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The Taiwanese Mystery behind the iPhone

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A Taiwanese company is making the most crucial piece of technology in Apple?s iPhone? A nearly forgotten brand from a bygone era has become the master of the world?s hottest touch-sensitive screen.

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The Taiwanese Mystery behind the iPhone

By Liang-Rong Chen
From CommonWealth Magazine (vol. 376 )

Supplies of the iPhone were exhausted as soon as this eagerly anticipated mobile device hit the market. A range of speculation regarding iPhone suppliers even caused a stir on Taiwan’s stock market. Still, only a few in the industry are aware that the iPhone’s most crucial piece of technology--the multi-touch screen that sends Apple CEO Steve Jobs’s fingers dancing as he casually enlarges photos and flips through electronic pages – is actually being manufactured by a Taiwanese firm.

Even those in the same line of business are incredulous when they catch wind of the news. In the disbelieving words of the president of one Taiwanese manufacturer of touch-controlled computers, “If that’s the case, why don’t we know?”

The fact is foreign investment analysis reports to this day all name Germany’s Balda AG as the sole supplier of the iPhone’s touch screen. Merrill Lynch has even estimated that the price per unit of Balda’s displays is US$30-35, making it one of the iPhone’s priciest components.

World’s Only Maker of iPhone Screens

The US magazine BusinessWeek adds to the praise being heaped upon Balda by pointing out that it is “the only company in the world currently capable of producing the millions of advanced small-format displays that Apple will need.”

Is this the same Balda we know from the mobile phone sector? Known as Europe’s largest manufacturer of plastic mobile phone shells, Balda sustained a major blow when BenQ pulled out of Siemens last year. As a result, it was forced to close three factories in Germany and lay off 70 percent of its workforce.

Yet the ways of the world are difficult to foretell. This German company that happened to be dragged down by one Taiwanese company was then lifted up on the back of another. Within the period of a few months its stock price soared, as it became the master of the world’s hottest multi-touch screen.

There providing the technology that delivered Balda was the old Taiwanese video display brand TVM (Taiwan Video and Monitor Corporation). At the end of 2006, the German company acquired a 50-percent share in TVM’s Xiamen, China-based subsidiary TPK Holding, and the new partners together invested US$113 million to set up a new glass touch-sensitive display production line. It was this production line that allowed it to win the iPhone orders from Apple.

Balda’s optimistic projection for TPK is that it will be able to turn out 30 million screens annually in the future. This year it is expected to generate revenues of 600-700 million euros (upwards of 30 billion NT dollars).

Consistently low-key in its actions and not publicly listed, TVM has remained closely integrated with its German partner since the inception of their relationship. According to a Balda press release, following a series of complicated stock swaps, the family of TVM president Michael Chiang came to hold a fifteen-percent stake in Balda (currently valued at approximately NT$2.8 billion) as of last February, making the clan Balda’s largest shareholder. At the same time, Balda also named Michael Chiang its CEO for Asia.

Old Brand Controls the Latest Technology

Why TVM? How was an old video display brand nearly forgotten by the technology industry able to gain control of the most advanced touch-sensitive technology?

TVM itself was not willing to divulge. Michael Chiang, through his secretary, politely declined a request for an interview with CommonWealth Magazine. This was to be expected, however, as Apple places strict confidentiality requirements on it’s OEM partners. Companies that reveal Apple secrets face the possibility of having their orders cancelled.

Prior to the emergence of today’s industry stars such as BenQ and Coretronic, in the early 1990s TVM was in fact a major player in Taiwan’s computer monitor sector. Michael Chiang, who studied business management in university and was known as an expert in sales, circled the globe along with his older brother Chiang Chao-tsung as they built TVM into Taiwan’s leading export monitor brand for a time.

“We earned a lot at that time. We were nearly selling units as fast as we could make them,” recollects one electronics company general manager who worked at TVM in those early days.

Furthermore, TVM was among the earliest Taiwanese businesses to move into Southeast Asia. It set up a factory in Indonesia in 1991 and became that nation’s largest monitor maker. Yet, this strategy ended up becoming a major turning point in TVM’s rising fortunes. One industry insider points out that TVM’s business did not go smoothly in Indonesia, and it subsequently faded out of the increasingly competitive computer display sector and turned to making touch-controlled screens used mostly for automatic teller machines and government data retrieval systems.

In 2001, Michael Chiang relocated TVM’s manufacturing base to Xiamen and brought onboard the former head of Tatung Information Technology’s main factory, Shih Kuo-ching, as general manager.

German analyst Nicolas von Stackelberg, who made a special trip to Xiamen to observe TPK operations, notes in his research report that TPK Holding, along with its R&D-oriented subsidiary TrendON Touch Technology Corporation, applies a wide range of patented technology in its small-format touch screens, which makes them thinner, more scratch-resistant, more energy-efficient and more touch-sensitive than those of their rivals. “Our technology is ahead of the competition by at least eighteen months,” stresses Balda CEO Joachim Gut.

The competition fails to see it that way, though. “It’s simple to do that type of thing,” says Chun-ming Huang, Wintek Corporation senior research and development director, clearly unwilling to accept Gut’s claim. Wintek stands among the world’s top-three mobile phone display manufacturers.

Huang’s take on the matter is that in the past TVM’s main products were large-format capacitive touch monitors that could sense the touch of a finger and that it had been determined that this technology could not be applied to mobile phones, because the width of fingers relative to lines of text led to difficulty with computer recognition. However, these problems have been gradually overcome due to advances in software technology, and Apple has emerged as the first company to use capacitive technology in mobile phone screens.

Driven by the “iPhone Effect,” Wintek itself is currently pursuing R&D on capacitive touch-sensitive screens on behalf of other clients. Moreover, industry insiders are predicting this type of technology will lead to the development of more creative applications, such as displays for refrigerators and medical instruments.

A new battlefield, in which Taiwan is well placed to contend, has opened up.

Translated from the Chinese by Stan Blewett


Chinese Version: 錄霸 掌握iPhone的神祕台商

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