Apple’s drastic cuts to production forecasts for its Vision Pro headset have focused attention on the device’s most expensive component: the tiny micro OLED displays required to produce genuinely immersive experiences.
The Financial Times reported this week that the US technology giant believes it will make fewer than 400,000 units in 2024, having previously made an internal sales target of 1mn in the first 12 months.
One problem is the design complexities for Apple’s new “mixed reality” headset. According to people involved in the Vision Pro’s production process, this includes the costs and technical challenges posed by using micro OLED displays, a relatively niche product the size of a postage stamp.
While the organic light-emitting diode (OLED) displays used in high-end smartphones are deposited on a glass substrate, micro OLED display materials are deposited on a silicon wafer more commonly used for the production of semiconductors.
The current generation of micro OLEDs have a resolution of 3,000 pixels per inch (PPI) — six times more than the PPI in a glass OLED display, and greater than the resolution of a state of the art 4K television for each eye.
But the cost of the silicon wafer, the challenge of manufacturing a product that can be ruined by tiny specks of dust entering during the manufacturing process, and the fact that no company has yet started mass production all contribute to its prohibitively high cost.
The total cost for two micro OLED displays — one for each eye — in an Apple Vision Pro is estimated by Eric Chiou, senior research vice-president at TrendForce, at $700, almost half of the manufacturing cost of a product that is due to retail at $3,499 when it is released in the US early next year.
According to two people familiar with the Vision Pro’s manufacturing process, the micro OLED displays for the first iteration of Apple’s flagship headset are being produced by Sony, which pioneered the technology for use in its digital cameras, using silicon wafers produced by Taiwanese semiconductor manufacturer TSMC.
But the Japanese technology giant, which declined to comment on whether it was a supplier for the Vision Pro, is reluctant to ramp up production of the displays, amid scepticism about the future growth prospects of the mixed-reality headset market.
“We will be watching to see how much demand [for micro OLED displays] will increase,” Terushi Shimizu, head of Sony’s semiconductor unit, said last week, adding that “I don’t think we will be aggressive” in producing the displays at the same scale as the image sensors it supplies for smartphone cameras.
Hiroshi Hayase, a display expert at Omdia, said Sony likely had the capacity to increase to some extent the production of micro OLED displays since it had been manufacturing larger volumes in the past for use in viewfinders for digital cameras.
Still, Hayase said it was unlikely that the market would expand significantly with the launch of Apple’s Vision Pro. “There are expectations but a large number of companies have already challenged the [augmented reality] market and have not succeeded,” he said.
“For Sony, it may have simply felt that there was no reason to say no since Apple is such a big client and numbers [of Vision Pro that will be sold] are likely to be limited.”
Analysts said Sony’s unwillingness fully to commit to the technology provides an opening for Korean rivals Samsung Display and LG Display to emerge as leading suppliers of micro OLED displays for the Vision Pro and its successors.
Samsung Display, which acquired US micro OLED producer eMagin for $218mn in May this year, is building a manufacturing facility for micro OLEDs at its plant in South Korea, with a view to starting test production next year.
LG Display, which produces the external OLED displays on the inaugural model of the Vision Pro, unveiled its own micro OLED prototype at the annual Consumer Electronics Show in Las Vegas in January.
The FT reported this week that Apple is working with Samsung and LG on developing future generations of its headsets, including a cheaper version of the Vision Pro designed to appeal to mass-market consumers.
China-based SeeYA has also sent Apple multiple prototypes of its micro OLED displays, according to two people familiar with the situation. Apple has engaged with the group, sending employees to work with SeeYA and giving feedback on the samples, said two people close to Apple.
But two people with direct knowledge of the process said that no display makers have yet managed to meet Apple’s expectations for the technology, amid ongoing concerns over the component’s cost.
They added that Apple was unwilling to compromise on the quality of the displays by using alternative technologies, even for future mass market models.
Yi Choong-hoon, a display industry expert and head of Seoul-based UBI Research, said Samsung “is in the best position to supply micro OLED for Apple’s second version of the headset”, but warned “the yield rate is not good in general across the industry”.
“It is not easy to boost the yield rate because the pixels are ultra compact and the wafer prices are so expensive,” said Yi. “They won’t be able to lower the prices of micro OLED any time soon.”
Yi added that Chinese companies might find it difficult to supply micro OLED panels to Apple in future given their potential military application.
Last year, eMagin was awarded a contract by the US Army to explore display technologies for the provision of sensor and tactical data to American soldiers. Washington has imposed export controls on technologies including advanced semiconductors it believes could be used by the Chinese military.
Nam Sang-uk, a researcher at the state-run Korea Industrial Economics & Trade research institute, said that all display makers face a dilemma as to whether to devote the necessary resources to produce components for what remains a relatively niche product, given the intense competition elsewhere in the display sector.
“In order to boost the yield rate of micro OLED, Samsung and LG need to make billions of dollars in investments,” said Nam. “But it is not their top priority . . . their focus will remain on OLED displays for TVs, tablets and foldable phones for now, as mixed reality headsets are unlikely to sell en masse anytime soon.”
