Digitimes Research: Taiwan on-cell touch panel shipments to see strong growth, yet offer little profit

Jason Yang, DIGITIMES Research, Taipei 0

Taiwan panel makers have been aggressively promoting their on-cell touch panels and quotes for a 5-inch HD (1280 by 720) on-cell touch panel already dropped to about US$10-12 in early 2015, attracting orders from major handset brand vendors and white-box players in China.

Digitimes Research expects these on-cell touch panels to undermine the market for add-on touch panels and force Japan Display (JDI) to shift its focus to other segments by raising its in-cell touch applications' resolution from HD to Full HD (1,920 by 1,080).

The touchscreen sector has seen some favorable developments for on-cell solutions lately. Innolux and HannStar Display have improved their production yield rates for on-cell touch panels.

Human-machine interface solution providers Synaptics and FocalTech, and touchscreen IC designers Himax Technologies, Mstar Semiconductor and Ili Technology (Ilitek) have geared up developing on-cell touch solutions, resulting in price declines. HD on-cell touch panels' quotes have now dropped to around US$10-12, approaching a level similar to that of GF-based touch panels.

Thanks to the dropping prices, China-based smartphone vendors ZTE and TCL as well as players that focus mainly on the white-box smartphone market have increased their adoption of on-cell touch panels and their orders are expected to boost Taiwan's overall on-cell touch panel shipments to above eight million units in the second quarter of 2015.

Meanwhile, JDI's touch panel solutions for HD mid-range smartphones are still priced at around US$20 because production costs remain high and the firm is keen to maintain its gross margins. Since JDI's solutions are unable to compete against GFF-based touch panels in terms of pricing, the Japan-based panel maker is expected to rely more on Full HD panels for high-end smartphone products.

As for China-based panel makers BOE and Tianma, the two firms are more aggressive in developing in-cell touch panels at their 5.5G LTPS TFT LCD production lines.

China's smartphone vendors have been more eager to adopt in-cell touch panels for their mid-range and high-end products since the on-cell technology is only able to support up to five-points multi-touch, making it less appealing for mid-range and high-end products.

But on-cell touch panels are mainly supplied to the entry-level market segment and their competitiveness relies on low pricing. On-cell touch panel makers are unlikely to profit much from the product line.

Taiwan panel makers are expected to achieve strong shipments for on-cell touch products, but they are unlikely to enjoy good gross margins.

JDI, which mainly promotes in-cell touch panels and has a strong capacity in LTPS TFT LCD, should continue to see high gross margins.