Samsung Electronics' mid-range and entry-level mobile devices (smartphones and tablets) in 2013 mostly adopted touch panels using thin-film technologies such as glass-film-film (GFF) or glass-film (G1F). Because the key component, the indium tin oxide (ITO) transparent conducting film (TCF), had been in short supply since the second half of 2012, Samsung decided to adopt G1F technology, which uses fewer ITO films compared to GFF technology for its entry-level/mid-range products. However, the strategy has triggered a reshuffle in Korea-based touch panel makers' rankings in terms of revenue performance.
Samsung's main touch panel supplier is Korea-based Melfas, which focuses on developing G1F technology. Melfas's revenues for the first three quarters of 2013 were KRW495 billion (US$458.18 million), up significantly from the KRW191.6 billion of the entire 2012, approaching fellow maker Iljin Display's KRW510.3 billion and surpassing Smart Mobile Application Company's (SMAC) KRW415.8 billion for the same period.
But Melfas still has weaker operating profits compared to GFF suppliers Iljin Display and SMAC. This shows that G1F's yield rate is still not as stable as that of GFF.
ITO film shortages have started easing since the second half of 2013. If G1F continues to see yield rate issues, Samsung may stop using G1F touch panels in 2014. To further reduce its mobile devices' thickness, Samsung is expected to start adopt more slim GFF and GF SITO (GF1) touch panels.
Slim GFF is able to reduce the thickness of a touch panel by shrinking the ITO film's thickness. In 2014, Iljin Display and SMAC will both shift some of their capacities to produce slim GFF touch panels. Meanwhile, to avoid the impact created by Samsung stopping using G1F, Melfas has developed GF1 technology that only uses a single piece of ITO film, similar to G1F. GF1's yield rate is also easier to improve.
On the other hand, Korea-based LG Innotek, an affiliate of LG Group, is currently supplying GFF and glass only (G2) touch panels and the company's revenues from related businesses rose significantly from KRW66.3 billion in 2010 to KRW560 billion in 2013. However, LG Innotek is still facing challenges such as raising its G2 yield rates and selling products to non-LG clients.
If Samsung stops adopting G1F touch panels, Digitimes Research believes Melfas's GF1 production will be crucial to sustaining its business in 2014.
