Bloomberg recently published an account detailing some of the key specifications of Apple's (NASDAQ:AAPL) next iPad Pro tablet, slated to launch sometime in the second half of 2018.
Per a previous report from generally reliable KGI Securities analyst Ming-Chi Kuo, Apple intended to use an organic light emitting diode (OLED) display on the 2018 iPad Pro.
OLED displays offer some advantages over the liquid crystal display (LCD) technology used in the current iPad Pro displays, such as better contrast and faster pixel response times. However, according to Bloomberg, Apple won't be using an OLED display in next year's iPad Pro after all.
Lots of issues
Bloomberg says, citing "a person with knowledge of Samsung's (NASDAQOTH:SSNLF) display operations," that it's not likely that Apple will use OLED displays on the next iPad Pro due to "technical and financial constraints." Samsung is the manufacturer of the OLED displays used on Apple's recently released iPhone X and is believed to be the only company currently capable of producing high-quality mobile OLED displays in substantial volumes.
The phrase "technical and financial constraints" is light on details, but I think I can fill those in.
Manufacturing good OLED displays is hard. Manufacturing OLED displays good enough for a next-generation iPad Pro is likely to be extremely hard.
For Apple to build an OLED display suitable for the iPad Pro, it'll need to work with its display partner -- almost certainly Samsung Display when it comes to anything OLED for now -- to solve several problems.
First, since Apple moved to a high refresh rate display with this year's iPad Pro models, it'd need to figure out how to bring that technology to large OLED displays while keeping power consumption in check.
If Apple can work that problem out in time, it'd still need to figure out how it plans to deliver an OLED display that's at least as sharp as the LCD found on the current iPad Pro. To do this, Apple would likely need to adopt an OLED panel that implements Samsung's S-Stripe sub-pixel pattern (in such a pattern each pixel has a unique red, green, and blue subpixel).
OLED displays implementing such a sub-pixel pattern, according to technology analyst Daniel Matte, are expensive to manufacture, which is why the iPhone X didn't use such a display panel. I also suspect that such a display would consume quite a bit of power, which would further add to the technology challenges that Apple and its display manufacturing partner would need to overcome.
Beyond simply building the appropriate technology, Apple would need to figure out how to build such displays in a cost-effective fashion. They would easily be far more expensive to produce than the one found on the iPhone X since it would be larger, use a more complex sub-pixel arrangement, and support high refresh rate.
A more expensive-to-produce display would be fine for a product that's commensurately more expensive, but the reality is that Apple doesn't charge for the iPad Pro what it does for the iPhone X.
The iPad Pro with a 10.5-inch display starts at $699 for the version with 64 GB of storage and goes to $1,129 for the variant with 512 GB of storage and cellular capability. The iPhone X, on the other hand, starts at $999 for models with 64 GB of storage and goes to $1,149 for versions with 256 GB of storage.
Of course, Apple's gross profit margins on its iPads are probably lower than those on its flagship iPhones, but it's quite likely that appropriate OLED displays for next year's iPads are still simply too expensive.
Impact to product competitiveness
Apple is largely unchallenged in the premium tablet market, so the company's focus is likely on building products to get current iPad owners to upgrade to new models as well as to attract as many first-time iPad buyers as possible.
While deferring the transition to an OLED display to, perhaps, the 2019 iPad launch would be disappointing, the good news is that the rumored form factor change coupled with the addition of the TrueDepth camera for Face ID should be rather significant updates.
These changes alone might not be enough to convince those who bought the iPad Pro this year to upgrade again, but for owners of older-generation iPads, the improvements should be quite compelling.
Ashraf Eassa has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.