At a time when chances of a fall release for the next generation Apple iPhone look stronger than a summer launch as expected before, a report surfaced late Friday saying that the highly anticipated smartphone will feature in-cell touch panels produced by Sharp and Toshiba.

Taiwan newspaper DidiTimes reported, citing sources in Apple's supply chain, that Sharp would manufacture the in-cell panels at its 5.5G lines while Toshiba Mobile Display (TMD) would use its 6G lines for production. The two companies will be ramping up in-cell panel production in the second quarter of 2012.

According to the sources, an improvement in yield rates of the in-cell touch panels at Sharp and TMD has persuaded Apple to choose to cooperate with Japan-based panel makers, the report added.

The sources also stated that if the next iPhone featured the in-cell touch panels, it will have a significant impact on the operations of Apple's current touch panel suppliers TPK Holdings and Wintek, which are specialized in the production of glass on glass touch solutions currently.

However, TPK also came up with a response, saying it is working on TOL (touch on lens) single-glass touch solutions, which will be more appropriate for the making of high-end customized devices. The market would also accommodate more than one technology, said the company.

According to Redmond Pie, in-cell touch panels basically put together touch functionality with the TFT (thin-film transistor) manufacturing process, which helps get rid of the need for additional glass.

Not only does this help bring down manufacturing costs of the device, but it also can help the company develop a thinner and lighter device altogether, said the report.

DisplaySearch analyst Davis Hsieh also believes that the next iPhone aka iPhone 5 will come with the technology. Hsieh told reporters at the DisplaySearch Taiwan Flat Panel Display Conference that Apple is likely to use display technology provided by Japanese panel makers rather than Taiwan-based suppliers for its next-generation iPhone to achieve a thinner profile for the device, Focus Taiwan reported.

Of course, Taiwanese panel makers are also developing this technology, but Japanese suppliers still run faster [..] compared with on-cell technology, touch panels that use in-cell technology can be made thinner because the touch sensors are actually placed inside the color filters rather than on top of them, Hsieh told reporters.

More Rumors on iPhone 5 Features

Home Button Alternative, All-Screen Model: Earlier this week, Rene Ritchie of iMore came up with a report in which he seemed concerned about what he called a confluence of events (that) led some to speculate that Apple could go wider instead of just bigger, which would be closer to 16:9 than the current 3:2.

We haven't heard anything about a 16:9 iPhone, but we have heard Apple is (perhaps still) discussing or experimenting with alternatives to the current Home button, said Ritchie. Could these experiments come together into an almost all-screen iPhone?

May be, but here's a glitch. Ritchie explained:

It raises the kind of problems for developers and apps that Apple has thus far avoided by retaining the same aspect and pixel ratio in iPhones since they first introduced the original iPhone. Given how long Apple is leaving older devices on the market as well - for example, the 2009 iPhone 3GS is still sold as new - it would be a long-lasting problem as well. Boxing 3:2 apps, like Apple does with iPhone apps on the bigger iPad screen, wouldn't create the premium phone experience Apple is known for.

4-Inch Screen Display: Matthew Panzarino of TNW said that the next iPhone may get a 4-inch screen, but it probably won't be widescreen. The current 3.5-inch screen is comfortable to use with one hand, and a 4-inch screen will also work fine.

An iPhone 5 with a 4″ screen would be a nice bump in size and I don't think that it would affect usability as much as one even a quarter of an inch bigger, Panzarino said.

Brian White of Topeka Capital Markets also said the next-gen iPhone could sport a 4-inch display, contrary to earlier reports of a large 4.6-inch and 3.5-inch screen. Some other sources also said that the device would sport Quantum Dot LED curved glass edge-to-edge display with 1280 x 720 resolutions (367ppi).

Processor, RAM: 9to5mac recently reported that Apple had internally seeded a prototype next-generation iPhone with the iPhone 4 design. The actual next-generation iPhone is specifically said to not include the iPhone 4/4S design, but Apple is testing these new devices in older casings to throw off leaks, said the report.

According to the report, the iPhone prototypes had a variation of the A5X's S5L8945X architecture and like the new iPad, they were also packing 1GB of RAM.

Earlier reports suggested that the sixth generation iPhone would feature an A6 processor. It was expected to be a superfast 1.2 to 1.5 GHz processor with 1GB or more of RAM to offer amazing processing capabilities to the smartphone.

Other Features and Specs: As far as the other likely features are concerned, the upcoming iPhone model includes an 8 megapixel (or even higher) camera with the ability to take pictures in the panorama mode, a 2 megapixel front-facing camera for video chatting, iOS 6, 4G LTE technology, Near Field Communication (NFC) technology, improved Siri and a much-improved battery life.

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