iPhone News Updated

TAIPEI, Feb 27 (Reuters) - When 30-year-old Ken Kao wanted a new mobile phone, he decided to replace his old keypad handset, with its worn-out buttons and rubbed-off numbers, with a slicker LCD touchpad model.

"It's so easy to navigate with my fingers," says Kao, general manager at a chemicals company in the Taiwan city of Taoyuan. "It's a big improvement over older PDA phones.
Kao is one of a growing number of people to ditch traditional keypad phones in favour of smooth, sleek touch screen models, which allow users to call phone numbers or surf the Internet by touching items on a liquid crystal display (LCD).

Touch screen phones have been around for the last five to six years, but the market got a major boost last year with the launch of Apple's iPhone, whose popularity has rubbed off on lesser-known brands, such as Taiwan's HTC.

Big phone makers, such as South Korea's LG Electronics, Sony Ericsson and Motorola, have also jumped on the bandwagon. Industry leader Nokia is due to launch a touchpad phone this year.
"Although touch screens have been used in PDAs for quite some time, it was really the arrival of the iPhone that spurred the wave of interest," said Carolina Milanesi, a mobile device analyst at research company Gartner.

As their popularity grows, sales of touch screen devices are expected to jump to over 80 million in 2010 from under 20 million in 2007, according to Gartner.

HTC sold 2 million touchpad phones in just seven months last year, equalling Apple's iPhones sales. LG plans to launch 10 new touchpad phones this year at around the $300 price range after seeing strong sales from its stylish Prada phone.

Even Research in Motion has said it might make a touchpad BlackBerry if enough customers ask.

TURNING POINT
Surging demand for touch panel phones will lift earnings of Taiwan component makers and assemblers, such as Innolux Display Corp, Wintek Corp, and Hon Hai, which supply the likes of Apple, LG and Sony Ericsson.

"It's a very fast growing business, and could soon affect keypad suppliers," said Morgan Stanley analyst Frank Wang.

Companies that develop the interface, such as Synaptics Inc will also benefit.

"2008 will be a pivotal year as handset designers will be competing to further enhance user's experience beyond what is offered today, and that will continue to fuel demand for touch screen handsets in the upcoming years," said Synaptics product marketing manager Andrew Hsu.

But for the market to really gain traction the price of screens has to come down, analysts say.
"Touch screens are certainly a trend," said Kim Woon-ho, an analyst at Prudential Investment and Securities in Seoul.

"Their biggest merit is the larger screen size, but they are for now limited to high-end phones. For them to become even more mainstream...prices need to come down."

Industry watchers say touch panel prices will come down rapidly as more products enter the market and component prices continue to fall.

Global touch-panel sales are set to more than triple to about 312 million units in 2010 from around 94 million units in 2006, said CLSA analyst Samantha Chu in a research report.

That surge will help drive down the average price for high-end touch-screen panels to $15 each by 2010 from $25 now.

Don't count out traditional keypad phones just yet, said Chris Hazelton, an analyst at research firm IDC. He said the technology still faces some technical issues, such as the lack of raised buttons that allow users to type on their keypads by feel.

"For now, the touch screen will still live in a parallel world with keypads," he said. (Additional reporting by So Eui Rhee in Seoul and Tarmo Virki in Helsinki; editing by Doug Young, Ken Wills and Louise Heavens)


By Sheena Lee