Despite high expectations for penetration of touch in notebook PCs, our research estimates that the penetration was only 2.5% in 2012. Based on ongoing research, we forecast that there will be 12% penetration in 2013. The key limitations at this time, in addition to the demanding requirements imposed by Microsoft Windows 8, are the touch module cost and supply chain availability.
Notebook PC touch modules are in the $50-80 range (with only air bonding), depending on size. The additional BOM cost is usually doubled in the product’s retail price, so a $50 BOM cost can bring $100 premium in retail pricing. Because of this, the industry is trying to find lower cost solutions.
As far as the touch supply chain is concerned, the notebook PC is very different from the smartphone. Smartphones have more sensor structure options, as well as more supply chain participants, so the supply situation is not as limited. The larger touch modules needed for notebook PCs are more challenging when it comes to manufacturing yields, technology and process. In particular, the ITO film is fragile, so glass substrates are preferred. Additionally, module makers need sufficient working capital to procure LCD panels while optical bonding is performed. Consequently, there are few module makers interested in notebook PC sizes because of the business requirements. Finally, there are few sensor structure options other than OGS (one glass solution).
OGS combines the processes of sensor patterning, cover glass finishing and module lamination at a single maker, and the total yield rate can be very low (~50%). The most critical stage is the cover glass finishing. Typically, pure glass-based touch sensor production lead time is about 2-3 weeks. However, in the case of edge-to-edge OGS sensors (sheet type), complicated processes such as scribing, forming, additional strengthening, and coating can increase the time to 8 weeks.
In addition to limited sources of production and long production lead time, seasonal timing can also make supply tight. Unlike smartphones, which are diversified across many brands and regions, the notebook PC has a more concentrated ecosystem, with fewer brands and clear seasonality. Brands that can plan in advance and make down payments to touch module makers receive priority, so don’t feel any supply limitations. Other brands perceive shortages due to a lack of such arrangements, but this is not necessarily due to capacity limitations.
TPK announced that their capacity (including their new G5.5 line in Pingtan and that of Cando) will reach 2.5M units per month (30M per year) this September. If the notebook PC market is 200M units, then TPK alone can serve 15% of the total market. Of course, seasonality and lead time issues will remain. However, we expect that additional touch module makers will move into the notebook PC touch market, including panel makers, and that low-cost solutions (such as SSG or eTP) for volume models will reduce production lead time so that capacity will improve.