Recordable compact disk maker CMC Magnetics Corp
CMC would not disclose the name of the Japanese company, only saying it was a very large one. The official announcement is to be made Monday.
The company also said recently that it would start shipping its new "Cyberboy" personal digital assistant from next month.
It reportedly predicts that the new product will contribute NT$3 billion to gross revenue next year, and will have a gross profit margin of 45 percent.
The upcoming announcement and the release of Cyberboy demonstrate CMC's attempt to diversify into more lucrative products as an oversupply of recordable compact disks and falling prices have cut into profits, securities analysts said.
However, by moving into areas out of its core specialty, the company's success is far from certain, they said.
The announcement of the name of the Japanese company to partner CMC in the development of touch screens will be significant in deciding the success of the venture, said Alfred Ying, electronics analyst at PrimAsia Securities in Taipei.
"If the Japanese partner is a strong player in the market and has lots of customers, that will be good for CMC," said Ying.
However, if CMC gets just the technology, but not the customers, then the benefit will be limited.
Touch screens are generally designed to meet customers' specific needs, such as in terminals in department stores, or on security doors in a factory.
They will also become increasingly widely used in portable devices such as PDAs, said Cindy Tsai, an analyst at Taiwan International Securities Corp
But even so, by deciding on touch screens as its next product to develop, CMC is entering into a crowded and competitive field, said Kristopher Thornton, vice-president of research at ING Barings in Taipei.
"It's not easy for anyone to get a big lead in this field," said Thornton, who anticipates the display panel market will inevitably undergo a period of consolidation. CMC's decision to jointly develop a product for the market is just another of its many ventures, said Thornton.
"No one knows which one will turn into a big player," he said. "They'll have one more ball to hit a home run with."
The home run may come from the launch next month of the Cyberboy, though analysts are skeptical.
Cyberboy is a PDA that incorporates an array of information application devices such as MP3 player, digital still camera, video game player and tape recorder.
The new device will cost NT$12,000 to NT$15,000, CMC said.
That's expensive, analysts say.
"It's a promising product for CMC," said Tsai, "but the issue is how will customers receive the product," she said.
"You could buy a low-end computer for US$600," said Thornton. In terms of that, the price range was a bit high, he said.
Then there's the competition and marketing. With lots of PDA products already on the market, the company would likely fare better selling Cyberboy on an OEM basis rather than under its own brand, PrimAsia's Ying said.
Ying also questioned the 45 percent gross profit margin that CMC is reportedly predicting from the product.
"Usually the gross profit for PDAs is about 15 percent," he said. CMC plans to ship 100,000 sets of the product this year, and two million next year.
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