The Apple iPhone’s impact was widely evident at the Consumer Electronics Show, as new touch-screen devices could be found everywhere
Andreas Rentz/Getty Images The consumer electronics industry came unbuttoned in Las Vegas this week. At the annual Consumer Electronics Show, which kicked off Jan. 7, companies from around the world unveiled myriad devices boasting touch-sensitive technology, rather than traditional push-button controls.
Motorola (MOT), Sony (SNE), and LG Electronics all showed off touch-screen phones this week. Microsoft (MSFT) Chairman Bill Gates touted a touch-screen computer, the Surface, akin to a flat panel TV for a tabletop. Even camera makers, such as Kodak (EK), included touch-screen LCDs in their devices. Touch-screen tech has been in use for years, but the impetus to develop and weave it into consumer electronics gathered steam with the June introduction of Apple’s (AAPL) iPhone. “The touch-screen industry is really getting hot,” says Jennifer Colegrove, a senior analyst at iSuppli. “Since the iPhone came out, there are a lot of companies that did not have a relationship with touch screens before that decided, ‘O.K., I want to make a touch screen, too.’”
Rapidly Expanding Market
The touch-screen tech ecosystem now includes more than 100 companies specializing in everything from smudge-proof screens to sensors capable of detecting fingers before they even contact the screen. Sales of leading touch-screen technologies, such as those used in mobile phones and navigation devices, are expected to rise to $4.4 billion in 2012, up from $2.4 billion in 2006, according to iSuppli estimates.
Some of the companies were barely known outside their home countries before their association with touch-screen tech thrust them into the spotlight. Balda (BADG.DE), the German outfit creating the iPhone’s touch screens (BusinessWeek.com, 4/16/07), was recognized mainly as a maker of cell-phone cases until it landed the Apple contract. Since being identified as an iPhone supplier (BusinessWeek.com, 7/2/07) by firms that take apart and analyze devices, Balda has secured a contract to provide between 6 million and 8 million screens for a leading mobile manufacturer. Production is scheduled to begin in April, 2008.
Tyco Electronics’ (TEL) ELO TouchSystems division, 3M’s (MMM) Touch Systems division, and China’s GeneralTouch Technology are also among the leading companies that develop touch-screen displays and related technologies.
Also riding the touch-screen wave are chip manufacturers that create the capacitive sensors that detect fingers and interpret their gestures. Among them is Cypress Semiconductor (CY), which supplies the technology that powers Apple’s iPod click wheel. Through its Programmable System on Chip (PSoC) segment, Cypress creates chips that can be coded to detect fingers from a few feet away and then translate their motions to device commands. “We supply the brains that attach to the film (touch screen) and interpret the signals and gestures,” says Norm Taffe, executive vice-president of the division that creates the PSoC chips.
Thanks in part to the touch-screen trend, Cypress’ PSoC division has grown faster than any other in the company, having shipped more than 250 million PSoC chips as of October.
Bye-Bye Buttons
STMicroelectronics (STM) has also seen growing demand for its capacitive sensors, which enable such features as touch-screen volume controls and power switches. “We are seeing the demand increase,” says Bill Raasch, STMicroelectronics’ vice-president of market development. “There is a big push, particularly this year, for 2008 notebooks having this kind of technology and implementing them in LCD displays.”
Indeed, handsets are only responsible for a portion of the demand. The mobile-phone market accounts for between 20% and 25% of the market for the leading touch-screen devices, iSuppli says. That percentage could decrease as more devices opt for touch screens. Portable navigation devices, such as Garmin (GRMN) and TomTom in-car GPS units, and handheld gaming devices are two other main consumer markets for touch screens, says Colegrove. New lightweight notebooks, such as the tablet PC, are also fueling the demand for touch screens in the consumer device market, with many of the 2008 models likely to incorporate some form of touch sensitivity, Raasch says.
Demand for touch-sensitive gadgets is emanating from businesses as well as consumers. The technology is increasingly used in mall kiosks, screens for medical devices, screens in taxicabs, and even grocery store checkout counters. That’s because the most advanced touch screens do not even need to be touched—they simply sense a finger’s electrical charge, or capacitance, over a button and perform an action. As a result, they wear out less regularly than buttons. “It turns out that having buttons creates a lot of problems,” Cypress’ Taffe says.
Room to Grow
Many touch-screen technology providers are banking on continued high growth. In a recent filing, Balda called the touch-screen market its “most promising.” The company estimates that the number of phones using touch sensors will rise from current levels of 3% and 4% of the handset market to roughly 20% of the market in the next three to four years. Balda also anticipates that most personal navigation devices will include touch-screen technology in the next few years.
Market crowding could tap the brakes on those growth rates, at least for some players. Competition has created a price war in the area of resistive touch screens, which require people to actually touch the screen. Resistive tech accounts for more than two-thirds of the industry, according to Colegrove. As a result, Colegrove expects that the market for this kind of touch screen will only grow about 3% a year, with many companies experiencing pressure on revenue. The market is already seeing consolidation. Touch International purchased 3M’s resistive touch-screen line in June, 2007.
Still, with so many devices seeking to incorporate touch screens, there’s plenty of opportunity, experts say. The companies that will do the best will carve out specialty niches, such as supplying multitouch displays for phones or inexpensive touch-screen controls for laptops. “There is still a lot of room to grow in the industry,” says Colegrove. Buttons, it seems, won’t be back in vogue any time soon.
Holahan is a writer for BusinessWeek.com in New York .
