Prime View's E Ink Deal Raises Concerns About E-Reader Pricing
01 Juni 2009 - 10:01PM
Dow Jones News
Taiwan's Prime View International (8069.TW) has grabbed a
stranglehold in the nascent electronic book reader market by
acquiring a small company that holds key patents for the displays
used in Amazon.com Inc.'s (AMZN) Kindle and Sony Corp.'s (SNE)
Reader devices.
Prime View said Monday it had agreed to acquire E Ink Corp., a
Cambridge, Mass.-based company that pioneered the core display
technology used in almost every e-reader now sold. The deal,
scheduled to close in the fourth quarter, is valued at $215
million.
The acquisition will give Prime View, already the world's
dominant e-reader display maker, control of a larger segment of the
manufacturing value chain. Some critics said that might enable the
company to wield an inordinate amount of pricing power in the
market.
Prime View currently licenses E Ink's technology, which creates
a black and white ink-on-paper look, and incorporates it into its
displays. The two companies supply nearly 20 e-book manufacturers
worldwide. The market for e-readers is expected to grow as more
material is available in a digital format.
One industry insider, who asked not to be named, was worried the
acquisition would enable Prime View to squeeze out emerging
competitors, such as South Korea's LG Corp. (003550.SE), which
recently began to manufacture e-reader displays based on E Ink's
technology. Samsung Electronics Co. (005930.SE), NEC Corp.
(6701.TO) and Seiko Epson Corp. (6724.TO) are also moving into the
market.
The person, who works at a company making e-readers, said the
acquisition would allow Prime View to keep the price of displays
using the technology high.
Prime View sells its display modules for about $60, roughly
twice as much as it costs the company to manufacture them,
according to people familiar with the industry. Displays account
for about one-third of the cost to manufacture an e-reader device,
those people said.
Prime View officials were not immediately available for
comment.
E Ink Chief Executive Russ Wilcox downplayed critics' concerns.
He said Prime View would continue to supply its technology to other
display makers, adding that rivals would surely emerge if the
company tried to squeeze out competitors.
"There will be lots of innovation and diversity," he said. "It's
rare in consumer electronics to see pricing go up."
The market for electronic book devices is forecast to grow from
1.1 million units in 2008 to 20 million units in 2012, according to
iSuppli analyst Vinita Jakhanwal. E Ink sales were $18M in the
first quarter of 2009, up 157% over the same quarter in 2008.
Forrester analyst Sarah Epps said it was "potentially
problematic" for one company to have that much power in the market,
but she noted that Prime View will be under pressure from partners
to make its technology more affordable.
Prime View pushed into the market in 2005 when it acquired the
e-paper business of Philips Electronics NV (PHG) and partnered with
E Ink. Prime View also invested in dedicated driver chips, touch
screens and flexible displays.
-By Scott Morrison; Dow Jones Newswires; 415-765-6118;
scott.morrison@dowjones.com