Sharp has announced that it’s building next-generation LCDs using IGZO (indium gallium zinc oxide) technology. This new approach first made headlines just before Apple launched the iPad 3, when it was rumored that Sharp would provide panels for the high-resolution tablet, but manufacturing difficulty reportedly led to Apple opting for a conventional S-IPS LCD panel instead.

Sharp has since ironed out these problems and is now manufacturing a 32-inch 3840×2160 panel, a 10-inch 2560×1600 panel, and a 7-inch 1280×800 one as well. IGZO functions as a replacement for amorphous silicon (a-SI). Because its electron mobility (the speed with which electrons can move through it) is up to 40x higher than a-SI’s, it allows for smaller pixels (higher resolution) displays, thinner wiring, and improved response time.

IGZO’s smaller transistors and thinner wiring are particularly important in the mobile segment. When Apple moved from 1024×768 to 2048×1536 for the iPad 3’s display, it had to more than double the number of LED backlights and significantly increase the battery’s capacity. As a result, the iPad 3 runs hotter than its predecessor. Thermal camera evaluations indicate that the back of the iPad 3 becomes 5-8 degrees C warmer than its predecessor.

The exact amount of power savings depends on the types of LCDs and the characteristics of each, but the difference can be significant. Sharp’s public comparison of two 11-inch 1200×800 panels — one built using amorphous silicon, one using IGZO — shows the IZGO panel drawing just 37% as much power as the amorphous silicon panel (factoring in both the panel and backlight).

We recently spoke with Applied Materials and the company told us it sees an opportunity for IGZO panels in between amorphous silicon (a-SI) and LTPS (low temperature polycrystalline silicon). LTPS offers even better electron mobility than IGZO, but is significantly more expensive.

The unbridged gap between handhelds and HDTV

Technologies like AMOLED and IGZO have gotten quite a bit of press thanks to impressive developments over the past few years, but there are reasons why so much of this technological achievement has focused on small screens. Part of it is simple physics — if you sit 6 to 8 feet away from your television, a 1920×1080 HD display is a Retina-class display (unless you’ve got a TV more than 55 inches wide).

Computer users can still benefit from higher resolution displays and, as the chart above shows, Applied Materials expects to see display resolution creeping upwards through 15-inch products. Whether or not we’ll see much uptake past that remains to be seen — there are certainly jobs that could benefit from a 3840×2160 32-inch panel, but there aren’t enough of them to classify the market as anything but niche.

The good news about the non-handheld display market, according to Applied Materials, is that the company expects OLED televisions will finally become a real thing this year. The bad news is that overall demand in 2012 is expected to be terrible.

Samsung is selling the LCD side of its display business while Sony recently announced its plan to cut 10,000 jobs and focus on marketing its Crystal LCD displays rather than investing in OLED. One reason why these manufacturers are wary of investing in widescreen production is that there’s virtually no evidence that consumers want to kick off another HDTV buying cycle. The complete failure of 3D TV’s to gain any sort of traction is an even bigger reason to worry. According to AM, over-investment in 2010 and weak demand in 2011 has led to a capacity glut; the company expects demand to recover next year.

As a result, we can expect the majority of display research to focus on handhelds for the time being, with some overlap in ultrabooks and other small displays. The 3840×2160 display that Sharp is now building would roughly qualify as a Retina display if viewed from a bit more than two feet away. It seems likely that we’ll see such panels marketed to professionals. With small screens already transitioning to higher pixel density, we may see a dichotomy emerge at the top and bottom of the market, with the majority of consumer LCDs stuck in the middle at conventional resolutions.