Introduction:
The recent announcement of the unexpected cancellation of a key Apple Micro LED project by ams OSRAM has sent shockwaves through the industry, particularly regarding its speculated collaboration with Apple for the Apple Watch Ultra 3.
This development has sparked speculation and raised questions about the future of Micro LED technology in wearable devices.
In this blog post, we delve into the details of the cancellation, its potential impact on the industry, and the opportunities it presents for Taiwanese and Korean manufacturers.
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What is Apple Micro LED Watch Project?
The project Apple was working on involved incorporating Micro-LED technology into their Apple Watch Ultra. Micro-LEDs are a next-generation display tech known for several advantages:
- Superior Brightness and Contrast: They offer much brighter displays with deeper blacks compared to traditional LED displays used in most smartwatches today.
- Improved Thinness and Flexibility: Micro-LED displays are thinner and more flexible than current smartwatch displays, potentially allowing for sleeker designs.
- Greater Durability: These displays are believed to be more durable and resistant to damage.
In essence, Apple was looking to equip the Apple Watch Ultra with a cutting-edge display offering a significant leap in visual quality, design, and possibly even durability.
Unexpected Cancellation :
The abrupt cancellation of ams OSRAM’s Micro LED project has prompted the company to reevaluate its development strategy, such as raising concerns about the integration of Micro LED technology into devices like the Apple Watch Ultra 3.
“At Yole Group, we estimate that at this point, Apple had spent more than $2.6B to develop microLED displays, to which one must add $420M for the acquisition of Luxvue in 2014. Apple’s partners had already spent close to $1.3B to start ramping up Manufacturing for the first microLED Apple watch in 2026.”
Eric Virey, Principal Analyst, Display at Yole Group
There are conflicting reports about the status of Apple’s Micro LED watch project. Here’s a breakdown of what we know:
- Cancellation Reports:
- Analyst Ming-Chi Kuo believes the project is cancelled due to high production costs and minimal value addition to the Apple Watch.
- This cancellation aligns with ams-Osram, a potential supplier, announcing the termination of their key Micro LED project [reliable source about apple cancelling micro led watch ON TrendForce trendforce.com].
- Contradicting Reports:
- Recently, reports suggest Apple might be looking for new suppliers after dropping ams-Osram, indicating the project might still be ongoing.
The cancellation signifies significant setbacks in Micro LED technology development and casts doubt on the feasibility of achieving cost-effective solutions.
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Opportunities for Taiwanese and Korean Manufacturers:
Despite the setback, opportunities abound for Taiwanese and Korean manufacturers to fill the void left by ams OSRAM’s exit.
Companies like Ennostar and PlayNitride possess the expertise and capabilities to collaborate with Apple on Micro LED watch projects.
Industry observers pointed out that Apple remains committed to microLED technology and is expected to explore alternative suppliers. Taiwan’s AU Optronics (AUO) and PlayNitride, which have just begun mass production of microLED watch display panels and chips respectively, are among the prospective frontrunners to fulfill Apple’s production needs.
~Digitimes
Furthermore, LG Display’s involvement in backplane and module production strengthens the supply chain for Micro LED technology.
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Implications:
Apple viewed the smartwatch as a precursor to its ultimate goal: the smartphone. With the iPhone 14 Pro Max, Apple was willing to invest significantly, paying $105 for its display—more than four times the cost of a basic flexible OLED display. Despite advancements in yield and cost reduction over 2 to 3 years since the smartwatch’s debut, analysts could only estimate a cost of $115 for the display, even with Apple’s intricate architecture combining TFT with microdrivers.
Even with ongoing improvements and cost reductions, analysts struggled to foresee a cost below $100 in the long term, according to Yole Group’s models. Consequently, analysts concluded that the shift to microLED for smartphones was no longer viable due to recent advancements in OLED technology.
Without a smartphone to justify the substantial investment in R&D and supply chain expansion, the rationale for the smartwatch diminished as well.
The cancellation of Apple’s Micro-LED Apple Watch project could have implications on a few fronts:
For Apple:
- Delayed Innovation: If the project is truly cancelled, it means a delay in Apple incorporating this potentially superior display technology. Competitors might take the lead in developing and releasing Micro-LED smartwatches.
- Resource Impact: Layoffs within the Micro-LED development team suggest wasted resources and a setback for Apple’s plans to be a leader in next-generation display tech.
Micro-LED Industry:
Ams-OSRAM boasts diverse and profitable product lines, along with a substantial cash reserve exceeding EUR 1 billion on its balance sheet and access to significant revolving credit facilities totaling in the hundreds of millions.
This financial stability sets it apart from GTAT, which faced immediate bankruptcy following Apple’s termination of a sapphire display cover project, despite having invested heavily in a billion-dollar fab. Yole Group anticipates that ams-OSRAM will weather such challenges and continue operating.
In response to Apple’s project cancellation, ams-OSRAM promptly announced a noncash impairment ranging from EUR 600 to 900 million. OSRAM values its Kulim 2 microLED fab at EUR 1.3 billion on the company’s books, including capitalized R&D costs and a pilot line in Regensburg. The capital expenditure for the fab alone has reached approximately EUR 1 billion thus far, with an additional EUR 150 million committed to equipment orders. While OSRAM aims to negotiate these figures downward with suppliers, impending depreciation on the facility poses a significant financial setback.
- Slowed Development: Apple’s high-profile cancellation might discourage other companies from investing heavily in Micro-LED development. It is potentially slowing down the overall industry progress.
- Supplier Impact: The cancellation of the project could lead to financial setbacks for companies like ams-Osram, which were oriented towards supplying Apple.
For Consumers:
- Delayed Access to New Tech: Consumers will have to wait longer to experience the potential benefits of Micro-LED displays in smartwatches.
- Continued Improvement in Existing Tech: This might lead to further advancements in traditional LED technology used in current smartwatches as manufacturers focus there.
However, there’s a chance Apple might be just reshuffling its approach. They could be looking for new suppliers or tackling production challenges before re-introducing the Micro-LED project.
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Conclusion:
The cancellation of ams OSRAM’s Micro LED project underscores the challenges and uncertainties inherent in the development of cutting-edge technology.
However, it also presents opportunities for other manufacturers to step in and collaborate with industry leaders like Apple.
As the industry navigates through these changes, continued innovation and strategic partnerships will be crucial for driving the advancement of Micro LED technology and unlocking its full potential across various applications.
