Fujifilm poised to aid MS vs. Apple

Fujifilm Holdings Corp., a company better known for cameras and film, could help Microsoft Corp. and the personal-computer industry fight back against Apple Inc.

Fujifilm is using its experience with silver to create bigger and more affordable touch-screen displays. Laptops and desktops sporting large touch-responsive panels are costly to produce because the sensors are made of a rare and brittle material called indium tin oxide, or ITO.

Fujifilm and other companies, including Atmel Corp. and Uni-Pixel Inc., are working on new, less expensive approaches that rely on different metals to help the industry lessen its dependence on ITO and overcome one of the biggest obstacles to adding touch to PC screens. Just 13 percent of notebooks this year will feature touch, underscoring the challenge facing Microsoft and PC makers such as Hewlett-Packard Co. and Dell Inc. as they try to mount a credible threat to Apple, which has been selling touch-screen devices since 2007.

“The entire industry has been looking for a replacement for ITO for years,” Cody Acree, an analyst at Williams Financial Group Inc. in Dallas, said in an interview.

Putting touch in 23-inch to 27-inch displays used in all-in-one desktop designs adds as much as $180 to the cost, according to Acree. For smaller computers and tablets, with up to 11.6-inch screens, it adds about $45, he estimates.

Microsoft’s Windows 8, the first of its flagship operating systems designed around touch technology, went on sale in October. The new devices met with tepid demand amid economic weakness, high prices and the lack of the touch-screen feature available in other gadgets. PC sales will decline 1.3 percent this year after falling 3.7 percent last year, according to IDC.

“We saw ramp-up challenges as the ecosystem learned to scale to new screen sizes and a wide variety of devices,” said Mark Martin, a spokesman for Redmond, Washington-based Microsoft. “Launch was just the beginning. Touch drives user engagement and is rapidly becoming a must-have capability.”

Martin declined to discuss Microsoft’s suppliers or say whether the company plans to purchase touch-screen technology from Fujifilm. The Japanese company isn’t listed among Microsoft’s suppliers, according to data compiled by Bloomberg.

Still, Tokyo-based Fujifilm is taking advantage of its photographic film technology as it seeks to meet demand. The company uses a material called silver halide to create sensor meshes in grids of almost invisible fine wires to detect touch, Keiji Uchiyama, a technical manager at Fujifilm’s Substrate Solution Group, said in an interview.

“Set makers are concerned about the shortage of touch-screen film supplies and about relying on ITO technology,” Uchiyama said. “The supply shortage became more apparent in the fall and we started to get a much stronger response to our product.”

Founded as Fuji Photo Film Co. in 1934, Fujifilm grew into a global supplier of photographic film for cameras, cinema and medical equipment. While Fujifilm successfully navigated the transition a decade ago from analog to digital photography, the recent proliferation of smartphones equipped with high-resolution cameras has prompted it and other digital-camera manufacturers to seek new growth areas.

While Nikon Corp. and Ricoh Co., which have branched out beyond cameras, are valued by investors at 21 times projected profit for the current fiscal year, Fujifilm, without new major product categories, has a price-to-earnings ratio of 18.

Consumers are growing familiar with touch-enabled devices, and they’re increasingly demanding the capability when shopping for a PC, Acree said.

“You have an entire generation that is starting out with touch smartphones and tablets,” he said.

Just 2.5 percent of notebooks sold last year were touch-enabled, and that figure that will rise to only 13.1 percent this year, even with the introduction of Windows 8, NPD DisplaySearch predicts.

“Consumers don’t see why they should pay a premium for a feature that’s already part of their smartphones and tablets,” said Richard Shim, an analyst at NPD DisplaySearch.

Almost all of the screens in iPhones, iPads and touch-enabled devices use ITO, a byproduct of zinc production. A so-called rare-earth material, most of ITO comes from China. 

(Bloomberg)