime to last the life cycle of the device. If you think about an IT application where there's a lot of white background over the course of the day, whether that's Excel or Outlook or other applications that folks are using on their notebooks or tablets, that uses more pixels. The pixels are on for a greater portion of the day. And so a tandem structure is thought to be needed to address the lifetime issues in certain IT applications. But those tandem applications will use our materials. So it's not a separate thing. It's really an incremental material opportunity for us because of the fact that there will be 2 layers in the device and 2 layers of our materials.

Got it. outside IT, are there other end markets maybe auto where you see OLED adoption taking off?

Yes. I think -- one that automotive, which I think you just mentioned. I mean, we've seen a lot of news recently of our customers showcasing their display technology, OLED display technology for automotive applications. So -- and that's both for cockpit, if you can think of it, the driver console and having the entire dash be covered into display as well as entertainment displays in the rear of the car for passengers being OLED. So we see a lot of different applications. There's also been some companies that have showcased even windows on buses, transparent OLED windows where you could have displays or advertisements or other things. So I think automotive is one segment, though that's gaining a good bit of traction that we're really interested in our monitoring. And that's also true not just for, as I mentioned, the displays in the interior of the car, but also for the taillights of the car. A number of the more premium carmakers, BMW, Audi, Mercedes and others have adopted OLED tail lights into some of their premium cars, especially as you think about the EV market, which is -- clearly has a lot of momentum behind it. Having an OLED display and OLED lighting in an EV is great because of the power benefits. An OLED display and OLED lighting would have significant power benefits relative to LCD or LED technologies. And so that will help provide longer battery life. And so that's a great use case for OLEDs in EVs and other cars.

Got it. And where do micro OLEDs play?

Yes. So micro OLEDs are -- use our technology, use our materials, but they're really focused on AR and VR applications. So small-sized displays that are used for near-eye -- typically near-eye applications. And so we see that as clearly a growing market as a lot of -- there's a lot of interest and momentum in those devices. And we are -- it's our material and our technology that's playing there. And that -- granted the size of the display is much smaller than a smartphone or a tablet or a notebook, so the material sales opportunity from our perspective is certainly less. But it's certainly an exciting market.

Okay. And then moving on to the blue emitter. Can you provide more color on how the development of your blue emitter is progressing? And what gives you the confidence about commercializing it next year?

Sure. So for those that aren't maybe entirely familiar with the blue material that we've been developing. So we have red and green material that we've been selling commercially and yellow green, which is another material. Those 3 that we've been -- commercialized, and we've been selling for a number of years, decade plus. Blue phosphorescent material is something that we nor anyone else has yet commercialized. So we've been doing a lot of R&D for a number of years to bring that to market. And we believe that in 2024, we will have commercial specifications met that will enable us to introduce that to the market commercially. So a lot of -- and we first announced in early '22 that we expected in '24 to have those commercial specs achieved. And since then, we've really moved along the path that we had set out for ourselves. So each generation of the material that we develop and that we introduce to our customers for sampling purposes, we've seen improved performance in. And so lifetime and energy efficiency and color point, those are really the 3 things that we look at. We've seen improvements in all of those. And I think lifetime is really the last one that we're continuing to work and improve upon to make sure that our customers have material that meets commercial specifications and that they could introduce into one of their products. So a lot of work to do between here and commercial launch, but we have confidence based on the progress we've made and where we can see ourselves going that in 2024 of those commercial specs should be achieved.

And Brian, when you talk about meeting those specifications, there are those internal specifications, right? And then you're also working with customers. You're getting feedback from them in terms of external specifications. And so for investors, should we be waiting for like some CapEx announcements or some capacity coming on as kind of the lead indicators in terms of when those qualifications really kind of translate into a ramp for you guys?

