Here is a specific use case that an in-editor material Tessellation+Displacement can do, that Nanite, nor Parallax Occlusion Mapping (“POM”), cannot replicate - edge-deformed material animation.
This means there is a true irreplaceable “Loss of Function” in UE5 with the removal of in editor material Displacement and Tessellation.
Please look at this POM material on the sphere in UE5.
It is emulating the look of points protruding out from the sphere.
Now look at the edge to far left, right, bottom, and top. It is a smooth sphere surface. Meaning, you only get a pointy emulation looking straight at it.
Now whereas, with Tessellation + Displacement (ie in UE4), you could actually simulate the pointy mesh exterior, and it would look pointy on the mesh, with up and down spikes along the exterior. So it wouldn’t look spiky in the middle but not on the edges like POM, it would actually have a spiky middle AND a spiky exterior.
Now, one can say, just remodel the mesh with the detailed spiky points on the mesh and use Nanite to render. There are several issues with this:
(1) the mesh’s spikiness CANNOT be animated as part of a material, since it is not a material - loss of function
(2) said mesh’s spikiness CANNOT be applied to any other mesh instance you want, at whim, as each and every mesh must have this shape itself forged into it, so that Nanite can be utilized fully - loss of efficiency
Consider the workload to
(a) modify each and every mesh with that baked detail so that Nanite can be utilized to render it, as opposed to
(b) merely applying a Tessellation and Displacement texture that can then be used in any animated BP fashion you want, on any static scenery, or skeletal mesh, you want.
POM is a visual trick, as is Tessellation+Displacement. But importantly they can be animated - pulsed on a time scale, inverted, rotated, panned, increased in intensity, etc - and applied to any mesh instantaneously, or linked to any BP so that the material can be activated at any controlled, or random point, instantaneously. Whereas, Nanite is a mesh-rendering solution for high detail, and is not a material-animation component. In fact, with Tessellation/Displacement in UE5 you could theoretically animate a material having a combination of both POM and Tessellation/Displacement. Nanite plays no role in such a case, it merely allows for high-detail mesh rendering.
Since POM cannot simulate a mesh exterior deformation, and since there is no way to replicate the “material-animability” of in-editor material Tessellation+Displacement through Nanite, this is a true case of “Loss of Function” in UE5, since edge-deformed material animation cannot be replacted by Nanite, nor POM.
As such, for consideration, this material animation component is a genuine reason for the introduction of Tessellation+Displacement for material editor in UE5.