Image source: Apple. 

Back in 2014, Apple (NASDAQ:AAPL) bought a small display company called LuxVue. The company is best known for working on a new type of display technology called microLEDs. At the time of the acquisition, it wasn't clear when the iDevice maker would start selling devices with microLED displays.

According to a pre-publication note in DIGITIMES, Apple is actively working to develop microLED-based panels that could be used in a next-generation Apple Watch.

Not this year's Watch, but maybe next year's

According to the note, Apple's micro LED panels aimed at the Apple Watch won't arrive in the new models expected to arrive this fall. Instead, DIGITIMES says Apple Watch models with microLED displays could arrive "at the earliest in the second half of 2017." This information, DIGITIMES claims, comes from "Taiwan-based supply chain makers."

Candice Brown-Elliott, a display expert, told DisplayDaily that microLEDs were "disruptive." They are said to be multiple times brighter than either OLED displays or LCDs, which should help with visibility in very bright, outdoor conditions -- possibly creating an interesting selling point for a future Apple Watch.

If true, this would be typical for Apple

For Apple's iPhone product lineup, the pattern has been for the company to introduce radically upgraded displays with "new number" releases, opting to recycle the same panels during "s" releases (a practice I'm not a fan of, particularly as competitors move more aggressively).

I wouldn't be surprised, then, to see Apple reuse the same panel found on the first-generation Apple Watch in the second-generation model before making a big leap to a microLED panel in the third-generation Apple Watch.

This could prove to be an interesting competitive advantage

It's clear that Apple is investing very significantly in the Apple Watch product line, particularly as we now know that the LuxVue buy was almost certainly done to support Apple Watch development efforts. It doesn't seem likely this technology will come to larger-screen devices, such as the iPhone or the iPad, anytime soon -- if ever.

Only time will tell if the smartwatch market grows to be anywhere close to as large as the smartphone, or even tablet, markets. However, Apple's actions suggest the company really believes in the future of this product category.

At the end of the day, it's going to become increasingly important for Apple to differentiate all of its various product lines with useful technologies that are difficult for competitors to match. If the smartwatch market winds up succeeding long term, there will be plenty of "copycats" looking to take a bite out of Apple's business.

These competitors, more often than not, try to compete on price. It will be of the utmost importance, then, for Apple to build significant, sustainable technological edges over the competition. As long as customers see value in what Apple is offering, it will be easier for the company to maintain relatively robust average selling prices and, ultimately, margins.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.