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FEATURE: iPhone expected to help boost Taiwan's touch screen industry

Models show off High Tech Computer Corp's ``Touch'' touch-screen cellphones on June 30. PHOTO: WANG YI-HUNG, TAIPEI TIMES

Taiwanese manufacturers are expected to benefit from Apple Inc's use of touch screens in its first handset, the iPhone, which analysts said would prompt cellphone vendors to increase the use of user-friendly touch panels in order to compete with the product.

"As king of consumer electronic gadgets, Apple always creates a trend for competitors to follow," said Eric Lin (林宜正), an analyst with Yuanta Core Pacific Securities (元大京華證券). "We believe this time is no exception."

In its marketing campaign, Apple identified the 3.5-inch screen as the product's main feature, showing how users can easily slide two of their fingers on the control panel to access all functions much like flipping the pages of a book.

Taking on the iPhone directly, Taiwanese mobile phone maker High Tech Computer Corp (HTC, 宏達電) marketed its flagship phone code-named "Touch" in a TV commercial showing the convenience of its similar touch screen.

"We believe that the launch of the iPhone injected new strength into the touch panel industry as mobile phone makers are increasingly using panel screens [to replace keypads]."

Harrison Po, Topology analyst

Both commercials caught the attention of investors. Local investors are snatching up stocks with potential links to touch panels, betting on a fast-growing demand, though local panel companies are not major suppliers of iPhone parts.

Most local touch panel companies should benefit from the spike in demand, Lin said, but they do not have their shares traded on stock markets.

Shares of optical disc maker CMC Magnetics Corp (中環), which owns a 42 percent stake in a touch panel manufacturing venture Trans-touch Technology Inc (富晶通) with Japan's Fujitsu Co Ltd, rallied to two-year high on Friday, closing at the 7-percent limit for the third trading session at NT$14.85.

"As demand jumps, we plans to start operating a new production line in the fourth quarter. That will help Transtouch double its profits this year from last year," a spokesperson of CMC surnamed Lo told the Taipei Times by phone.

Last year, Taoyuan-based Trans-tough swung into profits of more than NT$40 million (US$1.22 million), she said.

Offering an investment tip, Yuanta Core Pacific's Lin said he preferred stocks with solid growth such as Hon Hai Precision Industrial Co (鴻海精密), Innolux Display Corp (群創) and Elan Microelectronics Corp (義隆電子).

Hon Hai is assembling iPhones and its affiliate Innolux plans to invest NT$1 billion in making touch panels for its parent company, while Elan Microelectronics manufactures chips used in touch panels.

Demand is solid as touch panel shipments around the world are expected to expand to 95 million units in 2010, from 55 million units this year, boosted by rising demand from handsets, global positioning systems (GPS) and game consoles, Taipei-based market researcher Topology Research Institute (拓墣產業研究所) projected.

"We believe that the launch of iPhone injected new strength into the touch panel industry as mobile phone makers are increasingly using panel screens [to replace keypads]," Topology analyst Harrison Po (柏德葳) said.

Touch panels have been used in a wide range of products, from automatic teller machines (ATM), to electronic dictionaries and ticket machines.

Apple's unconventional approach of applying the control touch panel to mobile phones created craze for such panels in China, where fake phones abound.

Increasing Chinese demand was one of major factors that helped local firms led by unlisted J Touch Corp (介面光電) return to the black as orders flooded in to Taiwanese touch panel manufacturers from Chinese phone makers, which make handsets resembling Apple's, Po said.

More companies are jumping on the touch panel bandwagon dominated by Japanese firms.

Chi Lin Technology Co (奇菱科技) is shifting from LCD film to touch panel manufacturing.

Chi Lin is an affiliate of Chi Mei Group (奇美集團), which also owns the nation's second-biggest liquid-crystal-display (LCD) panel maker Chi Mei Optoelectronics Co (奇美電子).

Wintek Inc (勝華), whose core business is supplying LCD panels primarily for mobile phones, said it is scheduled to ship its first batch of capacitive touch panels, enabling multi-touch function like those used in the iPhone, in the second half of the year.

"We believe touch panel manufacturing is a promising business as an increasing number of electronics companies are using such user-friendly screens," company spokesman James Chen (陳政慧) said.

Taichung-based Wintek supplies LCD panels to numerous phone vendors including Nokia Nyj and Motorola Inc, making it a potential touch panel supplier to the big brands.

Ambition is good for companies to grab early growth opportunities, but analysts warned about patent issues and long learning curves.

"New players have to accumulate their own patents as fast as they can since it will be difficult to seek technological support, especially from Japanese firms that learned their lesson while transferring LCD technologies to local firms and won't let it happen again," Po said.

To make profits, they would need to ramp up production within six months to match the market demand, Po said.
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