DigiTimes is reporting that Apple's next gen iPhone will adopt Sharp & Toshiba's in-cell touch panel technology. In-cell touch panel technology integrates capacitive sensor arrays along side LCD pixels, making the display thinner and more responsive by removing layer of touch sensor arrays. Siu Han posted:

Apple's new iPhone, which is expected to be released in the third quarter of 2012, is likely to adopt in-cell touch panels rolled out by Sharp and Toshiba Mobile Display (TMD), according to sources in Apple's supply chain.

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 sources noted.

Sharp will produce the in-cell panels at its 5.5G lines, while TMD will utilize its 6G lines for production, indicated the sources, adding that the two makers will begin to ramp up in-cell panel production in the second quarter of 2012.

Last year, just before iPhone 4S was launched we had heard from one of our sources that Apple was working with Toshiba to develop a 4-inch 720p (mostly 1280 x 800 resolution) display for next generation iPhone that will be more responsive and at least 20% thinner. But few days after we heard this iPhone 4S was released with same 3.5-inch Retina display, so we thought that the Toshiba display thing was just a rumor. However, now it looks like Apple was indeed working with Toshiba on development of new LCD panel and we might see the fruits of that collaboration in the next generation iPhone.