Cypress Semiconductor - Immersion 1/2

Digging into CY conference call (available on seeking Alpha), there's actually much more than I first underlined.

For sure IMMR and CY seem to share the idea that mobile phones are just the beginning:

Brad W. Buss

True touch, our new touch-screen product, continued to grow rapidly and we’ve more than doubled its revenue in Q2, as we added additional customers and handset models into volume production. We continue to see a very strong design win and many of the handset vendors and we expect to see a multi-year growth coming out of that. And we expect it again to probably be our fastest programmable product to hit $100 million in our history.

T. J. Rodgers

The second thing that is happening to us is what’s called true touch, or what we call true touch. True touch is nothing but cap sense with the ability to sense capacitors in a like your track pad on your little -- on your personal computer, on your laptop, except in the case of true touch, the capacitor array is made from [inaudible], which is the clear electrode, a clearer conducting material. And that electrode is on a foil which is laid over the top of a screen, so you can see through it.

So you think you are touching an image on a screen -- in reality, you are touching invisible electrodes that are overlaid over that and then True Touch senses the XY position of your finger and whatever device you have knows what image you are touching because it’s creating that image and that’s in effect how touch screens get created.

We’ve got a design in the Samsung mobile phone, so that’s a big line design win for us. We’ve had another design win in the Sharp waterproof mobile phone. So we are starting to see, and Norm can talk more about this later, the turn on of true touch as a touch-screen type controlling.

Suji De Silva - Kaufman Brothers

Okay, good. And then secondly on true touch, I know you made a comment there, this will be the fasted product to $100 million in your history. What is that timeframe implied by that, looking at past products? And also if you could talk about the top five handset guys, how -- if you expect to penetrate all five over time? Thanks.

Brad W. Buss

On the 100, again, we’re just trying to give a data point where we are not looking to say it’s going to happen in X period or X year. I think it will happen quicker than normal and we’ll just leave it at that, put the burden on sales and Norm to continue delivering those big design wins.

T. J. Rodgers

Well, when do you expect the touch screen will pass $10 million per quarter?

Norman P. Taffe

Very soon. Very soon.

John Pitzer - Credit Suisse

I guess, Brad, on the True Touch part, can you help us understand the gross margin evolution we should expect on that part? And I guess T.J., as you think about the evolution of just the touch screen market, clearly handsets, big uptake coming. When do you see PCs coming and how are you positioned there? And if you could walk through the different competing technologies and how you think True Touch lines up, that would be great.

T. J. Rodgers

Those are all True Touch questions. Norm is best to answer them. Norm.

Norman P. Taffe

I’ll start I guess with your last question about the competing technologies -- the competing technologies, historically the market for touch screen has been a resistive market. One of the biggest growth factors which is helping everybody in this space that we are seeing a fairly rapid transition from resistive technologies, which you would be familiar historically on things like ATMs, et cetera, that have touch screens towards capacitive. Capacitive is much better in terms of the clarity of a screen, therefore it’s much more useful in handsets. We’re seeing handsets move from resistant to capacitive very rapidly and drive the growth. It also is more durable because you don’t physically compress the screen to it touch.

That’s the biggest driver. Within the touch screen itself, within the capacitive touch screen state, there’s been different types of implementation. Part of the reason we are having such great success on the design end is we are the leader in what was called multi-touch all points, which is a mutual capacitive approach to touch screens which allows you to recognize independent fingers on a screen.

Most previous solutions in the market have suffered from -- they may be able to recognize two fingers but actually not independently, and therefore there is something called ghosting, which has affected literally almost any touch screen you see out there.

I can’t name the customer but a recent very well-reviewed phone that uses our first generation touch controller technology has really gotten a lot of reviews, rave reviews on its touch screen capability because it eliminates that and it uses a multi-touch all point capability.

That capability is putting us in a very strong position and allowing us to get a lot of wins, very few of which that we are really showing any revenue from yet, but will significantly impact the back half of this year and then throughout next year.

Another comment, I think another part of your question was what about beyond the handset space, some of the other market places. I’m glad you brought that up because we do believe touch screen is significantly more impactful than the capacitive market, even though we had and built a very strong business [in capacitive] [inaudible], we expect touch to be quite a bit bigger. And part of that is because it’s one, being adopted even more broadly in handsets but it’s also being adopted in all kinds of other markets, like gaming devices, netbooks, notebooks, printers, even automotive is an area we are seeing quite a bit of early design-ins.

So I think there’s a big opportunity and we are participating in all the segments, not just the handset segment.