Sure. So we -- there -- I guess, first, there shouldn't need to be significant CapEx at our customers in order to adopt the phosphorescent blue material when we bring it to market. There should be slight modifications that are fairly normal for us. They should need to make, but there shouldn't need to be significant capital expenditures like a new fab. That's not quite what we're talking. It's really just normal course modifications that they would need to make. And I think that we've been disclosing in our quarterly reports in the last 2 quarters the amount of blue development material that we've been selling. So we sold $2.4 million of development material in the second quarter, which isn't the hugest number, but I think it's a sign. Because prior to that, we had sold $300,000 in Q1 and $300,000 in all of last year. And so clearly, it's a moving -- it's moving upwards. It's going to be a bit variable between here and commercial launch. So it's not going to be $2.4 million flat or $2.4 million up necessarily quarterly between here and launching it commercially. But the size of the number that we had in Q2, I think, is evidence of the progress that we're making. And we'll be providing updates quarterly going forward on how much blue development material we are selling. And so I think that's something to look for. There's also some contracting milestones to keep an eye out for because we need to enter into contracts with our customers for blue. And -- but in terms of launching it into a device or a display, that's probably for our customers to speak to more than it is for us. But I think the key point for investors and those following the company is that we're making good progress. We have more work to do, but we can see that we're on the right path to have commercial specs achieved next year.

Good. In terms of those contracts, is the blue already part of those contracts when we look at your ABC customers like you disclosed in your filings? Or will that be incremental to those contracts?

So we don't have any material pricing for blue set with any of our customers. So we need to have conversations with each of them on what the pricing needs to be for raw material supply perspective. All of our customers, except for Samsung have a license to blue through their IP, their license agreements. So we don't have -- and then for Samsung, they would need an incremental license to the material as well to be able to incorporate it.

Okay. And with respect to your own manufacturing, I know you guys have been expanding manufacturing last year in China and Ireland. And can you update us where you stand in terms of getting your manufacturing ready for production of blue?

So we -- as I just mentioned, we secured in 2021, a site in Ireland to increase our manufacturing footprint. And that was really to meet the demand that we saw in the industry in the years ahead and make sure that we had sufficient supply in our network. So that site is a great capability. It's a very large site. It's 16 acres, a number of buildings. We've been -- we brought on an initial phase of that site in the middle of last year, in the middle of '22. And we're currently manufacturing green material there. We will have the ability to manufacture blue material there as well and ultimately red. So we're planning for it to be manufacturing all colors at our Shannon site. And it's a great asset to our network, but it is currently underutilized because of the fact that by bringing Shannon on at its full ramp once we brought on all the phases of CapEx there, we will have doubled our manufacturing capacity. And -- but we're being very disciplined about how we bring additional phases on. But currently, there is some underutilization because our volumes have been relatively flat in the last few years. But we've nonetheless continued to bring on this capacity. And we view it as having this capacity online as part of our network is much more of an asset than a detriment. And so we haven't wanted to slow down any of those efforts, even though there has been certain macro factors in the near term that have slowed down some of the demand.

Great. And then in terms of sizing the blue opportunity, I believe you have previously discussed a 2:1 ratio of green and red material consumption in smartphones. What are your expectations for blue material consumption compared to red and green?

So as you said, the ratio of green to red is 2:1. We expect the ratio -- the quantities of blue in a device to be very similar to green. So if you think of a future smartphone display that has our blue material incorporated in it, you'd have 2 blue, 2 green, 1 red is the rough ratio that we'd be thinking. So it should be very similar to the green quantities in display. Pricing, obviously, is the question mark since we haven't yet negotiated pricing with our customers.

In terms of devices, it will make sense that blue should be adopted across smartphones, tablets, maybe in TVs at the same time because of the value proposition? Or do you see a different order in terms of device adoption?

We believe there's a use case in all OLED displays. So it's our view that once phosphorescent blue is commercially available and has commercial specifications achieved, there really shouldn't be a reason why someone would want to continue to use a fluorescent blue approach at that point. So ultimately, we think it has broad application across all OLED displays. There will certainly be an adoption curve and hard to say exactly right now which application goes first. But -- and that's really for our customers to determine once we have the commercial specs achieved, how they want to take that and bring it into their product portfolios.

Got it. And you guys always work closely with the host providers, will the host system be part of the blue emitter product? Or will that be separate?

