Summary: Our global technology team issued its Asia Touch Screen Sector
report on 31 August (appended to this report) in which they forecast
accelerated growth for touch panels over the next few years. The major
Japanese touch screen companies under our coverage are Nitto Denko
(6988, OUTPERFORM, ¥3,800 TP), which is likely to benefit from market
expansion in its transparent conductive film business (for resistive touch
screens) and Alps Electric (6770, NEUTRAL, ¥500 TP) with potential upside
from rapid orders growth, but in need of yield-improvement measures to
restore profitability for the overall electronic-components business.
■  Differentiation: We anticipate strong growth rates for optical and projective
capacitive (below, “capacitive”) in the touch screen market, though resistive
is likely to retain a large presence at 43% of the expected $6.2bn market in
2012. Technology breakthroughs could strongly affect market shares for the
various technologies, and we will closely monitor competition among sensor
and IC controller companies to establish leadership in the supply chain.
Leveraging technology advantages is a key factor in the positioning of
individual companies.
■  Stock calls: We maintain our OUTPERFORM rating and ¥3,800 TP for Nitto
Denko and NEUTRAL rating and ¥500 TP for Alps Electric.