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June 1, 2009 9:20 am

Prime View targets E Ink to reinforce hold

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Prime View International, the Taiwanese maker of screens for Amazon’s Kindle e-book readers, aims to consolidate its hold on the nascent “electronic paper” industry by acquiring E Ink, the US company that owns key technology for making the screens.

Prime View, a part of Yuen Foong Yu, Taiwan’s biggest paper-and-pulp group, is the world’s largest electronic paper module manufacturer by sales thanks to contracts to supply screens for the Kindle family and Sony’s Reader Digital Book devices.

E Ink, based in Massachusetts, was a pioneer of the technology that allows the readers electronically to “fix” different images onto the screen. By combining the two companies, Prime View hopes to speed up research and development into new technologies such as colour displays and flexible screens, it said.

The $215m acquisition is the latest example of the way Taiwanese companies, which are traditionally strongest in cheaply mass-producing electronics components, are responding to the industry downturn by moving up the value chain and acquiring original technology and research capabilities.

Scott Liu, chairman and chief executive of Prime View, said: “The people in both companies will unite to provide the world’s best digital reading experience and that will benefit all our customers and end users.”

Taiwan-listed Prime View is also planning to raise between $100m and $250m through a secondary listing on the London Stock Exchange, and a T$5bn ($154m) convertible bond and stock offering in Taiwan, according to a person close to the company.

While electronic book readers have been available for more than a decade, they have only become popular in the past two years with the launch of devices such as the Kindle that use electronic paper.

In the US, in particular, their success could eventually pose a challenge to traditional media distribution models, sparking a debate among media moguls over publishing models.

The market for electronic books is expected to grow from 1.1m units in 2008 to 20m units in 2012, according to market research company iSuppli. Unlike traditional LCD screens, which rely on a back light to illuminate the screen, electronic paper screens do not need an internal light source and are therefore easier to read. They also consume much less power – a key feature in a battery-powered portable device.

The display module is typically the most expensive component. In Kindle 2, which costs $185 to make, the screen costs about $60, according to iSuppli.

E Ink, however, is facing competition from other electronic paper makers hoping to move faster with the next generation of technology. Prime View was among the first to mass produce electronic paper screens, thanks to YFY's ownership of Hydis, a flat screen manufacturer. But one executive said the next few years “will be really tough” as competitors enter the market.

Britain’s Plastic Logic, spun out from Cambridge University’s Cavendish Laboratory – which pioneered plastic electronics technology in the 1990s – hopes to launch a flexible display e-reader early next year.

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