Submitted by Nicole Stuart as part of our contributors program.
The proliferation of mobile devices has sparked unprecendented growth in the touch screen panel market. With almost every new device containing some element of touch-enabled technology, many new companies are entering this high-growth sector, such as Sollensys Corporation (OTC-QB: SOLS) of Gwangju, South Korea. Sollensys finalized its pending merger last week, and investors are now trading the company’s shares actively on the U.S. stock market. Sollensys offers a pure investment in the “hard” physical touch screen market as an alternative to disappointing investment returns in the “soft” social media network market (Zynga, Facebook, Groupon). Sollensys manufactures physical components for use in standard 3.5-inch, 4-inch and 10.1-inch screens, such as those found in Android, iPhone, iPad, Blackberry and other types of interactive devices. Sollensys’ touch screens for various products range from 3 inches to 20 inches.
The global touch screen market is valued at $7.7 billion and continues to soar with an annual growth rate of 14%, making it one of the fastest growing areas of electronic manufacturing. Frank Woo, CEO of Sollensys said, “We are a company that possesses the technology of designing, tuning, assembling, and manufacturing touch sensor products,” some of the most important technologies in the touch industry. The touch screen industry is divided into three types of companies: IC (ATMEL, Cypress, etc.), Touch Sensor OEM (TPK, YoungFast, Nissha, etc.), and Touch Materials Supply (3M, Nitto, Denko, etc.). Sollensys was founded by efficiently combining two functionalities of Touch IC and Touch Sensor OEM companies. Currently, the touch design technology belongs to Silicon Valley companies in the U.S., while assembly and production is dominated by manufacturers in Asia.
According to Woo, Sollensys has been in a state of technology development and in the early stage of set-up process for the past two years. Their existing customers have been Chinese companies that supply smart phone terminals to companies like China Dot Com and China Mobile Dot Com (the plant for Phillips of China is included). The prospective customers in the reproduction of these goods in 2013 are in the smart phone business sector: Samsung Electronics, LG Electronics, Pan Tech, RIM (Black Berry), Nokia, etc. They are also in the industrial product business sector: Guatemala Educational Bureau, Central America Government, etc. Since Sollensys possesses capabilities of product development and independent design, it has a competitive edge in the industry by providing finished goods to its new customers quickly, “in less than half of the amount of time that other OEM companies can,” CEO Woo explained.
Sollensys has headquarters in South Korea and a factory in China, with additional offices in California and Guatemala. It expects to move its California offices from Newport Beach to a location closer to Silicon Valley, and it estimates that construction of its franchise-like satellite factory in Guatemala will be complete by 2014. Woo said that his company will provide the Guatemalan facility with Korean production process engineers who will supervise training and technical support for local engineers. Local operators will handle construction of the plant and teams of Korean and Guatemalan engineers will manage production equipment and clean room items. Sollensys expects to launch additional franchise locations in other countries soon under cooperation agreements similar to its Guatemalan agreement. Sollensys will support these satellites until local engineers obtain the necessary technical expertise required to maintain Sollensys’ standards. Sollensys expects to provide Korean engineers for training purposes for approximately six months to one year per location.
Woo explained that its Guatemalan deal falls under its “Technical Cooperation and Overseas Plant Export Contract.” It specifically involves selling (collecting of 30% rate of return as a technology premium) a turn-key manufacturing facility, including plant design, production equipment, and touch screen manufacturing expertise- Korean training included. If future products are produced at the facility, Sollensys will collect a royalty of about 2% of income per goods with touch screen sensors. When there is a change in technological specifications for touch sensors, Sollensys will generate additional income by providing consistent technical support, equipment and other utility requirements necessary to accommodate modified specifications.
Global expansion of Sollensys-licensed factories in the next 5-10 years will focus on Central America (Guatemala), Europe (Turkey), Russia, India, and Southeast Asian countries like Myanmar.
Sollensys’ marketing efforts for tablet PCs and phones with touch applications are already underway in Guatemala and Central America. Woo said, “Additionally, in 2013, by opening an Application Development Center in Silicon Valley, we are going to develop high-end medical and industrial touch products that are applied with touch screens.” Sollensys’ future Silicon Valley location will house research and development (R&D), marketing and pre-sales, while its Korean operation is responsible for technology alliance, technology royalty income and management of subcontractors.
Currently the touch screen industry is somewhat limited to mobile phones and tablets. However, if market surveys are correct in their predictions, products such as electronic appliances, automobiles, airplanes, medical equipment, and other industrial goods will soon adopt the technology expanding the market further. Sollensys plans to apply touch solutions to products in those industries, as well as to products for application in military, aerospace, oil & gas, mobile computing, banking and retail sectors. Looking forward, Sollensys will have to evolve, like others in the growing industry, as consumers using touch screens demand more complex features, such as flexible screens and ten-finger recognition. Sollensys has gone from manufacturing capacitive and resistive technology to the new generation “S-Sensor” products: flexibility for curved surfaces, support for larger touch screens, highly accurate stylus performance, and low sheet resistance (low power).
Currently, touch screen manufacturing facilities are concentrated in Korea, Taiwan, and China. It is expected that as these touch-sensor-equipped products spread worldwide as demand from each continent is likely to grow without exception. Consequently, markets in Europe, America, and the Middle East will want to produce the touch screen products in local factories with their own technologies.
The touch/sensor industry tops most charts of predicted market expansion rates for the technology sector. As touch screens become ubiquitous in society, many countries will want to develop their own industry for producing these products locally. Woo said that although countries such as the United States do not typically transfer their high-tech industrial technologies, such as semiconductor, LED/LCD, or aerospace to other nations, Sollensys sees that transferring high-tech IT technology to developing nations can be lucrative and has put this into his company’s business plan.
To further its plans, Sollensys will seek investment in 2013 as it ramps up revenue into an expected eight-digit range by 2014. It is confident of the expansion of the touch screen market globally with different applications. Because touch screens are so widely used, the global market using this technology will exceed $9 billion within three years. Sollensys’ core technology is still capacitive TSP and the company said that this technology will have the largest market share with multi-touch and gesture support moving through 2013 and beyond. However, the company continues to develop new technology such as the S-Sensor and multi-touch, which will evolve from limited two-finger to unlimited interactivity. It believes that with the launch of Windows 8, the use of multi-touch and gesture will become a more standard component of even the most traditional computing environments.