The hair peg differentiates into matrix cells, which will ultimately form the hair shaft and inner root sheath and the new hair's supporting structure, the outer root sheath and the solid peg must become a hollow tube.
The follicle matrix forms from the longitudinally arranged interior cells and is spatially organized so that specific cells will give rise to the concentric layers of the inner root sheath and the hair shaft. This so-called hair cone actually differentiates into FIVE different concentric layers.
Follicular keratinization as defined by the presence of keratohyalin in the cells of the hair canal and by the presence of trichohyalin in the cells of the hair matrix occurs in week 16 of gestation.
Programmed cell death occurs above the hair cone, leading to the formation of a hollow tube or hair canal and the hair tract. Cells of the hair canal keratinize at the same time that the canal is formed. Although the hair canal is patent by about this time in development, the opening of the hair follicle is still closed and the follicle does not contain a hair.