Case3:13-cv-02218-JST Document45-5 Filed09/26/13 Page2 of 41
`
`TPK 2018
`Wintek v. TPK Touch Solutions
`IPR2013-00568
`
`

`

`Case3:13-cv-02218-JST Document45-5 Filed09/26/13 Page3 of 41
`
`Daiwa »
`Capital mm ' '
`
`Display Technology MadeEasy
`8 March 2012
`
`"I'ublc ofcrmlcnls
`
`Touch-panel displays made easy...................................................................................................... 3
`
`Adding touch to a mobile device ...................................................................................................... 4
`
`Many technologies available within P-cap ....................................................................................... 7
`
`Types of integrated touch panel ..................................................................................................... 12
`
`TPM selection in a nutshell ............................................................................................................. 17
`
`Best touch solutions are G/G, G/F/F for now, but TOC in a year or two...................................... 18
`
`In-cell touch panel is not ideal for non-Apple brands ................................................................... 19
`
`Frequently asked questions ............................................................................................................ 20
`
`Appendix A: alternative touch solutions ........................................................................................ 23
`
`Appendix B: touch-panel supply chains ........................................................................................ 26
`
`Appendix C: major touch-panel technologies ................................................................................ 27
`
`Glossary .......................................................................................................................................... 28
`
`Please also see:
`
`Taiwan Touch Panel Sector:
`Cook's speech triggers more demand for touch panels
`8 March 2012
`
`Korea Touch Screen Sector:
`We foresee robust growth In addressable market
`8 March 2012
`
`cm Lln (886) 2 8158 5251 (an;W.mtw)
`
`Jan H. Lee (32) 2787 9173 mm.m)
`Joshua on. cm (82) 2 787 3116 Mm.mr.mn.m)
`
`"' 5....
`
`chllt'a spa-I'll 2.1.1537." m3.“
`triggers more “aha—d ..a..._._.._
`demand for mew—E 53:22:15.2:-
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`
`non-wann-
`
`

`

`Case3:13-cv-02218-JST Document45-5 Filed09/26/13 Page4 of 41
`
`Daiwa
`Capital Markets
`
`Display Technology MadeEasy
`8 March 2012
`
`
`
`Touch-panel displays made easy
`This is the first report in Daiwa's new series, Made Easy, in which we set out to
`explain an industry from top to bottom, and the ongoing developments and drivers
`within it, in layman's terms.
`
`In this report, we put you in the role of procurement executive at a hypothetical global
`smartphone manufacturer. Against the backdrop of constantly evolving technologies
`and emerging new solutions. you are tasked with determining the key criteria.
`balancing each technology’s strengths and weaknesses, and choosing the right
`solution for the job.
`
`Our decision to kick off the Made Easy series with touch panels follows on from our
`recent reports on the sector in both Korea (In touch with new market opportunities.
`published on 7 February 2012) and Taiwan (Threats become opportunities, published
`on 31 January 2012).
`
`We believe the outlook for the touch-panel space remains bright. As we see it, the
`market is likely to continue to boom in 2012 as smartphone, tablet-PC, automobile,
`and notebook makers move to make their products more user-friendly by adopting
`touch-panel displays (TPD), allowing for touch-driven command inputs.
`
`In Taiwan, our top pick is TPK (3673 TT, NT$483, Buy [1]), which we expect to remain
`the major touch-panel/lamination supplier for Apple (AAPL US, US$530.69,
`Outperform [2]). We forecast TPK's small-sized and mid-sized touch pane shipments
`for Apple to rise by 28% YoY and 36% YoY, respectively, for 2012. We have a six-
`month target price of NT$630, based on a target PER of 9.5x applied to our fully
`diluted 2012 EPS forecast. Risks to our call would be slower-than-expected iPad 3
`panel yield rate improvement, and pricing pressure from Vlfintek (2384 TT, NT$25.35.
`Outperform [2]) and CW (3481 TT. NT$15.15, Hold [3]).
`
`In Korea, our top pick is lljin Display (020760 KS, W13,450, Buy [1]), as we expect the
`company to continue to gain share in Korea’s touch-panel market and forecast robust
`revenue growth of 63% YoY for 2012. We have a six-month target price of W18,000,
`based on a mid-cycle PBR of 3.3x applied to our 2012 BVPS forecast. The risk to our
`call would be a slowdown in touch-screen orders from its main customer.
`
`I Touch Panel Sector. Darwa key stock calls
`
`.TPK.
`.
`__.
`367311
`_. __.
`.
`...
`.,
`__.
`._._. o..... .
`.
`.
`.
`......
`ertek
`2384 W
`"$25.35
`1.42
`
`mm.
`
`Wilt???
`020760 KS
`LEM
`__Wléfl
`.932.
`096660 KS
`Mata:
`WZA 500
`0 37
`000
`Source. Datwa
`Note.- (1) Our M32940 target price[or Wintel is based on our 20121-3 BVPS a M3243: and a target PER ofr .2013 in the middle ofitspast-
`PER a 3.2: (assuming a long—term ROE elm) on our 2012 BVPSforecast: the risk to our call luau
`be a Mount in touch-saver: and
`thrce
`range, the 71:1 to our view would be a delay in the launch of Win . (2) Our W52.ooo tar
`priest/yr Melfas is based on a target
`toad: sensor chip ordersfrnm its main customer.
`
`_M
`
`We trust that you find this first Made Easy report a useful introduction to the touch-
`panel space. and look forward to receiving your feedback.
`
`

