Good day, ladies and gentlemen, and welcome to Universal Display's third quarter 2021 earnings conference call. My name is Sherry, and I will be your conference moderator for today's call. 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 Darice Liu, Director of Investor Relations. Please proceed.
Thank you, and good afternoon, everyone. Welcome to Universal Display's third quarter earnings conference call. Joining me on the call today are Steve Abramson, President and Chief Executive Officer, and Sid Rosenblatt, Executive Vice President and Chief Financial Officer. Before Steve begins, let me remind you 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 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 Display's website. This call contains time-sensitive information that is accurate only as of the date of the live webcast of this call, November 4th, 2021. 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'd like to turn the call over to Steve Abramson.
Thanks, Darice, and welcome to everyone on today's call. We are pleased to report that revenue in the third quarter of 2021 was $143.6 million, operating profit was $57.7 million, and net income was $46.1 million or $0.97 per diluted share. Steve will go into further details on our financials, but first, let me provide an update on our outlook on the OLED industry and the company. As we look to the OLED market, we believe that panel makers and OEMs are preparing for a new wave of investment and product proliferation in the coming years. For display makers, there are three large consumer electronic end market opportunities: smartphones, IT, which includes tablets, laptops, and monitors, and TVs.
In addition, there are other budding consumer opportunities, including augmented and virtual reality, smartwatch, gaming, automotive, lighting, and signage markets. Where are we today? As we entered 2021, about 1/3 of the smartphone market was penetrated by OLEDs. By year-end, based on market research forecasts, OLED penetration is expected to widen to approximately 45% of the smartphone market. This has been largely driven by OLED adoption broadening beyond the premium segment and into the mid-range, as well as even some low-end smartphones. With more panel makers participating in the smartphone OLED market and panel pricing expected to decline, we believe that penetration is poised to expand further. One of the panel makers investing in smartphone OLED capacity is BOE.
BOE has two Gen 6 OLED panel production lines in operation, and according to reports, BOE is currently setting up its third Gen 6 OLED fab in Chongqing, with mass production of the first phase to begin in the second half of 2022. When fully ramped, BOE's three OLED fabs will have a combined total capacity of 144,000 Gen 6 substrate starts per month. In addition, BOE has plans to build a fourth OLED panel production line in Southeastern China. Augmenting the growth of the OLED smartphone market is the exciting and burgeoning foldable phone market. Foldable smartphones are widely expected to become the fastest-growing phone category, with market research forecasts calling for foldable OLED panel shipments to increase from 10 million units in 2021 to about 67 million units by 2025.
Looking forward, what are the additional applications expected to significantly drive growth in the OLED market? Let's start with TVs. OLEDs continue to gain strong traction in the TV market. LG Display noted on its earnings call last week that it expects to ship approximately 8 million OLED TVs in 2021, up from last year's 4.5 million units. For 2022, LGD believes 10 million OLED TV units is an achievable target as it ramps up an additional 30,000 plates per month of Gen 8.5 OLED capacity in Guangzhou, China. From a market penetration standpoint, OLED TVs are expected to make up about 3% of the addressable TV market at the end of 2021. While 3% is a low single-digit number, it also shines a tremendous light on the incredibly large adoption curve potential for OLED TVs.
Just to give you some context on what the TV market potential is from a display area perspective, approximately 5% OLED penetration of the TV market is greater than 50% OLED penetration of the smartphone market from a square inch standpoint. That is a lot of substrate area for material players like us. Moving along to the emerging OLED IT market. This market opportunity of laptops, tablets, and monitors has begun to be a focus for OLED manufacturers. As Samsung Display champions the OLED IT adoption charge, we are beginning to see the nascent stages of proliferation in IT applications materialize. As many of you are aware, OLED displays offer more immersive colors, higher contrast ratios, faster response times, and wider viewing angles than LCD panels.
