FocalTech, a leading touch controller IC maker, and Orise, a well-known smart handheld LCD driver IC solutions provider, have announced that they will merge operations under the name FocalTech, effective January 2015. While the new company will retain the name, and chairman – Genda Hu – of FocalTech, we believe the new company will represent a new form of vertical integration focused on the smart handheld device market.
It is not surprising that a LCD driver IC maker, with strong financial position, would extend its business into touch panel controllers; Novatek and Himax established their touch controller business units years ago. While driver ICs and touch controllers both utilize analog driving, touch controllers require critical know-how of algorithms, which impact user experience. The iPhone was able to define the smartphone market from 2007 to 2010 due to the fact that its touch screen and OS were so well-matched. However, driver IC makers have not been very successful in penetrating the touch market.
Touch controller ICs have become mature, with features such as glove support, waterproof operation, active (1 mm) or passive (2 mm) pen, hovering, and single layer (GF1) becoming available over the past year. SoC (system on chip) designs have been adopted in notebook PCs. Existing process technologies from 0.18um to 90nm and packaging such as QFN and BGA are good enough. There do not appear to be new features or strong market growth to maintain pricing and revenue growth in 2014.
On the other hand, embedded approaches (in-cell and on-cell) are growing steadily, taking share on smartphones, and the touch controller is an important element of embedded touch panels. Typically, controller IC makers’ customers are touch module makers (COF), system makers (COB), or brands. If embedded types continue to gain share, the supply chain will change. Brands may continue to consign controller solutions for premium models, but some may accept a total solution from touch module makers (add-on type) or panel makers (embedded type) for entry and mid-end models in the mature smartphone market.
Like FocalTech, Synaptics is developing businesses beyond touch controllers, acquiring Validity, known for fingerprint technology, in 2013. Synaptics may be interested in RSP (Renesas SP Drivers) to step into LCD driver IC business, although Apple has reportedly shown interest. Given the fierce competition between traditional first tier (Atmel, Synaptics and Cypress) and rising Asian makers (such as FocalTech, Mstar, Goodix), touch controller IC makers are likely to launch a new chapter on user interface and consolidation.
The FocalTech-Orise deal can be viewed first as a move to secure market share. As we reported in the Quarterly Touch Panel Market Analysis, Focaltech shipped more than 200M controller ICs in 2013 (mostly for add-on type). If embedded types become critical, they can have a complete offering of driver IC and touch controller for panel makers. Beyond that, it is a form of preparation for touch and display driver integration (TDDI), to simplify ICs and connections, as well as reducing field engineering requirements and conflicts between driver and controller.
Finally, it is a starting point for future display enhancement. Panel makers can improve display resolution and form factor, but struggle to create new attractive features. Even for touch, panel makers are still far from great success. Apple’s in-cell supply chain follows Apple’s patent, technology and rules. With this merger, we can see the possible development for the future. Now that touch and driver IC is integrated, capacitive fingerprint on the display could be next.