Analysis: Touchscreen chipmakers tap tablet boom

BANGALORE (Reuters) - The chipmakers behind the touchpads that are killing off the laptop mouse and the keys on a mobile phone are battling for supremacy in the latest blockbuster gadget -- the tablet PC.

Boosted by Apple’s iPad, sales of tablet, or slate, touchscreen units will jump to more than 136 million in 2014 from just 15.4 million this year, says market research firm iSuppli.

Tablet PCs are set to capture three-quarters of the PC touch market this year, from below 4 percent in 2009, crushing opposition from notebooks, netbooks and monitors.

“The tablet market is going to be one of the largest for touch screen controllers,” said Jennifer Colegrove, director at Display Search, which monitors trends in the display sector.

Colegrove expects the tablet PC market to generate $90 million in revenue for touchscreen chipmakers this year, and that could double in 2011.

And those numbers are expected to keep growing -- to as high as $500 million by 2012, forecasts Rodman & Renshaw analyst Ashok Kumar, dwarfing unit-for-unit the handset touchscreen market.

What began as a niche market 15 years ago -- when Silicon Valley-based Synaptics put a credit card-sized touchpad on the Apple Mac Book -- has exploded into a global touchpad market forecast to be worth $9 billion within a couple of years across PCs, handsets and other gadgets such as e-readers.

While smartphones have driven profits at Synaptics and peers Cypress Semiconductor Corp and Atmel Corp, these firms are now gearing up for the latest “killer device” -- the tablet computer, a device between a smartphone and a laptop.

Spurred by the success of the fully touch-based iPad, tech brands such as Samsung Electronics, Research in Motion, Motorola, Lenovo Group Ltd and others are expected to launch tablet-like devices soon, establishing a strong market for touchscreen chipmakers.

“The market growth has been explosive,” said Rodman’s Kumar. “The product category is here to stay and all the OEMs (original equipment makers) are throwing their hands in the rain.”

Other companies getting into the touchscreen controller market include Broadcom Corp, Texas Instruments Inc, Chinese Pixcir Microelectronics and Taiwan-based Elan Microelectronics Corp.

These firms make chips that allow users to control phones, digital music players or PCs by touch -- from a simple tap to more complex gestures that enable zooming, pinching and rotating.

Typically, the dollar content for a touch chip on a tablet device is 3-5 times the average selling price of a mobile phone touch chip.

“There could be anywhere between $10-$15 worth of content apiece (in tablets) to go after for Cypress, Atmel and Synaptics,” said Needham & Co analyst Rajvindra Gill.


While Synaptics leads the market in touchscreen chips, Cypress and Atmel are fast grabbing the attention of original equipment makers, scoring several design wins lately.

Among other tech giants reckoned to be preparing tablet-like devices are Toshiba Corp, Hewlett-Packard Co, HTC Corp and Cisco Systems Inc.

Cypress and Atmel have already snapped up some design wins for products expected to ship this year, giving them first-mover advantage as Synaptics lagged in unveiling its latest touch solution.

“Cypress is seeing design wins for (non-iPad) tablets that will be shipping in the third quarter,” said Capstone Investments analyst Jeffrey Schreiner.

At least two analysts said BlackBerry maker RIM’s upcoming tablet -- likely dubbed the BlackPad and expected to hit the market in November -- would use touch chips from Cypress.

Dell’s Streak, unveiled last month, and Samsung’s Galaxy Tab, due out this month, use Atmel chips, said Gleacher & Co analyst Ian Ing.

However, the tech brands are known to use more than a single supplier for many components, and Jefferies analyst Blayne Curtis noted Pixcir designs are also in Dell’s Streak.

Apple doesn’t reveal its part suppliers, but teardown firms say the iPad uses chips from Atmel, Broadcom and Texas Instruments.

As touch chipmakers slug it out for a share of the tablet PC pie, their sales pitch will focus on pricing, efficient power usage and the precision of the touch controller for the slate’s larger screens.

“In terms of low-power, Atmel has a great product and, in terms of pricing, both Cypress and Atmel are better positioned,” Curtis said.

Reporting by Mansi Dutta and Manasi Phadke, Editing by Ian Geoghegan