It is official now. Atmel's (ATML) alternative flexible touch sensor (named xSense) announced on April is now in production and its first commercial order was shipped last month to a Chinese smart phone manufacturer to be followed this month by a bigger shipment to a tablet manufacturer.
Why Should You Care
The market has been searching for an alternative to expensive Indium Tin Oxide (ITO) touch sensors and Atmel is the first to the market with a viable solution. Atmel's new touch sensor promises to be lighter, thinner, cheaper (around half the cost) and more precise than traditional ITO sensors. Also it has lower sheet resistance and that translates into less static, lower power consumption and increased sensor sizes.
Atmel's Perfect Timing
Atmel timing couldn't have been any more perfect with the release of Windows 8. Windows 8 will drive the need for larger touch sensors and Atmel's xSense with lower sheet resistance is perfect for the job.
It has been estimated that Atmel will gain 60% of the Windows 8 touch market and that was without taking the xSense advantage into account. We are talking about millions of Windows 8 tablets of all sizes, styles and designs that can be running using xSense and maXTouch controllers. And to meet these staggering numbers Atmel is ramping up xSense production capacity to one billion by 2013.
Microsoft has set a high standard on what a Windows 8 tablet should look like by unveiling the Microsoft Surface tablet and I have yet to see a tablet that can be its match. OEMs know this and they are stumbling over each other trying to come up with the next Windows 8 "it" design. This upcoming batch of Windows 8 tablets is preliminary just to meet the Windows 8 release date, the real competition should surface next year and is under development right now increasing the chance that xSense will be incorporated into this new design cycle.
The Rise and Fall of Atmel
Just last year Atmel traded for over $16 and now it is trading under $5 (under book value). Atmel raised and crashed because of the promise of increased touch sensor sales that the Android tablet market failed to deliver and lost market share in the smart phone segment to cheaper competition in the low end and greater competition in the high end smart phones. But now with xSense Atmel gains a price advantage that can't be argued with.
Forget about the touch controller the real money is in the touch sensor. An ITO touch sensor cost around $2 a square inch while a smart phone touch controller goes for under $2. The touch sensor is in fact one of the most expensive components in a touch devise. xSense can cut production cost while at the same time making a hefty profit - this cost advantage becomes even greater the bigger screen size becomes. Even if the competition gives their touch controller away for free the xSense and maXTouch controller combination is still cheaper than the ITO sensor alone.
Smart phones and tablets are not the only sectors that Atmel is targeting. Touch is expanding to all sectors in the market including the automobile industry.
The automobile industry has been recently adding touch controls to the center stack like in the Cadillac CUE. Now with xSense the automobile industry can replace those boring flat panels for sexy curved touch surfaces. That's why Atmel recently announced a new line of touch controllers designed for the automobile industry that includes support for curved touch pads (xSense).
Future PC Sales
Speculation has risen alleging that Windows 8 adoption will be slow and I argue that it doesn't matter, Windows 8 tablets are virgin territory and any gain in this sector will become an upside for Atmel. The current PC industry slump is driven mostly because two factors: one people using tablets as their primary computing device and two people waiting for the Windows 8 release before upgrading their computing device. Windows 8 was created to directly compete against the iPad and regain lost market share from Apple (AAPL). Windows 8 is clearly a more complete OS than the iOS (that was intended to be a mobile phone OS) and Windows 8 was designed with current consumer trends in mind.
XSense will not only help Atmel compete in the smart phone arena but will guarantee Atmel's lead in the Windows 8 market. Atmel perfect timing in releasing xSense just one month before the Windows 8 release will help Atmel secure many design wins. I believe that we are in the dawn of a new era of expansion for Atmel similar to the smart phone boom but this time it will be driven by Windows 8 and not Android.
Disclosure: I am long ATML.