NPD DisplaySearch pointed that the cost to produce the display for the recently announced Apple Watch is $7.86. The 42 mm Apple Watch is believed to use a 1.5-inch diagonal AMOLED fabricated on a plastic substrate, protected by a proprietary thin and flexible solid-phase plastic seal. The touch panel interface, cover lens, and other items add another $19.55 to the total. Accounting for the panel yield rate and other manufacturing costs, the total display system costs are estimated to be $27.41.

Although production costs are higher, the benefits of adopting a plastic AMOLED panel include a display module that is approximately 65 percent thinner and lighter than an LCD display and 50 percent thinner and lighter than a conventional AMOLED display. “The plastic AMOLED offers design flexibility and is very rugged,” said Charles Annis, vice president of manufacturing research at NPD DisplaySearch.

The total cost of the display system is highly dependent on yield rates throughout the manufacturing and assembly process. Producing high-resolution flexible AMOLED displays is challenging, due to the additional process steps required to coat the flexible substrate on a carrier glass, as well as encapsulation and laser-lift off, which further complicate the module manufacturing process.

“While current costs for the flexible AMOLED display are high, costs are forecast to decline as yield rates improve,” Annis said. “Simplified and new process flows, declining material costs, and increased production volumes will also contribute to lowering prices. Apple’s choice of a plastic AMOLED as the display medium for its Watch reflects not only on its strategy of emphasizing quality, but also suggests increasing confidence in flexible displays as an enabling technology for wearable computers.”

Along with the Samsung Gear, LG G Watch, and other smartwatches, the Apple Watch is expected to spur tremendous growth in OLED display shipments this year.

According to the NPD DisplaySearch Quarterly OLED Shipment and Forecast Report, worldwide OLED smartwatch display shipments are expected to exceed 11 million units in 2014, which is a year-over-year increase of 450 percent. Shipments of AMOLED panels for the Apple Watch alone are expected to reach 8 million units this year, as Apple builds up inventory for the 2015 launch.

“Smartwatches are already leading technology improvements in flat panel displays, especially when it comes to important features like panel flexibility and shape,” said Hiroshi Hayase, vice president of small/medium displays for NPD DisplaySearch. “Although smartwatches will soon lead the wearable device market on a unit shipment basis, the small size of smartwatch displays will not significantly affect overall OLED area demand.”