`

`Case3:13-cv-02218-JST Document45-5 Filed09/26/13 Page5 of 41
`
`Daiwa
`Capital Markets
`
`Display Technology MadeEasy
`8 March 2012
`
`
`
`Adding touch to a mobile device
`You are a new procurement executive at Five Star Mobile, a hypothetical smartphone
`maker in Asia seeking to expand its presence in the global market. You know that the
`smartphone market is extremely competitive, with the high end dominated by
`Samsung Electronics (SEC) (005930 KS, W1,172,000, Outperform [2]) and Apple,
`while the mid-to low-end segment is increasingly crowded, and it is hard to distinguish
`one product from another.
`
`You believe that Five Star Mobile can leverage its design team hired recently from a
`European automaker to differentiate the basic ‘Iook' of the smartphone from its
`competitors. But you think that another important feature to consider is the ‘feel’ of the
`handset. Keen to adopt the best touch-panel technology for this new smartphone, you
`have contacted several touch-panel makers in the region (Taiwan and Korea).
`
`So, what is a touch-panel display?
`
`TPD comes in various forms, depending on the type of touch solution adopted, but
`simply, it provides not only visual output with information, but detects the presence
`and location of touch point(s) to input instructions with a finger(s) and/or a stylus. One
`advantage of a touch panel is that it removes the need for a physical button (keyboard)
`on an electronic device. This is because a 'soft’ keyboard can be displayed on-screen
`and the user interface can be designed with much more user-friendly functions, such
`as zooming in and out of the content using two or more fingers.
`
`I Architecture of multi-touch technology
`
`Touch sensor
`
`Able to sense multiple points
`
`Touch sensor
`controllar 8* 5'1""
`
`Able to deliver sets of simultaneous
`points to the operating system
`
`OPOI’
`
`II
`
`lawn",
`
`Able to forward multiple streams of
`moving points
`
`moving points and taking action Source. 045mm. Daiwa
`
`Able to decode multiple streams of
`
`

`

`Case3:13-cv-02218-JST Document45-5 Filed09/26/13 Page6 of 41
`
`Daiwa
`Capital Markets
`
`Display Technology MadeEasy
`8 March 2012
`
`
`
`How much do TPMs for smartphone use cost?
`
`Five Star Mobile plans to launch a smartphone in the US$200-300 price segment, and
`the following table presents a bill-of-materials (BOM) cost analysis prepared by your
`procurement team. Since the mainstream touch solution is not yet built into the TFT-
`LCD display, an add-on component called a touch-panel module (TPM) is laminated
`on top of the TFT—LCD display. The cost of the TPM is about US$10, or about 5% of
`the smartphone’s total manufacturing cost.
`
`-- 80M cost estimate for a smartphone
`
`
`
`
`
`Source: Daiwc
`
`Choosing the right touch-panel module
`
`You know you have to keep manufacturing costs below US$200 per smartphone, and
`have met several major touch-panel companies in Taiwan and Korea with a view to
`determine the best touch-panel solution for your new smartphone. The TPM makers
`have told you that although there are many different types of touch panels available
`and new ones continue to emerge, there is no perfect solution - each touch
`technology has its own strengths and weaknesses.
`
`The touch-panel makers have given you the following ideas.
`
`There are various competing technologies. Resistive touch was once the most widely
`adopted technology until Apple introduced the iPhone, using projected capacitive (P-
`cap) touch. which has gone on to become today’s mainstream solution. Other
`technologies include optical imaging, infrared, surface acoustic wave, and
`electromagnetic.
`
`Resistive-type
`
`The early generation of touch-panel technology was based on resistive technology. It
`is usually composed of two flexible sheets coated with indium-tin oxide (ITO), a
`transparent, conductive material, and separated by an air gap with spacers. When the
`human finger (or anything else, as the contact does not necessarily need to be
`conductive) presses the outer-layer film (with ITO on the x-axis voltage), it creates a
`depression leading to the film coming into contact with the inner-layer film (with ITO on
`the y-axis voltage), the two sheets are pressed together to create the X and Y
`coordinates, then processed by the controller lC to locate the touch point(s).
`
`

