WinTek, a screen supplier for Apple, just reported sales numbers for the month. Normally sales increase 1% per month, but last month it dropped a precipitous 33%. The largest drop in 3 years. Such a large drop doesn't mean Apple is selling less iPhones, it means Apple is starting to produce iPhones with an entirely different screen.
Currently, the iPhone’s “On-Cell” display is layered a bit like a sandwich. At the very bottom, you’ve got the back light. Directly above that, the LCD section, which houses the red-, green-, and blue-colored pixels of the display. Then there’s a layer of glass. On top of that is the capacitive touch layer, which is then topped off by a tough layer of Gorilla Glass. The middle layer of glass separates the liquid crystal portion of the display from the touch portion.
In-cell display tech eliminates that middle layer of glass, combining the LCD and touch sections of the display into a single layer. One way this can be successfully accomplished is by “multiplexing” the electrodes normally used to relay touch input — that is, using the same electrodes to handle the signals for both touch control and the pixels of the LCD, according to a 2010 IHS report on touch-screen displays.
In-cell technology isn’t currently deployed in any shipping cellphones.
Basically, it makes the screen thinner and brings the actual pixels closer to the surface that you touch with your finger. This creates a closer connection between the user and the device. Closer, in fact, than any currently deployed cellphone.
Wired goes on to state that this is so new it will be hard to produce mass quantities:
Right now, in-cell touch displays are still an emerging technology. So while the core technology promises long-term benefits, yield rates could be a problem in the shorter terms, Alexander says
However, this only strengthens the argument that Apple would use In-Cell technology. We know Apple leverages its large cash reserve to soak up all supply of any new technology. They do this so that they don't even have to own the tech, IP, or production lines to lock out competitors. They just buy all the production, leaving none for anyone else.
These three things combined make me very optimistic for the technology to be applied in the new iPhone.