Samsung is making good progress in the OLED laptop market, where it is supplying OLED panels to global manufacturers, including Asus, Lenovo, Dell, HP, and Samsung Electronics. How big of an opportunity is the OLED IT market? Based on market research estimates, OLEDs are expected to account for a mere 2% in the IT market by year-end. That means it is an enormous opportunity, and it's an opportunity that an increasing number of OLED panel makers are broadening into. We believe that OLEDs are still in the early innings of a long-term secular growth market. As display makers expand their focus from small to medium and large area, reports are emerging about potential new Gen 6, Gen 8.5, and even Gen 10 OLED capacity plans, new OLED device architectures, and new consumer product roadmaps that include an expanding portfolio of OLED applications.
With this next wave of adoption taking shape, we are fortifying our position as an OLED leader and innovator on multiple fronts. We are leveraging our 25+ years of pioneering research, know-how, and experience into new materials and new technologies. We are also expanding our footprint, building our infrastructure that is designed to drive an effective cost structure and targeting new opportunities. These initiatives will further enable us to provide continued value to our customers while keeping UDC at the forefront of the growing OLED industry. On the OLED front, the discovery, design, development, and delivery of new and next-generation phosphorescent emissive materials, including new reds, greens, yellows, and hosts, is at the core of our R&D programs. With respect to blue, we continue to make excellent progress in our ongoing development work for a commercial phosphorescent blue emissive system.
We believe that a commercial phosphorescent blue is a question of when and not if. We plan to deliver an all-phosphorescent RGB stack, which will further enable higher energy efficiency and high performance for OLED applications across the consumer landscape. With the largest phosphorescent OLED team in the world, we are driving innovation at the molecular level through new materials and new device architectures. Our approach to our broadening OLED materials portfolio is both extensive and cohesive. This includes our computational, synthetic, mechanistic, and process chemistry expertise, coupled with our physicists, engineers, and technicians. Our development teams work closely with customers as we invent and commercialize next-generation materials to meet panel makers' ever-changing and ever-evolving specifications for color point, efficiency, and lifetime.
Our full OLED application centers located in Korea and Hong Kong provide a localized UDC engineering team to work directly with our customers in developing full OLED performance data to support their rapid new product cycle times. The consistent and successful execution of meeting multiple product cycles every year is part of UDC's core strength. It is why we are the key OLED material supplier of choice to the industry and why we have long-term relationships with all the leading OLED panel makers. We take our customers' ambitious targets, fulfill their objectives, and deliver industry-leading materials that drive the ultimate performance of our customers' growing OLED product portfolio. Our long-term partnership with PPG is a principal factor in our ability to accelerate a developmental material to a high-volume commercial material. Through our two decades of cooperation and collaboration, we have cultivated and bolstered our best-in-class manufacturing know-how and expertise.
This partnership has enabled us to continuously introduce state-of-the-art phosphorescent emitters to our global customers. Speaking of customers, I would like to share that we've extended our long-term commercial material and license agreements with Tianma Microelectronics. We are pleased to continue our strong partnership with this leading Chinese panel maker as they continue to advance their OLED presence and expand their OLED portfolio plans. Now, moving along to the OLED technology front. One of the primary R&D programs we are working on is Plasmonic OLED, our fundamental groundbreaking device architecture. While still in research, we believe that the potential benefits to customers in the industry are significant. We estimate that Plasmonic OLED has the potential to increase device lifetime by up to 10 times and double the efficiency, which we believe will pave the path for new OLED applications.
On the OLED production front, we are in the midst of retrofitting the first phase of a multi-year project at our new manufacturing site in Shannon, Ireland with our partner of over 20 years, PPG, for the production of our highly efficient, high-performing Universal OLED materials. This new facility will diversify the manufacturing base for our phosphorescent emitters to meet growing OLED market demand and evolving industry requirements. It will be designed to serve all of our customers for red, green, yellow, and in the future, blue emitter production. The site is expected to double our production capacity within the next 5 years.