So we're developing -- we have developed host material of our own that's our intellectual property. We've been providing some development quantities of hosts. So that $2.4 million that I referenced in the second quarter also includes some host sales of development material that we sell to our customers. So we are planning to bring a host solution to the market. I think the host market generally tends to be a little more commoditized than the emitter business. So we're going in aware of the fact that there are likely to be more competitors there that would be in the emitter side, but we are bringing a host solution to the table that we think is very compelling for our customers.

Understand. Let me pause here and see if there are any questions in the audience.

You talked about the penetration rate across different markets. 50% in phones, 2% to 3% IT, 2% to 3% in TV. Where do you see that going in kind of the medium 3- to 5-year time line? And then ultimately, where do you see that kind of tapping out? And then in EVs, like how should we think about the dollar content per vehicle on a go-forward basis?

Yes. So taking the first part in terms of the potential growth in penetration rates, I guess, taking each of those individually. Smartphones, I think it's additional penetration in the mid-tier. So we're at 50% now. There will always be low-end smartphones that will probably potentially never adopt OLED because the cost just doesn't make sense for that market. But I think there's additional room to grow in the mid-tier where we've seen in the last few quarters and years additional penetration there, but there's certainly more to go. So I can't give you an exact percentage, but there's certainly room to grow, but it's not like we could get to 100% just because of the fact that clearly there's going to be a low end that will always exist that will not adopt. In the IT market, recently, LG Display's CEO there, our major -- one of our major customers spoke at a conference, and he said that he believes the IT market in 5 years can grow 5x the current penetration. So if we're 2% now, 10% in 5 years is his assumption. And I think the key thing about the IT market as well as TV to note is, from our perspective, the size of those displays is larger than a smartphone and certainly larger than an AR/VR display. So that provides an additional benefit for us because there's more of our material that would be needed in one of those devices than in a smaller display. In the TV market, last few years have been challenging. Our customers who are supplying OLED displays in the TV market have had challenges kind of working that through and continuing to grow their business. There is capacity in the OLED TV market. So there's room to grow without needing to add new fabs there. And I think that's a key thing as we continue to see the price point of an OLED TV come down much more in reach from a consumer perspective. You're in the market for a TV, you walk into your consumer electronics store, yes, the LCD is going to be cheaper currently, no doubt. But if you want a premium experience, you're willing to spend a few hundred dollars more, you can get an OLED TV. And we've seen that price point come down much more reasonably and closer to LCDs in recent periods. Whereas if you rewind a few years, it was kind of in the stratosphere in terms of the price point. So I think that price point continuing to come down, our customers continuing to gain economies of scale and the OEMs that are introducing those displays additionally seeing additional volumes. And there's clearly a lot of marketing force being put behind OLED TV. So I think that it's a matter of that also working its way through and consumers continuing to see the benefits of those bring to the table. And the second part of your question?

The dollar content?

Yes, the dollar content and EV. I mean it's hard to say right now because some of the EV display can vary depending on how the -- Mini Cooper, I think just this week announced that they're going to have an OLED display in their EV model in 2025, but it's a circle relatively small, whereas if you think about Mercedes, the EQS, they have the entire dashboard covered in an OLED display. So it really just depends on how big -- how many displays are in the vehicle and how is their design.

[indiscernible].

I can't even put -- it's hard to put an exact even -- dollar number to it just based on the various use cases and also -- yes, there's a number of factors that would come into play. What's the doping concentration, the thickness of the display among other things. So there's -- it's hard to really quantify.

I'm curious, [indiscernible] size of that is in market and who are the competitors?

Yes. So there's -- the question was on the host market and who are the competitors and just general...

Size.

Size of the market. So the quantity of host is much greater than a display than emitter. So I think the analogy we use is if you think of a glass of chocolate milk, the milk is the host and the chocolate is the emitter is kind of the way of thinking about it in terms of the quantities. So there's a significantly greater quantity of it. So the market is larger in terms of the sheer volumes of material that are produced of hosts. The price point is obviously less -- much less than emitter miter given that as well. There's a number of companies, principally in Asia. There's some in Korea, some in China, some of the other places in Asia that work on host business primarily. We have partnerships with many of them. There's also companies in Europe that are working on hosts as well. So we participate in that ecosystem. You might have seen that we announced back in April when we acquired Merck's patent portfolio that we were going to be collaborating with them on some of their material development. They develop host themselves. So that's just an example of how we do have partnerships with folks that are -- and many others who are working on the host to provide them access to our emitters so that they can have the benefit of using that when they're developing their host material.