`

`Case3:13-cv-02218-JST Document45-5 Filed09/26/13 Page7 of 41
`
`Daiwa
`Capital mm' '
`
`Display Technology MadeEasy
`8 March 2012
`
`
`
`I Resistivetype touch panel
`
`I Resrstlve touch Nokia Asha 300 feature phone
`
`
`
`Source: 510 TaudrSysiems
`
`Source. Noun
`
`Although the resistive-type touch panel is inexpensive, it is not recommended for
`smartphones for the following reasons: 1) the thin plastic outer layer makes the screen
`less durable, and 2) manual recalibration is required periodically.
`
`Projected-capacitive (P-cap)
`Adoption of the P-cap touch panel increased with the launch of Apple's iPhone in 2007.
`A projected capacitive sensor is made of two layers of lTO deposited at the x-axis and
`y-axis to produce a charged electric field or capacitance. When the human finger
`(which is also conductive) touches the surface of the sensor, the change in electric
`capacitance at the location touched is detected by the touch controller lC in order to
`locate the touch point(s).
`
`I P-cap touch panel brie! model
`
`fiOS-sorths'l —'
`
`I Apple's P-cap touch panel. cross-sectional View
`cutawa-
`“1}me
`Mm \
`
`Fan-mu
`
`Why projected: electric-filed lines are "projected" beyond
`the touch surface when a finger (conductor) I: present
`Source: Danna
`
`Source: Dm'wa
`
`

`

`Case3:13-cv-02218-JST Document45-5 Filed09/26/13 Page8 of 41
`
`Daiwa
`Capital Markets
`
`Display Technology MadeEasy
`8 March 2012
`
`
`
`Many technologies available
`within P-cap
`There are various types of P-cap touch panels, which can be categorised broadly as
`glass-type and film-type.
`
`For the glass-type, there are two solutions: glassto—glass (GIG), and a single-glass
`solution called touch-on-cover (T00), also known as sensor-on-cover (SOC) or
`sensor-on-lens (SOL). For the film-type, there is the glass-to-film-film (GIFIF) and
`glassone-film (G1F). Comparing the two technologies, glass-type has advantages in
`optical performance and durability, and has narrow bezel; the film-type has
`advantages in cost, thinness and lightness. and ease of production.
`
`We provide below detailed descriptions of the touch solutions for P-cap TPMs.
`
`Glass-to-glass (GIG): cover glass and sensor glass
`In 2007, the iPhone became the first mobile device to use a GIG touch panel with ITO,
`a transparent conductor, deposited onto a glass to become a sensor glass. The cover
`glass is used to protect the sensor glass underneath, and the sensor glass is used to
`sense the touch points. The sensor glass is coated with two conductive layers of ITO:
`one for the x-axis, another for the y-axis. As the sensor glass is charged, an electric
`field is formed. The electronic field waits for another conductive material, such as a
`finger(s), to create a disturbance by touching the field, which then allows the chip (or
`controller lC) locating the X and Y coordinates of the touch points to execute the touch
`commands.
`
`There are two types of GIG solutions: double-sided indium-tin oxide (DlTO), patented
`by Apple, and single-sided ITO (SlTO) for non-Apple devices.
`
`I Glass-to-glass (GIG) P-cap touch solution
`
`Glesuo—Glass (Out-cell)
`
`GlasaIGlus: Dl'l'O Sensor Crss Sectional View
`HOSerwot-adsP—o
`.
`mam ..———O:
`flOSamrtY-uhic'”. — _ -
`
`GlassIGlass: SWO Sensor Crm Sectional View
`
`
`
`
`
`
`
`
`
`WWWNH .—__....
`
`
`Samara:
`
`no Senortxm no Senora-axis)
` Scum: Daiwa
`
`