On the OLED manufacturing front, we have been working on OVJP, or organic vapor jet printing, a novel manufacturing printing process that allows manufacturers to use a gas vapor stream to dry print red, green and blue small molecule materials directly onto a substrate without the need of a mask set or solvents. In addition to patterning without a mask, OVJP represents a next-generation process platform to enable high-performance device designs with graded and mixed layers. We believe OVJP represents a low cost, high performance, high throughput, highly efficient, large area patterned OLED manufacturing process platform. Our OVJP team, which consists of approximately 50 people, are continuing the development path for OVJP equipment and an advanced process platform. The OVJP technology development team in Ewing, New Jersey, is working hand in hand with the OVJP equipment team in Silicon Valley to advance our commercialization roadmap.
The teams are currently working on the key subsystems to prove the viability of OVJP for large area manufacturing. Achieving this milestone is a critical element in the building blocks for our alpha system design. While the commercial launch of OVJP is still a few years away, this estimated multi-billion-dollar revenue opportunity is part of our multidimensional approach to long-term growth. For over 25 years, innovation has been and continues to be a primary driving force at UDC. We believe that these near-term, midterm, and long-term strategic initiatives will further advance our robust OLED materials and technology leadership and strengthen and support our primary focus of enabling our customers' success and therefore our success. On that note, let me turn the call over to Sid.
Thank you, Steve, and again, thank you everyone for joining our call today. Revenue for the third quarter of 2021 was a record $143.6 million compared to second quarter 2021's $129.7 million and third quarter 2020's $117.1 million. Our total material sales were $75.6 million in the third quarter of 2021 compared to material sales of $77.4 million in the second quarter of 2021 and $68.7 million in the third quarter of 2020.
Green emitter sales in the third quarter of 2021, which include our yellow-green emitters, were $57.8 million, which is sequentially flat from the second quarter of 2021 and compared to $52.9 million in the third quarter of 2020. Red emitter sales in the third quarter of 2021 were $17.7 million. This compares to $19.5 million in the second quarter of 2021 and $15.2 million in the third quarter of 2020. As we have discussed in the past, material buying patterns can vary quarter to quarter. Some of the contributing factors include COVID-19 and supply chain issues as well as consumer product demand cycles, capacity ramp schedules, production loading rates, device recipes, product mix, material ordering patterns, customer inventory levels, and customer production efficiency gains.
Since a number of these factors are moving variables for our customers, they are also moving variables for us. Third quarter 2021 royalty and license fees were $63.9 million. This compares to $48.2 million in the second quarter of 2021 and $44.6 million in the third quarter of 2020. Third quarter of 2021 Adesis revenues were $4.1 million. This compares to $4 million in the second quarter of 2021 and $3.8 million in the third quarter of 2020. Cost of sales for the third quarter of 2021 were $31.5 million, translating into an overall gross margins of 78%.
This compares to $28 million in gross margins of 78% in the second quarter of 2021 and $23.4 million in gross margins of 80% in the third quarter of 2020. Cost of OLED material sales were $28.9 million, translating into material gross margins of 62%. This compares to 67% in the second quarter of 2021 and a comparable year-over-year quarter material gross margin of 70%. For the first nine months of the year, our material gross margin was 68%, and our overall gross margin was 80%. As we have noted in the past, gross margins can vary quarter to quarter.
We expect our overall gross margins to be approximately 80% for the year. Third quarter 2021 operating expense, excluding cost of sales, was $54.4 million compared to last quarter's $51.8 million and a year-over-year's comparable quarter of $45.3 million. We are investing in our research and development, including OVJP Corporation, our infrastructure, including our new Shannon site, and in our people to fortify our growth opportunities in the organic electronics landscape. Operating income was $57.7 million in the third quarter of 2021 compared to last quarter's $49.9 million and a year-over-year's comparable quarter's operating income of $48.4 million. Operating margin was 40% in the third quarter of 2021 compared to 38% in the second quarter of 2021 and 41% in the third quarter of 2020.
