ANALYSIS - Touchscreen PCs more hype than reality?

A model poses with a Microsoft Multi-Touch-enabled computer installed with Windows 7 during the 2009 Computex exhibition in Taipei June 2, 2009.

TAIPEI (Reuters) - Touchscreen technology is sweeping the consumer electronics market as technology brands hope to come up with the next iPhone, but these new toys could be little more than plenty of hype especially in the PC market.

Major phone and PC makers such as Nokia, Research in Motion Hewlett-Packard and Asustek have launched touchscreen-enabled products, aiming to ride the trend of what they expect to be the next big thing.

Microsoft's impending launch of its next-generation Windows 7 operating system is expected to give the budding technology a further boost, bringing a software that supports such capabilities into millions of home and office PCs.

But most consumers may not find touchscreen PCs very different from their usual laptop or desktop PCs, and the technology is unlikely to spread beyond mobile phones.

"I don't think it's going to be the next big thing by any means, but just more and more brands are going into it," said IDC analyst Jay Chou.

"The software's still in an embryonic stage, and until that changes, hopefully with Windows 7, it's still going to be a while more before we see things taking off."

Touchscreens, once only commonly found in supermarket checkout counters and airports and banks, jumped to the forefront of consumer technology thanks to Apple's popular iPhone, inspiring a whole list of knock-offs in the process.

PC brands' previous forays into touchscreens have fizzled, with products such as the tablet PC not living up to its initial hype when they were first launched more than a decade ago, with its popularity has dwindling.

The old-fashioned keyboard and mouse could still be the best way to use a PC, with user interaction habits notoriously hard to change, especially if there is a dearth of software support.

"I think it sounds like a lot of hype," said Gartner analyst Tracy Tsai. "It seems impractical to me for a person to use touchscreens on a computer, and when you're using a device so big, it really adds little value to the overall experience."

Touchscreen PCs have been around for a while now, but high costs and limited functionality have kept them to niche devices. These type of PCs make up less than 1 percent of all computers sold worldwide. While most analysts expect this figure to climb, few see it growing as quickly as some computer brands expect.

"The biggest question to me is how much value does a touchscreen add to your computer? Probably not very much, and if that's the case, why would I want to pay more money for such a computer," said iSuppli analyst Peter Lin.

Investors have been pumping money into companies that make touchscreens, with shares of component makers such as Wintek quadrupling this year while recently-listed Young Fast has more than doubled.

Research firm DRAMeXchange expects revenue at these companies that manufacture touchscreens to grow nearly 17 percent annually to about T$49.79 billion ($1.5 billion) in three years, betting that more PCs and other tech gadgets will be equipped with touchscreens.

IT'S ALL ABOUT COSTS

High cost associated with touchscreens could set back the technology a few more years until prices come down, with the cost of manufacturing a panel and its required chips jumping manifold on a PC when compared to a smaller smartphone.

Specialist manufacturer Wintek estimates it costs about $10 to make a 3-inch touchscreen frequently used in smartphones, but said costs can increase exponentially when the size increases.

"It really depends on the specifics of what the client wants, but prices can change and will of course be different when there are specific requirements that a client wants," said James Chen, a Wintek spokesman.

Touchscreen chip designer Elan Microelectronics, which counts Dell and HTC among its clients, estimates that adding a touchscreen to a desktop computer would increase its price by more than 10 percent.

"We've got to wait for the cost to come down a little before the kind of growth we're seeing right now in mobile phones can spread to computers," Elan's Chairman I.H. Yeh told Reuters at during the PC trade show Computex.

"Right now, I think it's still an issue whether or not consumers are willing to fork out an extra 10 percent for a touchscreen on their computers."

And not all consumers are buying into the hype surrounding touchscreens, especially as the current lean times force many of them to pull back on their discretionary spending and focus on what they really need.

"It's more expensive, and the money can be put to better use somewhere else," said 44-year-old John Lai, as he looked at the rows of computers on display at a computer shop.