MEX

With the rise of the slate as the form factor of choice, touchscreens have become a proportionally larger part of the user experience. The whole front face of devices is taken up with the screen and it determines the experience of text input, display and the main function buttons, all of which have been abstracted into software.

When the screen is such a large part of the experience, owning your own screen factories can be a significant competitive advantage.

I’ve heard from several large manufacturers this week who are increasingly envious of Samsung’s ability to fabricate its own displays. The South Korean manufacturer enjoys both a cost advantage and preferential access to the latest screen technology for its own devices.

Rumour has it Apple – which has been at the forefront of screen quality as a feature of customer experience – is seeking to manage this situation by investing in forward supply contracts to guarantee access to the latest displays. The company recently told investors it planned to use some of the cash on its balance sheet to invest multiple billions in this kind of manufacturing commitment.

Historically these scenarios have been cyclical. In the early stages of a new technology, demand outstrips supply and those with factory capacity are able to charge a premium. As demand grows, the manufacturers typically over invest in capacity and prices start to fall.

Another dynamic may come into play: the desire to deliver a consistent screen experience for customers across a range of devices. It is easy to imagine a portfolio of devices with different screen sizes but the same screen characteristics, where the consumer is convinced to buy the 10 inch tablet because they know it will have the same great screen experience as their 4 inch phone or 1 inch micro display. In this situation, manufacturers with an ability to supply all of those sizes will be favoured.