`

`Case3:13-cv-02218-JST Document45-5 Filed09/26/13 Page9 of 41
`
`Daiwa
`Capital Marlmts
`
`Display Teclmology MadeEasy
`8 March 2012
`
`
`
`I GIG touch example: Apple iPhone 45
`
`II GIG touch example: Apple 3 New iPad
`
`--'Iflfllr‘
`
`DDBDDDDDDD
`condemned
`-uuauunou
`
`Sam: Apple
`
`Source Apple
`
`Glass-to-fllm-to-film (GIFIF): cover glass and two layers of films
`There are several film-type TPM makers, such as Young Fast (Not rated) and J-Touch
`(Not rated) in Taiwan and lljin Display and Melfas in Korea. In this solution, the cover
`glass is used to protect the two layers of film underneath. The first layer of film is
`coated with ITO deposited at the x-axis, and the second layer of film is coated with
`ITO deposited at the y-axis. This structure is much slimmer than the 6/6 solution as
`the two layers of film are still much thinner than the sensor glass; however, films are
`more prone to defects as they tend to become deformed upon substantial changes in
`temperature and humidity.
`
`I Glass-to-film-tofilm (GIF/F) P-cap touch solution
`
`ITO “BUN-Ill!)
`
`“OS-WM)
`
`Source: Damn
`
`

`

`Case3:13-cv-02218-JST Document45-5 Filed09/26/13 Page10 of 41
`
`Daiwa
`Capital mm
`
`Display Technology MadeEasy
`8 March 2012
`
`
`
`I GIFIF touch example HTC Sensation XL
`
`
`
`Source: HTC
`
`GIass-to-one-fllm (61 F): cover glass and one layer of film
`G1F provides a hybrid solution. One axis of ITO sensors is printed on the cover glass
`and another axis of lTO sensors is attached to the film. As G1F uses one less film
`than the GIFIF solution, it is slightly thinner and has better transparency and optical
`quality. One drawback of the G1 F solution is that it tends to have a low production
`yield, and so we believe TOC will be more widely used by TPM makers in 2012.
`
`II G1F touch panel
`/Cmum
`
`”kappa”umwmm
`‘5‘ —'—fl08lwafis)
`“mm,
`ra- mm WM“
`
`“mm dim-y
`
`I G1F touch example. Samsung Galaxy 8 9-inch tablet
`-
`....__._ ..
`.
`,........
`
`
`
`Sam. Daiqu
`
`Source Mtlfus
`
`Touch on cover (TOC): coating ITO onto the back of the cover glass
`
`The main purpose of this solution is to reduce material costs (by roughly 15-20%) by
`reducing the thickness (0.3-0.4mm) of the sensor glass. There are various types of
`TOC solution, each with a different name by various suppliers:
`
`

`

`Case3:13-cv-02218-JST Document45-5 Filed09/26/13 Page11 of 41
`
`
`3 §Cap
`
`Display Technology MadeEasy
`8 March 2012
`
`
`
`-TOC touch solution
`
`Emil-u
`
`Gastroaunah:___u_ ______-______‘______‘__
`
`usuao:—J -
`
`
`Condumve «Inger/v
`
`rro Sensor ot-asds
`rro Samar (Vacs)
`
`
`Touch on Cover
`
`
`
`Sauna: Datum
`
`I TOC various types and mass-production schedule
`
`
`
`AU
`ironic:
`OnoGiaasSold'mnOGS
`
`9mm 13“"! WWWWW_
`
`M 13059") __
`WGdeWIOGSJ
`.
`Mela:
`osesaoxsa
`DiredP
`' w-m
`TPK
`31mm
`TwohOans 01.)
`Source: Companies Datum
`
`
`
`Sheet
`1012
`E
`&
`m
`M
`Sheet
`4011
`Piece
`2012
`
`While each TOC solution has a different name depending on the supplier, they all
`have a similar production method (sheet-type) except for TPK's touch-on-lens (T0L),
`which is produced using the piece-type method. The major difference between the two
`production methods is that the sheet-type is geared to low-to-mid-end mobile devices
`that still require a second chemical strengthening on the borders after cutting, while
`the piece-type is not. The piece-type method is much more difficult to manufacture
`and is geared to mid-range and high-end mobile devices.
`
`I TOC solution production methods sheet-type and piece-type
`Toc: Shoot Typo
`
`TOC: Piece Type
`
`Forming
`
`" Cum.
`
`cm;
`forming
`
`,,
`
`Wuhzistmrgthadng: glassissubmerydina bath mowingpomm'wnrdmhmdmm Thiserrmsafiwn mmvmgbmmfmrrobemphmdbypormmmfiwnmwhwhrrbu
`" Inkprintingfor colouring and coatingfor more glass treatments; such as, AG emriglare, an anti-reflectiw. and AS antismudge
`
`

