Stars Align for LCD Suppliers to Enjoy Big Gains from Touch Phones

LCD suppliers were one of the largest beneficiaries of the launch of Apple's iPhone in 2007, which ushered in a new era for large-display touch phones. But this is hardly the first foray into large-screen mobile touch devices. This article will explore what makes this latest effort by Apple and the responses from Samsung, LG, and HTC different from past touch-phone efforts and what the future holds for this sector.

by Jeff Brown

THE LAUNCH of the iPhone in 2007 ushered in a new era for touch phones with large displays (larger than 2.8 in. on the diagonal) with LCD suppliers being some of the biggest beneficiaries. Rumored and confirmed iPhone display suppliers, including Epson, Sharp, and Toshiba, all stand to realize an increase in phone display sales as a result of Apple utilizing a 3.5-in.-diagonal display, one of the largest on the market (Fig. 1). Apple's goal of selling 10 million iPhones in the first year of production didn't hurt either.

Within 6 months following the release of the iPhone, LG, and Samsung had responded by introducing at least one competing large-display touch phone. The LCD divisions within LG and Samsung, while providing their respective phone divisions with displays, will also benefit from the hype surrounding the iPhone and the resulting consumer interest in phones with large displays. Second-tier cell-phone manufacturers such as HTC, which uses Samsung LCDs in its recently launched large-display touch phones, further expand the opportunity for Samsung beyond its complementary cell-phone division.

But what makes the launch of the iPhone a start of a new era? Did Apple pioneer the use of a large-display touch phone with the iPhone? If not, what makes this latest effort by Apple and the responses from HTC, LG, and Samsung different from past touch-phone forays?

Large Displays in Small Devices

The concept of utilizing a large touch display in a portable, handheld electronic device is nothing new. In fact, Apple led the way in the early 1990s with the introduction of the Newton (Fig. 2), which utilized a 4.5-in.-diagonal touch display in a handheld, battery-operated device. Shortly thereafter, several companies, including Casio, Compaq/Hewlett Packard, Dell, Palm, and Sony, followed Apple's lead by introducing their own, typically smaller, version of what came to be known as a personal digital assistant (or PDA). Despite the reduction in size, 12 PDA displays analyzed by Portelligent between 2000 and 2004 revealed an average screen size of 3.4 in. on the diagonal – consistent with today's iPhone display size.

While display-size similarities exist between yesterday's PDA and today's iPhone, the time it took to ship 10 million units/year could not be more different. Ten years after the introduction of the first PDA, volume shipments barely exceeded 10 million units in a year, while Apple strives to accomplish that feat in its first year of production. But long before Apple realized the potential of bringing together the benefits of a large touch display with the volume opportunity in the cell-phone market, early pioneers such as Handspring, HP, and Palm paved the way by introducing their own large-display touch phones between 2000 and 2002. Yet, even with a cell-phone market size that exceeded 500 million units/ year, these converged PDA and cell-phone devices never achieved sales of 10 million units in a single year. What kept these companies and their respective display suppliers from realizing the same success expected by the most recent lineup of Apple and other large-display touch-phone manufacturers and their LCD suppliers?

Form-Factor Evolution

As annual cell-phone shipments surpassed 500 million units by 2003 and demand for the devices spanned all categories of age, race, income, and geographic location, the design of the phone, including the color, materials, size, and form factor, became at least as important as its functionality. Every year over the past 3-4 years, a single cell phone became the "must-have device," reflecting a certain fashion or style and with it a distinct form factor.

Launched at the end of 2004, the Motorola RAZR, with its ultra-thin form factor made of aluminum and magnesium, not only made a fashion statement but also cemented the flip form factor as the best design to combine style and functionality in a sleek device. As other cell-phone manufacturers copied the RAZR and sales of ultra-thin flip phones skyrocketed, the LCD industry benefited, as the average display size grew from the 1.8-in. diagonal found on block-style phones in 2004 to the 2.1-in. diagonal on the typical 2005 flip phone (Fig. 3). In addition to the growth in the primary display size found in the flip-phone form factor, LCD suppliers also benefited from cell-phone manufacturers often incorporating a secondary display housed on the outside of the device. By 2006, after Motorola had sold more than 50 million RAZRs, a new form factor was beginning to take center stage that would increase the display size, again further benefiting the LCD industry.