For the first nine months of the year, operating margin was 42%. We believe that we are on track for our operating margin to be in the range of 40%-45% for the year. Third quarter 2021 income tax rate was 20%. We estimated our full year tax rate will be approximately 19%, give or take a few basis points. Net income for the third quarter of 2021 was $46.1 million or $0.97 per diluted share. In comparison, net income for both the second quarter of 2021 and third quarter of 2020 was $40.5 million or $0.85 per diluted share. We ended the quarter with approximately $789 million in cash and equivalents, or $16.66 of cash per diluted share. Moving along to guidance.
While we are seeing impacts to the consumer electronics ecosystem from the pandemic and component shortages, we continue to expect our 2021 revenues to be in the range of $530 million-$560 million, with the ratio of material to royalty licensing revenues expected to be in the ballpark of 1.5 to 1. Lastly, our board of directors approved a 20-cent quarterly dividend, which will be paid on December 30th, 2021 to stockholders of record as of the close of business on December 16th, 2021. The dividend reflects our 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. As we near the end of 2021, we take a moment to reflect on how the pandemic continues to be a profound global disruption, but also how it has tapped into one's resourcefulness, resiliency, and resolve. As a corporation of approximately 400 employees spread across 14 locations around the world and participating in a young, dynamic market, this pandemic has been an ongoing journey of adapting to constraints and overcoming obstacles. Deep in every trove of challenges are the seeds of opportunity. At UDC, we have seized on those opportunities to continue to build up and bolster our leadership position in the OLED ecosystem and to emerge even stronger to further enable our customers and the OLED industry.
At the heart of the company are our employees and our steadfast commitment to cultivating and nurturing a global culture that celebrates innovation, collaboration, diversity, and inclusion. Since our founding, we have taken decisive steps to build a culture that empowers our employees and fosters an environment where they can thrive with inventiveness, ingenuity, and problem-solving. I am proud of the progress and hard work of UDCers to advance our path forward in building a sustainable and successful future for our company, our customers, our colleagues, and our communities. I would like to take this opportunity to thank each of our employees for their drive, desire, dedication, and heart in elevating and shaping Universal Display's 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 for the industry, for our customers, and for our shareholders.
With that, operator, let's start the Q&A.
Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the queue. You may press Star two if you would like to remove your line from the queue. For our participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. Our first question is from CJ Muse with Evercore ISI. Please proceed.
Good afternoon. Thank you for taking the question. I just wanted to first off I guess hear you know what you're seeing from your third largest customer. It looked like the sales there were roughly half of what at least we expected. You know, curious, is there inventory digestion there? When will that start to recover? And was that an impact to the material gross margins or per your 10-Q, you highlighted an intro of new red and green emitters. We'd love to hear color there, please.
Thanks, CJ In terms of your question on BOE, which is our third-largest customer, your customer ordering patterns, you know, can be lumpy for various reasons. In the first quarter of 2021, customer, you know, they purchased a significant amount of inventory. You know, even though their sales are sequentially lower, they had a substantial order in Q1. Pretty much for the year, they are in line with our expectations. We don't really believe that there's anything different except for the normal lumpy inventory purchasing from them.
Okay, that's helpful. I guess I wanted to, as my follow-up, go back to unbilled receivables. Now they came down, you know, in the last three months, but you know, you disclosed sort of changes in contractual amendment with clients. I was hoping you could walk through, you know, what exactly is going on there and how we should think about cascading those revenues, I guess, on a positive side, in 2022, and whether there could be any changes that would be headwind to revenues in 2022. Thank you.
Yeah, you're welcome. The line on unbilled receivables, that is a balance sheet item. It is essentially something that has really no impact on our revenues. You know, we have deferred revenues when we get paid by customers, but that is having to do with the billing when we enter into a new agreement with our customer. It really is a billing question. It is not a headwind. It is neither a positive or a negative in terms of our revenue recognition, 'cause under 606, this has nothing to do with it.