`

`Case3:13-cv-02218-JST Document45-5 Filed09/26/13 Page12 of 41
`
`Daiwa
`Capital Markets
`
`Display Technology MadeEasy
`8 March 2012
`
`
`
`I Example of TOC touch: HTC Wildfire smartphone
`
`I Example of TOC ‘ouch HTC Cha Cha smartphone
`
`
`
`Source; HTC
`
`

`

`Case3:13-cv-02218-JST Document45-5 Filed09/26/13 Page13 of 41
`
`Rallying
`
`DisplayTechnologyMggchhgfg
`
`Types of integrated touch panel
`All of the touch-panel technologies discussed in the previous section fall into one
`major category: the add-on (out-cell) category, in which the TPM is attached to the top
`of the TFT-LCD display. But another touch-panel technology is emerging, in which the
`touch panel is integrated into the main display. This is being led by LCD-panel makers
`and competes with the add-on technologies of conventional TPM makers.
`
`Integrated-type technologies, such as on-cell and in-cell touch panels. are currently
`being developed by the major LCD-panel makers. However, these technologies still
`need verifying for mass production, as defective touch panels would result in the entire
`TFT-LCD being scrapped since the touch panel cannot be separated from the main
`display.
`
`For the integrated technologies, while the touch feature is built within the TFT-LCD
`display, TFT-LCD makers still require the conventional touch-panel makers’ core
`competence in laminating the cover glass onto the in-cell-touch-enabled TFT-LCD
`display.
`
`I Comparison of conventional and Integrated touch-panel technologies
`
`ammllurmmmplmmoduh
`
`Kev'l‘echnology
`
`
`
`trump-oi
`
`
`KeySuppller
`Source: DisplaySmmh, Daiwa
`
`“-14.00 miles. but Magi-reclamation servicefromlouch
`Wm
`Touchpmelms
`
`
`On-coll touch panel for TFT-LCD displays
`For on-cell touch panels, the touch sensor is deposited on the top of the colour filter
`and one layer of glass is eliminated, resulting in a thinner module with lower
`production costs (theoretically) compared with the add-on solutions. The major
`challenges for on-cell technology include the following: 1) it requires additional photo
`masks in the production process of TFT-LCD to create the touch sensors on the top
`surface of the colour filter substrate, and this effectively lowers the overall production
`yield, and 2) potential defects on the touch sensor could result in the whole colour filter
`having to be scrapped.
`
`

`

`Case3:13-cv-02218-JST Document45-5 Filed09/26/13 Page14 of 41
`
`Daiwa
`W
`
`Display Technology MadeEasy
`8March2012
`
`
`
`I 0n~cell touch panel for TFT-LCD
`
`m—CIII Touch for TFT-LCD
`
` Glm smnm—>
`
`GREEN
`
`Anaylayerotfi‘r-LCOx
`mountain‘s-g”
`
`_
`
`
`
`
`ammmawim
`
`Source: Datum
`
`On-cell touch panel for AMOLED
`SEC launched its own touch-panel technology for active matrix organic light-emitting
`diode (AMOLED) in 2010, and this is currently used in its high-end smartphones, such
`as the Galaxy Sll and Galaxy Nexus. The company integrated touch sensors on the
`top glass layer of AMOLED for encapsulation. The production of the touch sensor is
`outsourced to HannsTouch (Not rated) and CPT (Not rated).
`
`I On-cell touch panel for AMOLED
`
`On-Clll Touchfor AMOLED
`
`
`
`

