A decade later, Apple’s microLED Smartwatch!

Yole Group is following the microLED technologies and the related ecosystem for a while. Through a wide collection of annual reports, analysts are delivering their vision of the technical evolution and identify the business opportunities. This collection includes: MicroLED (Technology & Market focus) – Sony MicroLED Display (Technology, process & cost) – MicroLED Displays – Intellectual Property Landscape and Analysis

Back in April 2022, Osram announced the construction of a 800M euro microLED fabs. For Yole Intelligence analysts, it was just the confirmation of a prediction from our previous microLED reports that Apple was going to collaborate with Osram to ramp up manufacturing of microLED smartwatch displays in 2024. Discover today the analysis of Yole Intelligence’s senior analyst, Eric Virey.

A long story

The relationship between Apple and microLED display technologies started in 2014 when Apple acquired Luxvue for an estimated $450 million. At the time, the company thought it could leverage the startup’s technology to produce its own smartphone display within a few years.

It wasn’t a straightforward journey. It took longer than expected and another $2.2 billion in development costs for Apple to advance the microLED technology to a point where it felt comfortable making the jump to volume manufacturing. The project almost got canceled in 2017, but the microLED team persisted and delivered successive breakthroughs to the point where Apple and its partner are now in the process of spending what will be another $2 billion+ in multiple phases to set up volume manufacturing.

The first and largest of those partners is LED maker ams-Osram which, back in April 2022, announced an €800 million investment to build the first microLED fab on its Penang (Malaysia) campus. That’s a hefty sum for any LED maker, but OSRAM is receiving advance payments from Apple to soften the blow.

A double benefit for Apple

Apple could benefit in two ways from this bet. First, microLED should give it a highly differentiating display with unmatched brightness, contrast, color, viewing angle, and lower power consumption. To get that, Apple is willing to pay a significant premium.

Second, just like it did when it parted from Intel for its microprocessors to design its own and use TSMC for manufacturing, Apple will gain some independence from the well-established display industry and behemoths like Samsung, LG or BOE, which currently supply its OLED smartphone displays. With microLEDs, Apple could better control its supply chain, ultimately sourcing its microLED chips and various key elements from multiple foundries and suppliers. By adopting a disruptive display-driving technology (AKA “Microdrivers”), Apple could even completely part ways with traditional display makers.

Smartphones and tablets next?

If everything goes as planned, microLED smartwatch display manufacturing will ramp up in 2024. However, nobody has ever produced microLED displays in high volume, and Apple has made some bold and risky technology choices, such as the decision to use an 8” wafer manufacturing platform. Any ramp schedule slip or failure to meet Apple’s high quality and performance standards could mean missing its usual September launch window and pushing it out to 2025.

The smartwatch is a beachhead. It will provide Apple and its partners unique opportunities to close technology gaps and iron out the supply chain. If successful, by 2025, it could start seriously thinking about smartphones or tablets, which, however, demands further technology development and massive investments in additional capacity. We’re not expecting this to happen until at least 2027…if ever: the smartwatch is complex enough, and smartphone applications will compound challenges for microLEDs in terms of technology, costs, and performance. Meanwhile, OLED is not standing still and continues to improve.

How Apple fostered a new industry.

Interest in microLED started at Sony and various academic institutions as far back as 2001. Sony even showed a microLED TV at CES 2013. However, with its 2014 acquisition of Luxvue, Apple is the one that put microLED on the map. A clear inflection point is visible in patent filing activity, an ideal proxy to track interest and activity in emerging technologies.

Note: The MicroLED IP report, from Yole Group will be updated in 2023 – Contact us for more information.

Either they didn’t believe in the technology or thought it was falling too far from home in terms of the critical technology bricks one needs to master to make a good microLED display, but traditional display makers were dismissive at first and late to the game (to their credit, Taiwan panel maker AUO got an earlier start, the company was also an early investor in…Luxvue). However, display makers have since caught up, with Samsung, LG, and every single display maker now investing significantly in microLED development. Samsung has been showing microLED TVs since 2018. Those, however, have yet to enter the consumer market (see our CES 2023:  coming soon), but the inflection point could happen around 2025-2026, as discussed extensively in our microLED reports.

Apple’s effort is an incubator for the whole industry

MicroLED has but a few champions and is a complextechnology. Apple’s effort to bring sapphire display covers to smartphones in 2014-2015 crashed and burned, and such an outcome remains a possibility for microLED. Failure of Apple’s production ramp or Samsung halting its microLED TV efforts could bring the industry to a halt. Without TVs, watches, or smartphones to drive investments, smaller players will find it challenging to build supply chains at a meaningful scale for automotive and specialty displays alone. Microdisplays for AR, however, have different supply chain requirements and will be sheltered from such a blow.

The microLED industry has collectively spent $8 billion in development and another $1.7 billion in acquiring microLED startups, including Google’s $1 billion acquisition of Raxium in early 2022. Apple’s smartwatch effort will serve as an incubator for the entire industry. Success would give the industry both a substantial confidence boost and a supply chain jump-start: ams-Osram could also service non-Apple products such as TVs or automotive, and become a high-performance, cost-effective, microLED die source for companies that would otherwise not be able to develop their own supply chain.

Efforts are accelerating in Taiwan’s (AUO/PlayNitride/Ennostar) and China’s ecosystems. We estimate that by 2025, cumulated microLED spending will reach $18 billion. This surely pales compared to OLEDs’ more than $150 billion Capex since 2006 but shows that microLED momentum is accelerating. Success could shake up the $100 billion+ industry. MicroLED has a more distributed, horizontal supply chain than the traditional TFT display industry. This could enable a more agile and competitive supply chain, facilitating the emergence of new display makers thanks to lower, more distributed capex requirements. In the process, we expect M&As to continue as larger players attempt to acquire critical technology bricks. Overall, an exciting transformation that we will keep watching and documenting closely!

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About the author

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As a senior market and technology analyst at Yole Intelligence, Eric Virey is a daily contributor to the development of LED, OLED, and display activities at Yole Group.

He has authored a large collection of market and technology reports as well as multiple custom consulting projects on subjects including business strategy, identification of investments or acquisition targets, due diligence in buying and selling, market and technology analyses, cost modelling and technology scouting.

Thanks to his deep knowledge of the LED/OLED and display industries, Eric has spoken at more than 30 industry conferences worldwide over the last five years. He has been interviewed and quoted by leading media all over the world.

Previously, Eric has held various R&D, engineering, manufacturing and business development positions with the Fortune 500 Company Saint-Gobain, based in France and the United States.

Dr. Eric Virey holds a PhD in Optoelectronics from the National Polytechnic Institute of Grenoble.