Although originally launched as a combination e-mail device and phone in 2002, the RIM BlackBerry went mainstream in 2006 with the release of the 8700 series of phones (Fig. 4) and the BlackBerry Pearl by including such features as Web browsing, multimedia playback capability, and image capture. Soon after the launch of the 8700, competitors including Motorola, Nokia, and Samsung followed with similar multimedia e-mail machines such as the Q, E61, and BlackJack. Once again, the LCD industry benefited from this latest form-factor transition as LCDs grew from the average 2.2-in.diagonal found on the RAZR and its competitors to an average 2.5-in. diagonal in the RIM BlackBerry 8700. By the end of 2006, as e-mail and texting became the killer app, RIM shipped more than 6 million BlackBerrys in a year with competitors likely adding another 1–3 million comparable e-mail machine devices. Not long after the launch of the BlackBerry 8700, cell-phone manufacturers were already set to launch the next evolution in cell-phone form factor to alleviate the display-size limitations imposed by the BlackBerry design.

By slicing the phone in half with the keyboard located in the base and the display nested in the top section, HTC and other major cell-phone manufacturers were able to further expand the display size beyond 2.8 in. on the diagonal while maintaining the same footprint as popular block-style phones. The HTC TyTN and TyTN II (Fig. 5), each incorporating a 2.8-in.-diagonal display and QWERTY keyboard in a slide message form factor, soon became the best-selling devices in Europe and Asia and helped push HTC's shipments to beyond 10 million units per year. Despite positive reviews for the combination of features, useable QWERTY keyboard, and large display, the slide message form factor required the thickness of the phone to grow from the benchmark 0.6 in. for the Motorola RAZR to almost 1 in. for the HTC TyTN and 0.8 in. for the HTC TyTN II. The next evolution in the phone form factor would solve the thickness problem while contributing to a further expansion in the display size.

Fig. 1: This image shows the size of the display on Apple's iPhone 3G. At 3.66 in. on the diagonal, it represents one of the largest screen sizes of any mobile phone and helped usher in a new focus on large touch-screen phones. Photos courtesy of Portelligent.

Fig. 2: The Apple Newton was the first handheld, battery-operated electronic device to utilize a large (4.5-in. diagonal) touch-enabled display when it was introduced in the early 1990s. Copyright Ralf Pfeifer, 2005.

With the launch of the Apple iPhone in 2007, the high end of the market turned to the most basic of form factors, eschewing all mechanical mechanisms such as hinges, pivots, and slides as well as the keyboard itself, while expanding the display size to a cellular-phone chart-topping 3.5-in. diagonal. Less than 0.2 in. wider than the iconic Motorola RAZR and 0.4 in. thinner than the RIM BlackBerry 8700, Apple managed to squeeze into the iPhone a display 40–60% larger than its famous predecessors by turning to a software-based keyboard and stretching the display to the corners of the phone leaving just enough frontal area for a speaker and a single Home button. Soon after the launch of the iPhone, Samsung, LG, and HTC followed with similar touch phones utilizing a display size greater than 2.8 in. Collectively, these large-display touch phones will ship close to 10 million units in their first year of production with an average display size over 3 in.

As Apple and the other major cell-phone manufacturers return to display sizes last seen on PDAs and converged PDA cell phones available more than 5 years ago, what is fueling the significant difference in demand and is it sustainable? Can the next evolution in cell-phone form factor further increase the average display size and are any disruptive technologies on the horizon that could turn the display-size trend upside down?