`

`Case3:13-cv-02218-JST Document45-5 Filed09/26/13 Page15 of 41
`
`Daiwa
`capital mm
`
`Display Technology MadeEasy
`8 March 2012
`
`
`
`II On-cell AMOLED example Samsung Galaxy SII smartphone
`
`
`
`Soum: Sanmmg Electronic
`
`ln-cell touch panel for TFT-LCD
`
`For in-cell touch panels, the touch sensor is located inside the LCD cell. The touch
`sensor can comprise light-sensing elements, micro switches (voltage-sensing), or
`capacitive electrodes (charge-sensing).
`
`ln light-sensing, the photo sensor is placed in each pixel or group of pixels and the
`visible-light sensor recognises 1) the shadow of a finger under a bright light, 2) the
`reflection of the backlight on the finger in a dark environment, or 3) the lighting from
`stylus and/or eraser (please refer to the picture on the next page demonstrated by AU
`Optronics).
`
`For voltage-sensing, pressing the LCD surface closes micro-switches in each pixel to
`detect the location touched. it works with any touch objects, such as a finger or stylus.
`However, durability is an issue as it requires the LCD surface to be touched and the
`cover glass cannot be added.
`
`In charge-sensing, pressing the LCD surface changes the dielectric constant of the
`liquid crystal, which alters the capacitance between the electrodes. This type of in»cel|
`is being developed by Sharp, Toshiba Mobile Display (TMD) (Not listed), and LG
`Display (LGD) (034220 KS, W27,600, Hold [3]).
`
`

`

`Case3:13-cv-02218-JST Document45-5 Filed09/26/13 Page16 of 41
`
`'
`Dalwa
`
`
`CapitalMafltsts
`
`Disl T1 1 MdE
`pay ecmo ogy
`:34;th
`
`
`
`I ln-cell touch panel with light-sensing elements
`
`h-eon Light-sensing Touch
`
`
`
`Soumr AU Optrunirs
`Nome: Light—sensing in-ceIl touch panel is not yet waflable cemmem‘nlly
`
`II ln-cell touch panel with charge-sensing elements
`
`hall cmmmhg‘l'ouch
`
`
`
`

`

`Case3:13-cv-02218-JST Document45-5 Filed09/26/13 Page17 of 41
`
`'
`Dalwa
`
`
`Capital mm
`
`D'
`1 T 11111 MdE
`1sp ay cc oogy gab/{$1123
`
`
`
`‘- ln-cell touch panel WIth charge-sensmg example: TMD portable navigation device
`
` 7 (L. m TH) I100 MIG pllnHW-VGM
`
`Source: Tbshz'ba Mobil: Display
`Note: Charge-smslng mum-(ouch fiz-aell touch panel is not yet commercially available
`
`

`

`Case3:13-cv-02218-JST Document45-5 Filed09/26/13 Page18 of 41
`
`'
`Da'wa
`
`
`Capital Mariam
`
`D'
`1 T1 1 MdE
`lspay ecmo ogy
`:Maerchgfg
`
`
`
`TPM selection in a nutshell
`
`We summarise the various types of touch technology in the table below.
`
`I Summary of touch technologies and their features
`
`TFr-l.CD Ollt~cell(Add-On)
`
`'
`
`GIGDfiOfl'Fr-LCD Yes_
`
`_ Mh'fi lsedinlheiPhone arLPai
`Am“!
`-,-
`thmwmmmm. 15-20%2v‘wirllrlalaricostsaslhewmglmisnotnemam
`Mmmhmmmmwmwmm
`Waldfiyltiiealfamu-b-bwenddeviolu
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`

`Case3:13-cv-02218-JST Document45-5 Filed09/26/13 Page19 of 41
`
`Daiwa
`Capital Mallets
`
`Display Technology MadeEasy
`8 March 2012
`
`
`
`Best touch solutions are GIG, GlF/F
`for now, but TOC in a year or two
`The most important factors for touch panels are cost competitiveness and the
`customer's acceptance of different touch-panel technologies. Although there could be
`new emerging technologies, if they are not verified for mass production, this could
`pose a potential procurement risk for smartphone makers.
`
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`If we were in your shoes as procurement manager for Five Star Mobile, we would see
`6/6 or G/F/F as the best touch-panel solutions for the job at hand and conclude that
`TOC could become a strong contender in the next year or two.
`
`

