Digitimes Research: Shrinking tablet market prompts China touch panel supply chain to look for growth elsewhere

Jason Yang, DIGITIMES Research, Taipei 0

With demand for white-box tablets gradually shrinking and China's brand tablet shipments also performing weaker than expected, China-based touch panel and touch controller IC firms that used to focus on China's tablet market have mostly started shifting parts of their capacities to manufacturing smartphone touch applications or products for high-end industrial control and car electronics. However, it remains uncertain whether these players will be able to profit from the new product lines.

Among these original white-box tablet supply chain players, DPT-Touch, after one year of transformation, is currently able to ship one million smartphone touch panels a month, almost the same as the volume for its monthly tablet touch panel shipments. The player's parent company Token Sciences also established a new subsidiary recently, looking to enter the before-market of the car electronics industry using the OGS technology.

Silead, which used to focus on supplying touch panel ICs for white-box tablets, has seen its handset touch control IC shipments grow strongly from 3-4 million units a month in early 2015 to over five million units currently. Meanwhile, its tablet touch control IC shipments have slid from over eight million units a month previously to only about seven million units.

With white-box tablets' production costs dropping sharply since the second quarter of 2014, most touch panel supply chain players that used to focus on the white-box tablet sector, such as DPT-Touch and Holitech, have stopped taking orders for tablet applications that offer overly low quotes and have turned to the higher-end brand and education tablet markets for orders.

However, they have to compete against brand vendors' existing supply chain partners, and the education tablet market typically sees stable shipments but weak growth. This means these players also have to look for other touch panel applications with stronger growth potential.

China's smartphone market is reaching saturation, with vendors facing rising pressure from the price competition. Their demand for touch panels has gradually turned from the mainstream GFF technology to the cheaper GG technology. This is prompting these touch panel suppliers to shift more of their capacities to producing smartphone touch applications, and white-box smartphone brand vendors have also become keener on adopting GG touch panels for their overseas shipments.

As for the industrial control and car electronics application markets, clients typically have stringent requirements for the panels' durability in rough environments. Traditional resistive and GG touch panel are still competitive in these markets, giving incentives for these white-box touch panel suppliers.

The handset, industrial control and car electronics markets may have their respective advantages in either economies of scale or potential for strong growth, but Digitimes Research believes these white-box supply chain players will see challenges trying to make profits quickly from these new product lines. After all, competition in the handset market is already fierce; the GG touch technology is only suitable for entry-level devices shipped to overseas markets; the car electronics market has a high entry barrier in terms of technology, and its suppliers also face high compensation costs for recalled products.