Hello, Brian. I have maybe a quick question on material to royalties. I think you gave a 1.5 for the year. But I think for the last couple of quarters, it has been tracking a little bit below. So maybe any color on maybe where you might end up? And also, when we look into 2024 -- and I know it's early because blue is not priced in yet. But any sense of how should we think about Blue in terms of that ratio as well? Would it help it bring it down? And what are the impacts on margins?

Sure. So I think on the ratio of royalty and licensing to materials, 1.5:1 is the guide that we had given for this year. I think that some of what you've seen in terms of that being slightly less than 1.5 in the first half of the year is just customer mix. We have certain customers who have different royalties to material ratios. And so it's just been -- that's played out a little differently than what we had originally expected. We still think that there's -- it's going to tick up a little bit in the second half of the year, but we need to kind of wait and see how that plays out. In terms of next year and blue contribution and how that might impact margins, it's -- well, I guess there's a number of things there: one, we've said we'll have material available next year that meets commercial specifications. We've not said at what point in the year, at what volumes are we selling blue next year. How do our customers choose to introduce that? So I think there's a number of things to figure out on that end. We also don't have pricing set for blue with any of our customers. So those are conversations we need to have with each of them as we get closer to those commercial -- that commercial launch. The cost of manufacturing is another thing. I mean, blue is going to be initially more costly for us to manufacture. We have a plan to bring that cost down over time. But that's another element that we'll be working through. So hard to give an exact answer for you, but I think the key point is we're very close to having those commercial specifications achieved. We know there's a lot of interest in our customer base in our blue material. And we think that it's going to be a real game changer for our customers and the broader market once we can bring it to market.

Could you just give us a sense of kind of the state of the union in terms of -- just in terms of the OLED fabs out there today in terms of the plans for the next couple of years? My understanding -- and it's maybe a little bit dated, but it's mostly just, I think, Samsung, LG and BOE just -- and especially in the China market, I guess, can you give us a sense of maybe the next couple of years, who's kind of bringing on capacity, who are the -- maybe the top 3, 4 players who are going to be expanding a lot and kind of what you see there?

Sure. We have -- yes, as you noted, Samsung Display, LG Display and BOE are certainly the top 3, but there are other customers of ours in China. We have China Star, Visionox, Tianma and others who are continuing to grow their OLED business as well. I can't speak exactly to their fab plans, but all of them are growing, and they're growing their OLED business. And they continue to believe that OLED is the display technology of the future and where things are going. So we think there's a lot of potential for growth there in that market. But we have a number of customers in China, all of whom are doing quite well in their OLED business.

And maybe just add on to that, are any of them with -- whatever the TV gen is maybe Gen 10, I guess, any of them have meaningful gen -- TV, whatever gen is planned?

Sure. Yes. So the -- in OLED TVs, there's really 2 players at this point, LG Display being the largest player with their white OLED approach. So that's a white OLED with a color filter that they have as their architecture for their television. And then Samsung Display has the QD OLED, which is a blue OLED with quantum dots to create the red and green color. So those are the 2 predominant players as well as technologies. Our Chinese customers to date have not been -- meaningfully stepped their toe into the OLED TV market at this point. But I think they're all monitoring what happens with the market? Is there an increase in demand? Is there a greater utilization of some of the OLED TV fabs in the coming years that exist elsewhere in the other companies? And therefore, it doesn't make sense for them to take one of these approaches. Something we haven't talked about either, Atif, and I haven't, yet today is we have a TV technology that we've been developing ourselves an equipment technology, which is called OVJP, or organic vapor jet printing. And what that's really focused on is having a red, green and blue side-by-side printed tech-OLED TV. I talked just a second ago about the white OLED approach that LG Display has and the quantum dot approach that Samsung Display has. But the approach that we're working in R&D with OVJP is how to print using a dry printing process directly onto a substrate using print heads, which will enable the same architecture of an OLED TV as you have for your smartphone, which is red, green and blue side by side. And the reason why currently that isn't commercialized at any of our customers is right now, use the -- they use a mask technology to produce smartphones. So they have a mask, they deposit material, and that's the method for depositing material onto smartphone-size displays. If you scale that to much larger displays like a TV, the masks there can start to sag, and there can be an issue with the manufacturing of those at large display sizes. So OVJP is meant to address that technological challenge through the use of these print heads. And we've been -- had a lot of technological improvements in OVJP over the last few years. We've announced many of those at our quarterly calls. The most recent one was we were able to print using the OVJP system, all colors, all layers of an OLED display. And so that was a key milestone for us. And we continue to expand the size of the glass that we're printing on with OVJP. And also have conversations with customers and others in the industry about how we might be able to partner and move this forward to being a commercially viable system.

