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Apple Watch 2.0 will use Micro-LED Display
The Apple Watch currently on sale have an LED display. A great change for Apple because IPS display is always the first choice. Now, it’s micro-LED display for the next Apple Watch.

More a very long time Apple devices stuck with IPS display technology while its competitors have upgraded to the more advanced OLED screens. The only exception is the Apple Watch which used OLED display on the date when it was released. This became a good decision to make the display make use of the deep blacks and power efficiency on a small watch screen.
However, Apple is rumored to be upgrading soon with the next Apple Watch.
It was reported that the new Apple Watch will ditch the OLED technology for Micro-LED by the middle of 2017. Micro-LED is said to be thinner, lighter and provides a wide range of improved color gamut. With an even brighter screen and support for higher resolution.
The only downside is the cost of mass producing these panels. If it will be calculated it would probably end up with the Apple Watch 2 still using OLED technology and not until the 3rd generation that users see some perceivable change.