It's only been a few months since Apple (NASDAQ:AAPL) officially adopted OLED display technology in its latest flagship, the iPhone X. That was a momentous move that had been in the making for many years. Always looking to the future, Apple is already eyeing the next big shift in display technology: MicroLED. MicroLED has sometimes been considered a successor to OLED, enjoying many of the benefits, as the technologies share some fundamental similarities.

Back in 2014, Apple acquired LuxVue, a small start-up that was developing MicroLED technology. The Mac maker has been working on the technology in the years since, developing a portfolio of MicroLED patents. As such, it should come as little surprise that Apple is now reportedly looking to insource display technology, as displays are one of the most critical components of a gadget that affect the user experience.

Top half of iPhone X display

Image source: Apple.

Owning a "fundamental" technology

Bloomberg reported yesterday that Apple is now designing and producing prototype displays for the first time at a "secret manufacturing facility" in California near its headquarters. The company is betting that MicroLED will be the next generation of displays, which can enable even thinner form factors while consuming less power and delivering even brighter displays.

These displays are reportedly even harder to manufacture than OLEDs, which made Apple consider abandoning the initiative approximately a year ago, but the company has continued to push forward and make progress. Still, Apple is years away from actually launching a device featuring a MicroLED display.

If Apple can perfect the technology in the years ahead, it could meaningfully differentiate its products while owning much of the underlying technology, unlike the status quo, in which the company predominantly sources displays from Asian tech conglomerates like LG and Samsung that it also competes with.

It would also be the continuation of trend that's been going on for years: increasingly developing core and fundamental technologies in-house. In fact, CFO Luca Maestri recently pointed to this as one of four reasons Apple's R&D expenditures have been on the rise in recent years:

The third reason, I think, is a very strategic one and a very important one that allows us to keep our differentiation from the rest of the industry, and it's the fact that today, we do much more in-house development of some fundamental technologies than we used to do a few years ago, when we were leaving more of that to the supplier base. Think of the work that we do around processors or sensors, right? Much more work than we're doing today in-house than we used to. It's very important for us because we can push the envelope on innovation. We have better control over timing, over cost, over quality. And so we look at that as a great strategic investment for us, right?

Display technology absolutely qualifies as a "fundamental" technology.

The report has sent shockwaves through Apple's supply chain, with shares of many display makers getting hit, as well as their own suppliers. That notably includes Universal Display (NASDAQ:OLED), which is down 15% as of this writing. Universal Display provides much of the core intellectual property (IP) and materials that go into OLED displays and counts LG and Samsung as its largest customers. Apple's adoption of OLED has long been seen as a catalyst for Universal Display.

Evan Niu, CFA owns shares of Apple and Universal Display. The Motley Fool owns shares of and recommends Apple and Universal Display. 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.