iphone.jpgThe innovative touch screen employed in Apple's new iPhone is not just made in China but developed there too.

Xetra-listed Balda, the German company that supplies Apple, last year paid €59.5m for a 50% stake in Xiamen-firm TPK Holding, which had developed an innovative glass-surfaced touch screen.

Unlike conventional touch screens, TPK's screen can sense several fingers simultaneously and this has allowing Apple to develop a radically different type of user interface in which commands are given by finger gestures and combinations.

Indeed, Apple was quick to patent the software that allows a user to place thumb and forefinger on the display, then spread them apart to magnify an image

TPK Holding is a subsidiary of Taiwan-based TrendON, and in Xiamen it has a manufacturing joint venture with Optera, the US company that leads in hi-tech coatings of touch screen glass.

According to iSuppli, the Chinese-made touch-screen module used in the iPhone has an estimated cost of $27, representing around 11% of the cost of the iPhone. That makes Balda the second most important supplier by value after Samsung of Korea, whose chips account for around 31% of the bill-of-materials cost.

Apple's best-selling iPod is assembled in China but none of the key components were developed there — see this EngagingChina story.

Although Balda was better known as a maker of plastic shells for cell phones, the well-timed deal with TPK has given the German company a profitable new market to tap — and shown that Chinese technology firms are moving up fast in the innovation stakes.

More on Balda and TPK in this BusinessWeek article.

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