Etching residues of crystallized indium tin oxide (ITO) films deteriorate thin-film transistor (TFT) characteristics and negatively affect the display images. The usability of active-matrix displays is inseparable from hydrogenated amorphous silicon (a-Si:H) TFT backplanes. In particular, in large-area displays, reducing the overlap area of gate and source lines can reduce crosstalk capacitance, resulting in uneven color defects. In this study, orthogonal design is established to optimize deposition parameters of amorphous ITO films. Low-power and high-water-vapor flow during sputter deposition can effectively suppress ITO crystallization and etching residue formation. A TFT with an optimized ITO film presents the best electrical performance and affords images free from brightness variations and streak defects in the display backplane, i.e., ITO-s3 exhibits a superior ΦH of 1.954 × 10−2 Ω−1 within the range of (0.028–1.974) × 10−2 Ω−1. This allows us to propose a deterioration mechanism of TFT characteristics, as follows: (1) ITO residues increase the internal stress of the gate layer and deteriorate the TFT characteristics; (2) ITO residues lead to cracks and voids in the SiNx dielectric and act as carrier traps. The results of this work offer an avenue to develop advanced large-area displays applicable in vehicles in light of taking full advantage of existing equipment.