`

`Case3:13-cv-02218-JST Document45-5 Filed09/26/13 Page20 of 41
`
`Daiwa
`Capital Mallets
`
`Display Technology MadeEasy
`8 March 2012
`
`
`
`In-cell touch panels are not ideal
`for non-Apple brands
`While Apple is working hard with Sharp, TMD. and LGD on in-cell touch-panel
`solutions, it is only of use for the iPhone, and not yet for the iPad or other brand
`makers.
`
`The main reasons are as follows.
`
`1)
`
`In-cell touch panels are ideal for large-volume, single-model smartphones, such as
`the iPhone. it is not economical for other brand makers and the panel makers to
`make a new set of photo masks for each smartphone (as these are not in
`standard sizes such as TVs, monitors, and notebooks) that does not have a
`volume shipment of more than 2.5m units.
`
`2)
`
`It is still too costly to use in-cell touch panels for tablets, as the total cost is high
`due to a low yield rate, and it is quite costly to scrap those that are not up to
`standard.
`
`

`

`Case3:13-cv-02218-JST Document45-5 Filed09/26/13 Page21 of 41
`
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`
`Frequently asked questions
`
`1. What are the types of projected capacitive (P-cap) touch solutions
`and which supplier offers what?
`
`@ Answer
`I Types of projected capacrtive (P-cap) touch solution
`
`
`
`"I"? .-k
`
`
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`
`331610277114?)
`WW "3}
`690K
`
`Source. Company, Daiwn estimates
`
`2. What type of touch solution is adopted by each major brand maker
`for various price segments?
`
`@ Answer
`I Touch solutions by brand maker
`
`
`
`mm
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`Source: Dahua record:
`
`6 3. Which touch solutions have the best performance vs. cost?
`
`.
`.
`., Answer
`@ The 6/6 and GFF solutions offer the best performance for their cost. Although
`G/G provides greater sensitivity and transparency (saves more power) with
`economies of scale, GFF is easier to produce and production costs are lower.
`G/G has the advantage of producing a single product in high volume, whereas
`GFF has advantages in a variety of low-volume products with a quick time to
`market.
`
`-
`
`-
`
`--
`0
`
`4. How come Taiwan touch-panel companies are much larger than
`Korea touch-panel companies?
`-. Answer
`Taiwan TPM makers have been riding on the success of Apple in mobile
`devices. And a few companies dominate the touch-panel market for both the
`iPhone and the iPad. However, the Korea TPM makers have been competing
`more fiercely in a much smaller and fragmented domestic market, supplying
`touch panels mainly to SEC and LG Electronics (LGE) (Not rated).
`
`

`

`Case3:13-cv-02218-JST Document45-5 Filed09/26/13 Page22 of 41
`
`D I————-—
`CapitaIMarkets
`
`Display Technology MadeEasy
`8 March 2012
`
`
`
`0 5. Does profitability vary with the degree of vertical integration?
`
`Answer
`
`@
`
`Although there are many TPM companies, not all of them are vertically
`integrated. One of the important components in TPMs is touch sensors, and
`normally, a company that can produce touch sensors in-house has higher
`profitability. However, given the complicated manufacturing process, another
`important variable is production efficiency.
`
`I Vertical integration of TPM companies
`
`
`
`Source. Commits Daiwa estimate-
`
`6. Would TPK and Wintek go out of business if Apple adopted in-cell
`touch panels?
`Answer
`
`@
`
`No. because TPK and Wintek’s core competence is not making sensor glass,
`but laminating the materials together and providing touch solutions at a lower
`cost through vertical integration.
`
`Even if Apple adopts in-cell touch panels for the iPhone, it would not have a
`completely negative impact on TPK and Wintek, as Apple would still rely on
`touch-panel makers to provide full lamination (direct bonding) services between
`the cover glass and the in-cell-touch display.
`
`While iPads, other iPhones, non-Apple tablets and smartphones would
`continue to adopt the GIG solution, the extra capacity left from only laminating
`once would open up business opportunities for other brands doing business
`with non-Apple brand names and result in them enjoying a better gross margin.
`
`@Q
`
`7. Would the dollar profit of lamination services be cut by half if the
`iPhone adopted in-cell touch panels?
`Answer
`
`No, because the yield rate for lamination would improve to 95-96% from the
`current 92% when laminating twice (once between the cover glass and sensor
`glass to form the touch-panel module, and the other between the touch-panel
`module and TFT-LCD display); as such, cost of goods sold would be lowered.
`Besides, touch-panel makers should charge a higher dollar profit as laminating
`between the cover glass and sensor glass should be much harder than
`laminating between the cover glass and the expensive in-cell-touch display.
`
`