Thank you.
Thank you, CJ
Our next question is from Sidney Ho with Deutsche Bank. Please proceed.
Great. Thanks for taking my question. My first question is on the third quarter. I noticed the material sales was kind of flattish, but licensing revenue was up quite a bit, up 30% quarter-over-quarter. That would make the ratio of material sales to licensing revenue close to 1.2. Just trying to understand why is it so much lower than the 1.5 you expect for the full year, and how should we think about that ratio going forward in Q4? Thanks. Sid, I'll have follow-up.
Thank you, Sidney. You know, the material royalty license ratio can vary quarter to quarter, 'cause it really depends upon customer mix. You know, for the year, we still expect the material royalty licensing revenues to be in the 1.5-to-1 range.
Is there anything particular this quarter that drops it to 1.2?
No, it really is, it's customer mix, to be perfectly honest.
Okay. Maybe a follow-up question. As the IT market starts adopting OLED displays, can you talk about what the revenue opportunity per panel or per area, whatever metrics you can use, are they more like smartphones or TVs on a revenue per area basis? Thanks.
Yeah, well, obviously for us, it is the increase in square inches of plates that are processed, and the more square inches of glass that's processed, the more materials we sell. These are made similar to what smartphones are made, so it is, you know, it is RGB side by side. The recipes may be a little different for IT than they are for smartphones, but for us, any increase in factory utilization and any new capacity that comes on is a plus for us.
Great. Thank you.
Thank you.
Our next question is from Krish Sankar with Cowen and Company. Please proceed.
Yeah. Hi, thanks for taking my question. I have two of them. Sid, you know, in the past you have said that the component tightness do not impact you directly, but you know, LG Display last week said their area shipments declined in September due to component supply issues. I'm just trying to figure out, are you seeing any derivative impact or, you know, maybe to ask a long-winded question, you know, your full year guidance range of $530 million-$560 million, do you think you're gonna be in the upper end or lower end based on tightness? Because that could imply December quarter could be sequentially up or down in revenues. I'm just trying to figure out a way to think about that.
Thank you for the question. In terms of the guidance for the year, you know, we have stated that, you know, there are in recent weeks, there's been a number of companies in the consumer electronics ecosystem that have discussed pandemic and component shortages that impacted Q3 and changed their outlook for Q4. I mean, when we put our guidance together in the beginning of the year, we tried to think about all the possible headwinds. When we did it, you know, in February and, you know, based upon everything that has occurred, I mean, we're still comfortable with $530 million-$560 million as the revenue range for the year.
Can you give any color on sequential growth in December or how you think about revenues?
Well, if you look at the fourth quarter, you know, and we've reiterated the guidance, as I said. Yeah, we talked about first half and second half, and we thought, you know, second half would be up. If you look at the low end of $530, it would be up slightly from the first half. If you look at the upper end of our guidance of $560, then, you know, second half would be up about 12% over the first half.
Got it. Just a quick follow-up. The increase in inventory in the quarter, is this all primarily due to the purchase of Iridium, or is there something else going on?
If you look in our 10-Q, you will see that raw materials has grown. It's really in the raw materials area. As we have talked about in the past, you know, we've really tried to manage Iridium so that, A, we never have an interruption in supply, and B, trying to average the price that we have, that we pay for it, because during the pandemic, you know, there were real issues in getting it, but we had none.
Thanks, Sid.
Thank you.
Our next question is from Jim Ricchiuti with Needham & Company. Please proceed.
Hi. Thank you. Good afternoon. Just a question on the way that the revenues are tracking among your customers. You mentioned that your third-biggest customer, despite the variability quarter to quarter, it's essentially in line with the way your expectations. Is that true of your other customers, whether your two large customers in Korea? In general, we're seeing, you know, quite a bit of variability from your other customers in China. I'm trying to get a sense as to how much of that is in line with the way you had been thinking about the business earlier in the year, or have we seen things change a bit as the market dynamics have changed?
