Display-based interface changing : touch panel, display driver, finger print and force touch
The smartphone market is mature, so competition among controller IC makers is fierce. Lower profit margins have forced some makers out of the market, and surviving makers are expanding into areas such as fingerprint, display driving, and force sensing because most controller IC makers already offer features such as hovering, active stylus, water proof, and glove use. What they are now deploying is something beyond touch screens. Three groups (Synaptics, FocalTech, and MediaTek) with new offerings are emerging.
Synaptics acquired Validity in 2013 and RSP (Renesas SP Drivers) in 2014. With these acquisitions, Synaptics' product lines extend from touch and trackpad applications to fingerprint and display driving; the company further boasts TDDI (touch and display driver integration) for embedded touch solutions (in-cell and on-cell). Synaptics is also preparing a force-sensing solution for non-Apple brands.
Orise and FocalTech officially merged in January 2015. This new FocalTech benefits from revenue contributed by the two original business lines, display driver and touch controller. Although FocalTech did not have a fingerprint solution, they have leveraged IDEX since Q4'14. Additionally, FocalTech just announced its own force-sensing solution at the end of August. Orise's revenues were higher than FocalTech's before the merger, but Orise's display driver IC business was quite mature, so gross profits were much lower. Normally, profitable and growing IC businesses have gross margins of about 40-50%. As a tier 1, Novatek had almost 28% gross margin, but Orise had only 13-15%. FocalTech previously performed near 40%, but the new, merged FocalTech likely has a lower profitability.
MStar's subsidiary company and Ilitek announced their merger on August 26. The subsidiary will acquire Ilitek. MediaTek acquired MStar in 2012, but the deal is not officially complete in China (takes three years per Chinese government), and MStar is still operated as a stand-alone company. Ilitek is in display drivers and touch controllers; MStar is famous for its LCD scaler, TV SoC, and touch controller. MediaTek also invested in Goodix, a Chinese touch controller IC maker. Ilitek's mother company is PowerChip, which will probably establish a 12" semiconductor fab in Hefei, China to approach the display driver IC market. If it does, MediaTek can likely pass through PowerChip to seek future business opportunities with BOE.
Both Orise and Ilitek faced low profitability and revenue growth as the global smartphone market matured. Therefore, mergers were an appropriate strategy for these two. However, Parade still has high profitability. Parade announced that it would acquire Cypress' touch controller business for USD 100M on June 10. What Parade really wants is to extend its business and product portfolio before its cash cow (eDP T-con, display port controller) is fully maximized. Like other competitors, Parade wants a TDDI solution in the future.
Since 2014, the touch controller industry has experienced remarkable changes. Synaptics and FocalTech now have their own touch controller, display driver, fingerprint, and force sensor solutions; both can provide a complete user interface solution. MediaTek has covered these business lines via subsidiaries and investments. Display driver IC makers Novatek and Himax have also stepped into the touch controller business. Market maturity is driving business evolution.
Integration and expansion
The main sensors used for smartphones are CIS, MEMS, and projected capacitive touch. CIS and MEMS both have high technical thresholds and established tier 1 makers, making them less accessible to the IC makers mentioned above. For example, Sony, Samsung, and OmniVision are famous for their smartphone CIS products. GalaxyCore in China is notable in the entry- and mid-level segments. In terms of MEMS, STMicroelectronics is a top maker for consumer electronic devices; Bosch is popular for automotive applications; InvenSense is famous for the gyroscope; and Knowles is famous for the MEMS microphone. mCube, in which MediaTek has invested, is developing a G-sensor but it is still far behind STMicroelectronics. Consequently, display-based user interface solutions are best leveraged for the three groups.
The three groups have almost finished their mergers and expansions. All of their business lines started with touch controllers then extended to display driving and fingerprint solutions. The next step is likely force sensing.
Display drivers have seen gross margins of less than 20%, but TDDI (Touch Display Driver Integration) opens up the possibility of working more closely with display panel makers and earning more revenue from two lines. The key is to catch up to tier 1 makers such as Samsung and Novatek. Unlike RSP, Orise and Ilitek were not really tier 1 driver IC makers before, and panel makers will not be interested in weaker driver IC technology for TDDI, even with the option of good touch controller solutions.
Well-integrated fingerprint solutions will not be mature until the fourth quarter of 2015 or even 2016, but some makers are leveraging their partners' solutions (especially algorithms). Because the sensor die is exposed (with only a hard coating), makers and brands are also concerned about the module end. A thin glass or ceramic layer can replace the hard coating by the fourth quarter. However, the infrastructure (payment and OS platforms) will take time to mature and penetrate.
Non-Apple force sensing technology is still in the early stages. Solutions from Synaptics and FocalTech look similar to Apple's but with a different sensor structure and algorithm. More important than the technology, however, is the OS platform's API and SDK, which must be ready for app developers. Yet, Android's is not ready yet.
The mature market for controller IC is driving business evolution. Compared with makers who only have a touch controller product line, these groups have more resources to leverage. For example, STMicroelectronics sold its inertial MEMS and touch controller products to Samsung as a package. We expect these surviving makers to offer one-stop shopping or complete solutions to customers, and this will force other makers to find a new niche in the future.
The Touch Gesture Motion and Emerging Display Technologies 2015
For the past 6 years, IHS has produced a series of Touch Gesture Motion conferences and for the past 7 years, DisplaySearch has produced the Emerging Display Technologies Conference.
The Touch Gesture Motion and Emerging Display Technologies 2015 will bring together the content of these two popular events into a two-day insight-packed discussion and networking event with executives from around the world. It is a popular platform for innovators, product developers, manufacturers, and leading brands to discuss aggressive market growth strategies.
For more information visit https://ihsmarkit.com/events/touch-gesture-motion-emerging-display-technologies-2015/overview.htm
David Hsieh is a display senior analyst for IHS
Posted on 30 October 2015
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