E Ink Holdings Inc (元太科技), a supplier of e-paper displays, expects a slight uptick in growth this quarter as demand for e-readers and electronic shelf labels (ESLs) improves amid the effects of the COVID-19 pandemic, it said yesterday.
The pandemic is having only a minor impact on its operations, the Hsinchu-based company said, adding that its fab in China is expected to return to 90 percent capacity by the end of this month, from between 70 and 80 percent, as supply chains disrupted in January and last month recover.
Remote work and schooling policies due to city lockdowns are stimulating demand for e-paper used in e-readers, information boards on public transportation and medical devices.
Photo: Chen Mei-ying, Taipei Times
The growth of e-readers this month in China would entirely offset January’s and last month’s declines, company chairman Johnson Lee (李政昊) told an investors’ teleconference yesterday.
Even retailers and grocery stores have started using ESLs to to restock and reprice supermarket shelves quickly and easily, Lee added.
Demand for ESLs “is growing even faster than the period before the pandemic,” Lee said.
However, installation of ESLs would temporarily be affected by the coronavirus in European and US cities that are in lockdown, Lee said.
Overall, “when we look at the outlook for the first quarter, we think it should be a bit better than last year,” Lee said, implying that revenue this quarter would surpass the NT$2.95 billion (US$97.57 million) in revenue made in the first quarter of last year.
The coronavirus is affecting the supply side, so customers are ordering in advance over fears of supply constraints, he said.
To cope with increasing demand, E Ink plans to spend NT$1.2 billion on expanding capacity in New Taipei City’s Linkou District (林口), a company investment plan submitted to the Ministry of Economic Affairs showed.
It also plans to add manufacturing tools at its fab in Hsinchu, which would add some capacity, E Ink said.
Last year’s downtrend in royalty income would likely extend into this year, the company said.
Royalty income is expected to fall at a faster pace than the 5 percent annual decline posted last year, as active-matrix organic light-emitting diode displays are replacing LCD displays on smartphones, chief financial officer Lloyd Chen (陳樂群) said.
Last year, E Ink took in NT$2.24 billion in royalty income by licensing advanced fringe field switching LCD technology to flat-panel makers.
To make up for the loss in royalty income, E Ink said that it is investing in the e-paper ecosystem, such as forming partnerships with flat-panel makers to promote the adoption of e-paper displays.
The company’s efforts have increased sales of higher-margin e-paper materials, propelling its gross margin to 48 percent in the final quarter of last year and bringing full-year gross margin to 44.4 percent, from 41.7 percent in 2018.
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