E-paper display supplier E Ink Holdings Inc (元太科技) yesterday cut its full-year revenue forecast to an annual decline of 10 percent, attributable to the US-China trade dispute, which dampened consumers’ demand for e-readers and e-notes in the US.
The Hsinchu-based company in March projected that revenue this year would be flat or grow slightly from last year’s NT$14.21 billion (US$453 million).
“Some of our US clients are affected by the new tariffs” on US$300 billion of Chinese imports that include consumer electronics, E Ink president Johnson Lee (李政昊) told an investors’ teleconference.
“Demand for e-readers and e-notes fell short of our expectations. We have cut the prices of our products to cope with the situation, which would reduce our revenue generated from consumer electronics,” he said.
Consumer electronic products, primarily e-readers and e-notes, constitute about 70 percent of E Ink’s overall revenue.
In contrast to the weakness in consumer electronics, demand for electronic shelf labels (ESLs) remains strong, the company said, adding that it would stand pat at its previous shipment forecast of 20 to 30 percent annual growth this year.
Retailers continue to replace paper labels with ESLs to improve workflow, although they are faced with economic uncertainty, Lee said.
As ESL shipments grow, the company’s gross margin in the second half might stay at a similar level recorded in the first half at 41.94 percent, E Ink chief financial officer Lloyd Chen (陳樂群) said.
ESLs have higher gross margins than the company average, so higher shipments might help offset the weakness in consumer electronics sales and keep the overall gross margin from falling in the second half, the company said.
Gross margin last quarter improved to 41.5 percent from 37.7 percent a year earlier, but was lower than 42.4 percent in the first quarter, the company’s financial statement showed.
Net income in the second quarter rose 2.72 percent annually and more than doubled from the previous quarter to NT$884.65 million, with earnings per share of NT$0.78.
E Ink posted an operating income of NT$112.41 million, ending two straight quarters of operating losses.
Royalty income dropped 13.94 percent annually to NT$686.91 million, after debt-ridden Chunghwa Picture Tubes Ltd (中華映管) exited the LCD market.
Chunghwa Picture Tubes is a major LCD panel maker that licenses E Ink’s high-resolution fringe-field switching LCD technology to make high-definition displays.
E Ink said royalty income is expected to fall by a single-digit percentage annually this year, with the decline likely to extend into the next two or three years, as smartphone makers are moving from traditional LCD panels to better-definition organic LED panels, it added.
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