Smartphone Revolution: Buy These Tech Stocks

It seems high-resolution displays won't be limited to just LED TVs. NPD DisplaySearch estimates that 1080p, 2k and 4k resolution displays, collectively, will be equipped in about 55% of total smartphones shipped in 2017 -- a sharp increase from 30% in 2013. Fortunately for investors, there are ways to profit from this exponential growth.

System-on-chips
Video playback requires a processor to access data bits from volatile memory, encode it, and present it in visual form on a digital display. With higher resolutions, more data bits need to be processed simultaneously. Essentially, this means that 4k, 2k, and 1080p content playback require fast system-on-chips.

Qualcomm is currently the leading system-on-chip manufacturer, commanding a global market share of 64%. Its Snapdragon processors are equipped in a wide range of smartphones and tablets; smartphone processor sales account for 43% of its overall revenue.

Qualcomm unveiled its latest, Snapdragon 805, earlier this year. The chip houses an Adreno 420 GPU with four Krait 450 processors, which allow it to output content at 4k resolution. In fact, the chip is being used to power the world's first 10-inch tablets running at 4k UHD resolution.

With a gigantic market share, huge exposure to the smartphone industry, and product deployment already under way, Qualcomm stands to benefit immensely from improving smartphone displays.

DRAM modules
Computing processors access media content from non-volatile memory and store it in volatile memory for speedy encoding. Therefore, flawless 4k and 1080p media playback requires a fast DRAM memory as well. For this reason, Micron stands to benefit greatly.

Micron is the third largest mobile DRAM manufacturer, commanding a 23% global market share. For fluidic user experience, the company currently offers LPDDR3 modules -- about 60% faster than LPDDR2 memory. These chips are deployed in high-performance mobile devices like Apple's iPhone 5s and Samsung's Galaxy S4.

Source: JEDEC

The pure-play memory manufacturer is also sampling its LPDDR4 memory. Compared to equivalent LPDDR3 modules, these chips are about 50% faster and consume 40% less electricity. More importantly, these next-gen modules have the required bandwidth to play 4k media content -- illustrated in the table below.

Source: JEDEC

Micron already has an established market position. With this critical launch, therefore, the company will be able to benefit from improving smartphone display resolutions.

Display panels
Universal Display is another beneficiary here. It is the leading manufacturer of OLED panels, designed exclusively for smartphones, tablets, and TVs. Its revenue stream is largely comprised of OLED smartphone panel sales; revenue from Samsung Display represented 68% of Universal Display's overall revenue in fiscal year 2012.

The OLED manufacturer's trailing-twelve month revenue currently aggregates to $146.6 million. This number, however, can grow exponentially over the coming years.

Higher-resolution screens magnify content detail, and the lack of proper color vibrancy results in a dull user experience. Therefore, smartphone manufacturers may feel compelled to ditch generic display panels and adopt OLED panels, offering a wide gamut of colors and contrast range.

Market research firm DisplaySearch agrees. The firm estimates that OLED panels will be equipped in 40% of total smartphones shipped in 2018 -- an exponential increase from 0.2% in 2013. Between 2013-2015, the research firm expects the market to grow six-fold.

With valuable clients like Samsung, Universal Display won't have to scout for willing buyers to capture this expected growth. With a pure-play business model, the OLED manufacturer can deliver exceptional returns over the coming years.

Foolish final thoughts
All the mentioned companies are established leaders in their respective industries. Therefore, investors might want to consider investing in all of them to diversify their rewards, and reduce the risks of volatility.

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The article Smartphone Revolution: Buy These Tech Stocks originally appeared on Fool.com.

Piyush Arora has no position in any stocks mentioned. The Motley Fool recommends Universal Display. The Motley Fool owns shares of Qualcomm and Universal Display. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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