`

`Case3:13-cv-02218-JST Document45-5 Filed09/26/13 Page23 of 41
`
`Capitalfilarlmts
`
`Display Technology MadeEasy
`8 March 2012
`
`
`
`Again, iPhone does not comprise all of the touch-panel makers’ revenue
`sources; and besides, top-line growth should be higher than expected as the
`ASP/unit for in-cell touch display business should be higher than the regular
`display with TPM on top.
`
`co
`
`@®-
`
`8. What’s the difference between full lamination and edge lamination?
`
`Answer
`
`Full lamination is also called direct bonding and edge lamination is also called
`air-bonding and. Basically, the former is more difficult with a lower yield rate
`because it requires the entire surface to be laminated onto another surface
`using optical clear adhesive (OCA), and the latter is much easier as it only
`requires the border to be laminated with double-sided adhesives.
`
`9.
`
`if Apple adopted in-cell touch panels for the iPhone 5, would other
`brands also adopt them quickly?
`Answer
`
`No, because it's costly, as each smartphone—size is not a standard-size like a
`TV, monitor or notebook; as such, a new set of photo masks needs to be made
`and the process cost of in-cell solution is significantly higher than that of the
`GIG solution (especially when the yield is not good, because the entire display
`cannot be reworked, but has to be scrapped).
`
`In other words, it’s not economical to adopt the in-cell solution if a model can't
`sell more than 2.5m sets (according to industry experts).
`
`Moreover, the in-cell touch panel is currently patented by Apple, and the
`technology itself could face a bottleneck due to insufficient capacity for other
`brands. Currently, there are Toshiba Mobile Display, Sharp, and LG Display in
`plan for mass production on a fairly small scale designed to be engaged for
`Apple only.
`
`9 ,_
`
`10. How long does it take to design and manufacture a touch panel for a
`new smartphone model?
`Answer
`
`The design and qualification process for a GIG touch solution for a new
`smartphone model usually takes 6-9 months depending on different customers
`(the process used to take 9-12 months for Apple). Once the spec and design
`parameters are qualified by the customer, the ramping up for production to an
`acceptable yield rate for the first shipment can be done within 1-2 months.
`
`

`

`Case3:13-cv-02218-JST Document45-5 Filed09/26/13 Page24 of 41
`
`Daiwa
`Capitalm
`
`Display Technology MadeEasy
`8 March 2012
`
`
`
`Appendix A: alternative touch
`solutions
`
`Optical Imaging
`
`The optical touch sensor uses imaging sensors (like a camera) installed in the top-
`right-hand and top-left-hand comers to see if there is any interference of the sensing
`area. If anything interferes by forming shadow(s) in the light reflecting back to the
`camera, the position of the touch is then detected. This is ideal for large-size displays;
`such as TVs, but it could be bulky as it needs room to hide to cameras.
`
`I Optical imaging touch
`
`I Optical touch example HP All-in-one PC
`
`
`
`Source: Touch Panel Middle East. Inc
`
`Source: HP
`
`Infrared touch
`
`The infrared touch sensor is implemented by infrared LEDs and light detectors
`installed in the front of the display on both vertical and horizontal bezels. When
`anything touches the screen, it also disrupts the infrared beams and causes a drop in
`the signal received by the light detectors. The X and Y coordinates of the touched
`area is then located. This is ideal for monitor-size applications; however, it’s not easy
`to calibrate between the signal senders and signal receivers.
`
`

`

`Case3:13-cv-02218-JST Document45-5 Filed09/26/13 Page25 of 41
`
`Daiwa
`W
`
`Display Technology MadeEasy
`8 March 2012
`
`
`
`I Infrared touch
`
`I- Infrared touch example: Kindle Touch
`
`
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`Electromagnetlc/dlgltiser touch
`The electromagnetic touch panel has a sensor board in the back of the display. These
`sensor boards are positioned to sense the electromagnetic radiation (or radio
`frequency) generated by electromagnetic pen. When the specially designe