Thanks, Jim. I think that when we look at it, the fact that our guidance is exactly what it was in February, I think overall things are in line with what we thought they would be. Quarter to quarter, things do change, just like, you know, we said, you know, the one customer in China in the first quarter bought a lot more, which, you know, the percentage went up. But overall for the year, I think we pretty much are in the ballpark with all the customers.
There's been some reports as it relates to some of the component constraints that there's been some chips that have moved out of tablets and gone into phones. I know you guys are removed from that, but are you seeing any signs of that with any of your customers in terms of you know changes in some of the applications for the screens? Or are you too far removed from the supply chain?
Yeah, to be honest, we're pretty far removed from it. We do know that, you know, as lots of companies and our customers have reported, all of them are having issues with chips. To answer your question specifically, I don't really know.
Okay. Last question, just with respect to your operating expense, looking out at Q4, is there gonna be any change in terms of how either you know the makeup of the expenses? It sounds like you're continuing to invest fairly heavily in R&D as it relates to some of the newer projects you're working on. How should we think about R&D expense in Q4?
Yeah, for the year, we talked about R&D expenses being up by 25%. You know, we expected all of our expenses to be up 20%-25% for the year when we gave our guidance. I think we're in that ballpark for the year. There's nothing, you know, as Steve mentioned, we are focusing on OVJP and blue, and the R&D expenses are gonna go up as we stated. I don't think there's gonna be anything different in Q4 than you've seen in Q3.
Okay, thank you.
Thank you, Jim.
As a reminder, just star one on your telephone keypad if you would like to ask a question. Our next question is from Shannon Cross with Cross Research. Please proceed.
Thank you very much. I was just wondering about inflationary pressures on materials and just in general, you know, what you're seeing, how you're able to offset it, perhaps what you're doing from an inventory standpoint to try to stay ahead or at least in line with what's going on. Thank you.
Yeah. Thanks, Shannon. I mean, we always are looking at ways of looking at our supply chain and trying to ensure that, A, we have an uninterrupted supply, but obviously we care about cost. We've always looked at having multiple sources for the components that go into it. Obviously, we've talked about Iridium because that's, you know, commodity and the prices are out there and you can see what they have done. We, you know, started buying Iridium years ago. We have some inventory that's a very low price, and we bought it, you know, during the whole time. We have inventory that's a higher price. I think we really have tried and are doing a pretty good job of managing it.
I don't think I can say that I expect inflation to, you know, really impact our COGS. You know, in the future because everything is going up. I don't believe that to be the case.
Okay. Thank you. I guess I apologize if this has been somehow discussed. I had another earnings call tonight. I'm just curious, we're starting to see some pretty aggressive pricing moves for OLED TVs and frankly, TVs in general, especially with the higher sizes. Can you just remind us of, you know, in the past when prices have come down or you've seen, you know, what we're hoping to be a growth in the market, sort of how long it takes or when we start to see the benefit in your numbers versus the market, especially given some of the changes you've had in terms of accounting?
Yeah. Thank you. Well, LG noted on their call that there's strong demand for OLED TVs and talked about 8 million TVs this year. You know, there are two fabs and, you know, they initially guided from 7 million-8 million. They're talking about being at the high end. For us, you know, when the panels get made, it's probably, I don't know whether it's three months or six months or two months exactly when our material goes in. But clearly, we are in the panel itself, which then, if it's, you know, gets shipped to either LG or a lot of their 18 other customers. So there's no new capacity, but their factory utilization has gone up. So that's where you would see it with us.
They're supposed to add 30,000 substrate starts so that they can be at 10 million units next year.
Great. Thank you.
Thanks, Shannon.
Our next question comes from Regan Tan with Berenberg. Please proceed.
Hi, good evening. Thank you for taking my question. I was just wondering, what are the most popular enhancements, capabilities that customers have asked for? Can you develop those organically or would you need to pursue M&A for that?
