E Ink Holdings Inc (元太科技), which supplies e-paper displays for Amazon.com Inc’s Kindle e-reader series, yesterday said it may see losses this quarter and the next one because of weak seasonal demand.
Revenue is expected to fall by between 5 percent and 10 percent from last quarter’s NT$5.86 billion (US$192.4 million), chief financial executive Eddie Chen (陳彥松) told an investors’ conference.
With revenue at such a level, “there is a strong likelihood that E Ink will drift into the red during the first half of the year,” Chen said, citing weak seasonal demand for ebooks.
E Ink posted nearly double quarterly net profit for the last quarter. Net income expanded to NT$1.01 billion last quarter, primarily from royalties income, compared with NT$511 million in the third quarter last year.
E Ink booked NT$820 million in royalties income last quarter. Operating income reached NT$228 million, reversing an operating loss of NT$228 million for the prior quarter.
The company turned a net profit for last year of NT$29 million — a significant improvement from net losses of NT$749 million in 2012 — thanks to an income tax refund for minority interest, its annual report showed.
“The company is still undergoing a series of corporate restructurings aimed at improving its financial health, and there is a long way to go,” Chen said.
He said E Ink’s South Korean subsidiary, Hydis Technologies Co’s, utilization rate dropped to less than 30 percent last year because of weakening demand for ebook devices.
E Ink plans to broaden its product portfolio this year by including more displays for smartphones, Chen said.
The company began shipping e-paper products to Russian smartphone vendor Yota Devices last quarter, and it will start mass producing electronic price labels or luggage tags this year to further diversify its product mix and increase sales, he said.
E-paper display was the biggest revenue source for E Ink last year, accounting for more than 80 percent of its revenue of NT$18.9 billion.
Displays only made up 15 percent to 20 percent of revenue.
“E Ink needs to strengthen its non-e-book businesses in order to better its financial performance,” Taipei-based Horizon Securities analyst Stanley Hsu (許家銘) said by telephone.
Hsu said the global ebook device market will no longer be able to achieve high shipment growth due to the rise of tablets, since consumers are able to read ebooks offered by Amazon or Kobo on their tablets.
Citing studies by Horizon Securities, Hsu said shipments of e-book devices reached a peak of 20 million units in 2012 and then fell to 16 million units last year.
As market demand for smartphone remains robust, E Ink should address the underdeveloped e-paper smartphone market “because that is a new niche market,” Hsu said.