Brian, on the OVJP, is the idea that there'll be a new equipment that will be inserted in existing line that can do this step? Or you'll have to introduce brand-new equipment for the full line? And what is the monetization strategy here?

Yes. So it's probably a new line rather than a retrofit, but OVJP uses fewer process chambers than other technologies. So it would be less floor area so to speak that an OVJP system would need to occupy. And the monetization strategy, I mean, this could go a number of different routes. It could be some sort of joint venture. It could be a licensing model or a royalty model that we would put in place. So we're a few steps away from that since we still have more R&D to do. But we believe that it's an interesting technology that we see as having good application for OLED TVs.

The reason I ask that question is because we also hear from like Applied Materials, Tokyo Electron, they're working on something kind of exotic and just trying to understand if what they're doing is different from what you guys are doing? Or is it similar?

Yes. So it's different. We're the only ones doing this type of approach. But as you said, there are others in the industry who are looking at -- there's some that are working on photolithography approach. There's a number of other different applications that are being evaluated. But we see a lot of promise in OVJP.

Great. And then just on the capital allocation. You guys have a significant amount of cash with no debt on your balance sheet. You guys regularly raise your dividend. But I hear from investors about why not a big share repurchase.

Yes. So we want to grow the business. So I think having capital in the business to be able to fund, whether that's R&D projects that we see as being very promising or acquisitions of patent portfolios or even business acquisitions that we may evaluate, having access to the capital is a priority of the company. And we have, as you noted, increased our dividend annually. We aspire to continue to do that going forward. So having access to the capital, I think, provides us a lot of flexibility and options. But we do evaluate buybacks, but it's just not been something that, to date, we've done in a meaningful way.

Okay. And then the gross margins, the blue emitter kind of coming next year, how should we think about the materials gross margin? And also, if you can comment on the situation with iridium, which last year, a year before, kind of goes through some kind of availability issues.

Yes. So Iridium, I'll start with the last part. So Iridium is a key raw material for some of -- many of our materials. And so we have a strategic supply that we have on our balance sheet and inventory of iridium. We've been buying it at various price points. The price has gone up in the last few years. So that's been a headwind to gross margins. One thing on gross margins is we -- one thing when I joined the company, I kind of quickly noticed there was a lot of folks that were focused on material gross margins rather than total gross margins. Total gross margin is a much more meaningful way, in my view, of evaluating the health of our business and our performance because we look at really the total value that we receive out of a customer relationship rather than looking at one piece or another, whether that be licensing and royalties or material sales. We're looking at it in aggregate. So total gross margins, this year, we've guided to 77% to 78%, which is not far off where we've been historically. So while material gross margins have taken a hit in recent periods, the total gross margins are very much relatively intact compared to where they've been over a longer period of time.

And we should assume the same range for blue emitter once it gets introduced?

Yes. On Blue. Gross margins a little, again, back to -- we don't know the price and the cost. There's a number of things to kind of nail down there before we can give guidance specific to that point. But we view it -- we view blue as having a premium price profile relative to our red and green. So we're not viewing there as being a negative impact as a result of blue.

Great. We're almost out of time. And thank you, Brian, for coming to the Citi Conference.

Thank you.