Well, we work.
Thank you.
Thank you for the question. Our R&D teams work closely with our customers. What you know, what they ask for are, you know, performance for our material. They're always looking for lifetime or efficiency or color and, you know. Our teams works closely with all of our customers. You know, we do that here. You know, we are the ones that develop the materials. You know, we are the full OLED leader for 25 years, and we will continue to lead the market. We do all of the full OLED development work in our facility.
Great. Thank you. I appreciate that.
Thank you.
Our final question is from Martin Yang with Oppenheimer. Please proceed.
Hi. Thank you for taking my question. I have an accounting question regarding your VC investments. Recently, we saw that the DigiLens has raised a new round of probably a higher valuation. How does that impact your financials? Can you maybe give us some more details?
Sure. DigiLens is one of our investments. It's a small investment. When you look at the investments on our balance sheet, the value of DigiLens is, you know, our total investments are under $10 million in that and another company. Right now, that's not gonna move the needle, to be perfectly honest.
Got it. I have another question, but also my final question. You know, China, this quarter, when we isolate maybe LG and BOE was really strong. What was driving that year-over-year growth?
I'm sorry, I didn't hear the last part of your question.
Yeah. What was driving the year-over-year growth in China when you think about customers that are non-LG and non-BOE?
I'm sorry. I apologize for not hearing it first. Well, clearly, if you look at China, it is BOE, and you've got LG fab there. As we talked about TVs, they're talking about 8 million units, which is the high end. You're gonna see LG's facility in China that is growing, and BOE is ramping up its two facilities. We also have other customers in China, which includes, you know, Tianma and Visionox. There is a lot of activity there, and we've talked about it over the last couple of years, that we will continue to see growth coming out of China.
Got it. Thank you, Sid.
Thank you very much, Martin.
We do have one more question. This is from Nam Kim with Arete Research. Please proceed.
Hi, thank you for taking my question. There are a lot of news on Mini LED, I guess, in IT space, especially one of the big OEM pushing aggressively Mini LED on their product. Do you see Mini LED can be comparable to OLED, or Mini LED is just a middle step before OEM adopt OLED later? Any thought or opinion on your end would be great. Thank you.
Thank you, Nam. I think it, you know, the customers are working on their recipes, and whether or not the same materials or what we will get our customers asking us to design materials that specifically meet their specifications. I think it is something that, you know, we're working closely with our customers to make sure that we design new materials to meet their needs, or if we have something that meets their needs, make sure that they have it. You know.
Yeah, at the end, you think Mini LED is kind of a middle step between traditional LCD and OLED. At the end, you know, OEM probably adopt OLED instead of a Mini LED. Is that what you mean?
I do think that Mini LEDs are, as you're well aware, just another backlight technology. You know, as LG's CTO noted recently on their earnings call, talked about Mini LEDs, and his quote is, "Mini LEDs are nothing more than an LCD with slightly improved backlights. As such, they have the same limitations as LCDs, such as light leakage and flickering. Therefore, you know, OLEDs are superior to Mini LEDs. You know, OLED displays are the technology that can realize high quality and affordable prices." Obviously, just like LG, we are very bullish on OLEDs.
Okay, thank you.
Thank you.
Our next question comes from Brian Lee with Goldman Sachs. Please proceed. Brian, your line is live if you would like to ask a question. Please check if you have your mute feature. Okay, we will come back to you in a moment. Our next question is from Andrew Abrams with SCMR. Please proceed.
Can I get a little color on your ability to pass on increased cost, meaning iridium prices? How flexible are your customers in terms of a base price, not a different material, you know, a new enhanced material, but on basically the same material that they were buying six months ago. Second, if you could talk a little bit about the base price for OLED panels that your royalty is based on. Can you give a little color on any changes that you've seen on an ASP average coming out of particularly LG Display, and how that might affect your royalties in one direction or the other?