Operating Systems and Content

The original large-display touch phones launched between 2000 and 2002 made use of smart-phone operating systems from Microsoft, Palm, and Symbian, all of which evolved from the PDA market. By the beginning of 2003, Motorola launched a Linux-based touch phone with a 3.1-in. display. During the next 4 years, the smart-phone market saw explosive growth from less than 10 million units in 2003 to over 80 million units in 2006, according to IDC. But the majority of the volume and growth came from Nokia phones, which avoided the use of a touch display and had little impact on the average display size. The most common criticism of the large-display touch phones during this time period was the dependence of the operating system and its accompanying applications on the use of a stylus, relegating the phone to two-handed operation.

Fig. 3: After Motorola launched the RAZR phone with its 2.2-in.-diagonal LCD screen, other manufacturers followed suit, increasing the average screen size on flip phones. Photos courtesy of Portelligent.

Fig. 4: The Blackberry 8700 series brought such devices into the mainstream in 2006, thanks in part to its 2.5-in.-diagonal screen. Photos courtesy of Portelligent.

It wasn't until the launch of the iPhone utilizing the iPhone OS, derived from Mac OS X, where the operating system was designed from the ground up to take full advantage of the large, touch display without the use of a stylus, allowing for single-handed operation. Shortly after the release of the iPhone, HTC followed up with its own touch-interface overlay on top of Microsoft Windows Mobile, Microsoft released a new version of Windows Mobile that provided for enhanced touch-display browsing, Samsung launched the Samsung Instinct that utilized a proprietary touch-interface operating system, and Symbian demonstrated its own version of the S60 operating system, incorporating enhanced touch-interface capabilities. The responses from Apple's largest competitors in the phone and operating-systems markets indicate the seriousness of the threat the iPhone imposes on the entrenched players. Once again, the display manufacturers stand to benefit as large cell-phone displays are required to implement an effective touch-display interface. But it takes more than a slick user interface on a large-display touch phone to reach and sustain the volumes for which Apple and its competitors are hoping.

The rise of audio and video content that can be consumed on a portable electronic device has changed dramatically since the first large-display touch phones appeared in 2000. Back then, iTunes, YouTube, Rhapsody, and other online music and video services were not even in existence. In order to get music or video onto one of the early precursors to today's touch-display phones, a consumer had to purchase a software application for a personal computer, convert their analog content in the form of a CD or DVD into a reduced sampling of the original, and download the file to their phone. The time and cost to accomplish this feat usually meant the converged device was relegated to use as a phone and PDA while not performing either function as effectively as the stand-alone devices available at the time.

While MP3 players have continuously shrunk in size with audio playback having virtually no limits on form-factor miniaturization, video consumption on portable devices seems to be more correlated to form factor and display size. Although several portable media players providing video playback, including the iPod nano, have utilized displays as small 2 in. on the diagonal, a recent walk down the aisle of a flight from Austin to San Jose indicated the iPhone display at 3.5 in. on the diagonal was the minimum size to watch a full-length movie. With iTunes and other online media services allowing for easy downloading and consumption of high-resolution video content, the future once again looks promising for the display industry.

Fig. 5: Phones that featured a slide form factor, such as the HTC TyTN II, allowed phone makers to increase the screen size even more, to an average of 2.8 in. on the diagonal, while keeping the same footprint as other "block" phones. However, the overall thickness of the device increased. Photos courtesy of Portelligent.

The Future

History has shown that the cell-phone industry has consistently responded to consumer's desire for a larger display through the evolution of the form factor. But with displays now stretched to the four corners of a device without room to grow in either width or length, the future evolution of the cell phone will rely on a display that is not bounded by the limited dimensions of the device. Wireless USB and other short-range high-speed wireless technologies will allow cell phones to send a high-definition video stream to a nearby display on the back of a plane seat or a hotel-room television, while microdisplays built into personal media viewers connected to a cell phone will provide the equivalent of a 27-in. high-definition television emanating from what looks like a pair of sunglasses. It remains to be seen whether these advances will yield the same benefits for the LCD manufacturers that they enjoyed from the development of previous generations of cell phones. •