One small-cap tech company to watch

Touch-screen technology is changing, now it is used everything from banking to vending machines and retail displays. Here, Tom Bulford investigates the market, and tips a world leader in this fast-growing sector.

The Penny Sleuth braved London's sweltering heat the other day to join a very well attended presentation by a small UK manufacturer that has just won a very exciting contract with none other than Coca-Cola. This was Zytronic (LSE: ZYT), which saw its share price gain 10p after it announced that the soft drinks giant will use its touchscreen technology on a new generation of dispensers that will offer a choice of no fewer that one hundred hot and cold drinks.

This is quite an achievement for the £26m Gateshead manufacturer, and evidence that it is a world leader in what is evidently a fast-growing sector. Touchscreens are becoming more and more prevalent, whether on station ticket machines, ATMs, gaming consoles, vehicle dashboards or mobile phones and Zytronic offers a product which, while more expensive than most, is clearly superior.

Out of 80 companies, Coke's chosen this one

The secret, as technical director Dr. Andrew Morrison explained, is that the part of the Zytronic screen that is activated by human touch is behind a piece of glass and not in front. This piece of glass can be thick and very tough and because it protects the important stuff that lies behind, Zytronic's screens are much more durable, and this seems to have been a key consideration for Coca-Cola.

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As with most industries, that for touchscreens is a good deal more complicated than one might imagine. There are 80 manufacturers of touchscreens around the world, and they employ about a dozen different technologies - although they are all derived from four basic versions. The first touch sensor was developed in 1971, and here the customer pushes his finger against a flexible screen which in turn presses against an electronic panel behind it that can determine its exact position, dictating a specific response from the machine.

In a second technology, the finger interrupts a pattern of acoustic waves that are flowing across the front of the screen; a similar type uses infra-red beams rather than acoustic waves. Finally, there is 'surface capacitive' technology, which involves the application of a small amount of voltage to all four corners of the screen.

These all have their merits, but they also share the disadvantage that the active part of the display is exposed not only to the human finger, but to other such agents as strong sunshine, spilt drinks, or vandals. They also need to be enclosed in a frame (known as a 'bezel'), giving them a clunky, rather than sleek, appearance...

Zytronics is a leader in 'projected capacitive technology', where an almost invisible mesh of fine electrodes is placed behind the front screen. These electrodes oscillate at a known frequency which is altered by the finger's touch thanks to something called 'body capacitance'. Again, by measuring changes to the oscillation of electrodes on both the X and the Y axis, the control electronics can determine the exact position of the finger.

Key advantages of Zytronic's system

This has several advantages, of which durability is perhaps the most important. Bank ATMs are an obvious product that must not, if at all possible, fail. Zytronic's screen is also deployed at petrol stations on the Continent, where the driver typically will insert a card at the pump. Here Zytronic offers an additional feature, which sees all of the information stored behind the glass deleted in the event that the glass is broken. Next Zytronic can offer a flat, flush screen with no surrounding prominent bezel. This is both neat and aesthetically pleasing, and is the technology behind those digital picture frames that have appeared in recent years.

Development is certainly not stopping. Today, Zytronic is working on screens that incorporate functions normally carried out by an independent device a key pad being the obvious example. It is working on screens that, by reacting to several simultaneous touches, could transform gaming machines. And it is also developing a flexible screen, the 'Zyprofil', that can be rolled up like a carpet and potentially produced on high-speed production lines. An application for this is in shop windows, allowing the passer-by to interact with an image on the shop window. This thin film also offers the possibility of curved, rather than flat, displays.

But it is those snack-food and drinks dispensers that are really exciting the Zytronic team right now. Kraft Foods is already evaluating the technology. But perhaps the biggest market of all is in Japan. With a snack dispenser on just about every corner, this is truly the land of the vending machine, and today these are still activated by mechanical buttons.

Through its Japanese distributor, Zytronic has started to talk to Japan's vending machine makers. But whatever happens here, Zytronic seems to have plenty of opportunity to maintain its admirable growth record. This is one small cap that I'm adding to my watch list for the future.

This article was written by Tom Bulford, and is taken from his free daily email The Penny Sleuth