Thanks, Andy. As we've stated, and I think you're aware, we have said that all of our long-term contracts have pricing built into those contracts. You know, we don't, I mean, customers would want prices to go down, but we have it built in versus, and we've made one of them to go up, but we can't do either one because we have contracts for the materials that when we started the contract that we were selling are built in, whether it's reds and greens. That's not an issue. As we talked about customers, when they order new variations of them, they start at a different pricing level and work their way down and get cumulative volume discounts. That's something that we do not have the ability to pass on.
Regarding the second part, I can't really talk about details of what is in our royalties. When we do talk about royalties, we talk about a percentage of the ASP of the panel. If panel pricing goes down, you're gonna see less because your percentage is gonna be based upon a lower number. Normally, when panel pricing goes down, it's because the volumes go up.
Got it. Okay. Thank you. I appreciate it.
Thank you.
We were having technical difficulties. We once again have Brian Lee with Goldman Sachs. Please proceed.
Hey, team. Good afternoon. Thanks for squeezing me in here. I apologize if some of these have been asked already, but I guess the first one I had was just on the sales mix this quarter. You had a much higher mix of royalty and licensing versus materials versus the past couple quarters. I know a lot of times you talk to the mix of customers as being the reason you see some quarter-to-quarter variation in that, but your top two customers were basically the same % of sales mix this quarter versus last. You know, that royalty versus material mix did shift. Anything you can speak to there just to give us a sense for what might have driven that?
Well, I mean, I think that, you know, you are correct. That's what we have stated, and that does have the biggest impact on it. Customer A and customer B were up, and customer C was down in the quarter.
Okay, fair enough. That's a fair point. On the materials revenue, and I promise this is my last one, and I'll pass it on.
Okay.
There hasn't been real seasonality this year. I know this is a, you know, an interesting environment in many regards, across different industries. For you guys, you're almost always accustomed to seeing a decent amount of seasonality in your materials revenue. This year there's been almost no seasonality. If you look at the kind of $75 million to high $70 million revenue run rate you've seen every quarter this year. Is there anything unique? Has anything structurally changed, would you say, in terms of your customers and your customer buying patterns? Then, does this translate to Q4 as well? What sort of seasonality would you be thinking about here on the materials side, specifically, as we head into year-end? Thanks.
Sure. Thank you, and we apologize for the problems you're having. You know, it's a difficult question because seasonality is something that isn't exactly. We're not in, you know, a consumer electronics business that, you know, is gonna have big lumping, one big hump as you get towards the holidays. You know, I've heard from other companies in the consumer electronics ecosystem, you know, the pandemic and component shortages have impacted output and therefore, you know, it's going to affect everybody in the food chain, including us. You know, in addition to the normal quarter-to-quarter variations in sales, which can be lumpy as we've talked about, you know, I think we're gonna continue to see lumpiness.
Our next question is a follow-up question from Krish Sankar. Please proceed.
Yeah. Thanks for taking my follow-up. Sid, I just wanted to ask. I know someone asked a Mini LED question. Just wanna ask the same question, but your views not on Mini LED, but micro-LED and QD-OLED. Kinda curious on how you think of it vis-a-vis OLED opportunity. Thank you.
Yeah. micro-LEDs, you know, as you're well aware, are very early stage, and right now it is something that you'll see, you know, like we've talked about. I think Samsung has a 110-inch micro-LED TV that reportedly has a price tag of $156,000. You know, there's still a number of unanswered questions, and when they actually will get into the market and what market they will address is pretty much stuff that we hear. It will have opportunities if and when it gets into the market for very small and very large displays.
Thank you. This does conclude the question and answer session. I would like to turn the program back to Sid Rosenblatt for any additional or closing remarks.
We just wanna thank you all for your time tonight, and if you have any follow-ups, please, you all know that you can contact us. Everyone have a good night. Thank you.
Thank you. This does conclude today's program. You may disconnect your lines at this time.