When the iPhone was unveiled back in 2007, its touch screen was a revelation to the industry. You don’t need a stylus; you just touch it with your finger and it responds almost instantaneously.

While the iPhone’s touch display may feel a bit magical, the glass is coated in a thin, transparent material called indium tin oxide (ITO) that can sense when you touch the display. It’s one of those little tiny feats of engineering that you never really notice, except according to a new report from the U.S. government, supplies of ITO are dwindling and researchers are hustling to find a replacement.

As reported by GigaOM, the U.S. government estimates that from 2010 to 2011, the cost for indium has risen 25 percent. Even more worrisome, they’re projecting that indium mines might run dry around 2020, which is leading manufacturers to look for an alternative material that can provide a new touch screen coating.

At this year’s Semicon West conference in San Francisco, industry experts from across the globe reported their findings on alternative solutions. So far the most promising alternatives promoted at the conference have been graphene — a material made out of a one-atom-thick layer of carbon atoms — and Silver Nano wires that are 10,000 times skinnier than a human hair, but can be cut to any length and are extremely flexible.

Nanotech Biomachines CEO Will Martinez says manufacturers are hard at work to free themselves from using ITO on their touch displays:

Some manufacturers are already planning on incorporating ITO alternatives into their devices. Foxconn might begin using carbon nanotubes in the non-Apple devices it makes by the end of 2013, and Samsung is working on prototypes that use graphene.

Recent estimates claim there are 531.9 million smartphones with touchscreens in the world today, but that will increase to 1.4 billion within the next few years, leaving manufacturers with a lot of R&D work to do before a solid replacement can be found, according to Martinez.

Source: GigaOM