Japanese electronics giant Sharp has developed a new LCD which incorporates optical sensors in each pixel.

The company claims that the technology provides a more efficient way of making multi-touch sensitive screens such as those used in Apple's iPhone.

"The panel allows users to rotate maps through 360 degrees at the touch of a finger and to easily expand and reduce images," said Eiichi Katayama, an analyst with Japan's Nomura Securities.

"In our view, this is a remarkable technology that should find its way into a wide variety of applications including PDAs and portable navigation devices.

"This is the fruit of Sharp's proprietary technological research, and we think it should prove a valuable asset for the company."

Sharp said in a statement that conventional methods to provide such touch sensitive functions mainly involve laminating or bonding a film on top of the LCD panel.

But this can lead to problems with reduced display image quality and increased thickness for the display section.

The optical scanning capability already allows the screen to scan documents or business cards, and could eventually be used for fingerprint recognition.

Sharp plans to begin sample shipments of 3.5in LCD panels using the new technology later this month.

While these early samples will have half-VGA resolution, similar to high-end mobile phones, Sharp expects to be able to increase the resolution easily in the future. Mass production is planned for the second quarter of 2008.

Rival Japanese LCD technology developer TMD has also announced displays with optical sensors embedded in individual pixels.

But Sharp's sample shipments are the first to offer simultaneous multiple point tactile recognition in a touch screen, according to Katayama.

The new touch-screen technology could provide a welcome boost for Sharp's small-format LCD screen division.

"We think the new panels show real promise given that they have been developed using only proprietary technology," said Nomura's analysts.

"They could provide even more of a boost if the new technology can be commercially applied to Sharp's own mobile device products."