Wednesday, June 9, 2010

E-reader Special -- Taiwanese company PVI bestrides e-reader market

AKIKO SUZUKI AND IKUYA TANAKA report for THE ASAHI SHIMBUN GLOBE in Japan, writing [on 2010/05/14]

A solitary box of tissues sits on a desk. Its floral design wrapped around the words "May Flower" in Chinese characters is a famous brand in Taiwan.

The tissues are made by Taiwan's largest paper company, Yuen Foong Yu Paper Manufacturing Co. (YFY). In late March, our reporter sat in the company's waiting room preparing for an interview with Scott Liu, chairman of YFY subsidiary Prime View International Co. (PVI) and a key figure in a technological revolution that seems set to challenge paper's dominance in the world of publishing, if not in cleaning runny noses.

In 2009, PVI purchased E Ink, a developer of "electronic ink" for e-readers. The acquisition, which is estimated to have cost more than $400 million (around 37 billion yen), including a transfer of preferred stocks, made headlines across the world. Major American book distributor Amazon's Kindle and many other leading e-readers use the company's electronic ink displays.

The technology behind the displays is complex: globules of positively-charged white ink and negatively-charged black ink are injected into several million tiny liquid-filled capsules and spread across a wafer-thin sheet. Electricity is used to manipulate this array of black and white particles, forming letters and pictures.

But its benefits are easy to appreciate: unlike liquid crystal display (LCD) panels, electronic ink displays are not lit from behind. They reflect external light as paper does and therefore reduce the strain on readers' eyes.

There is a short delay when changing pages but, as long as the page remains unchanged, no electricity is consumed, reducing the need for battery recharging.

"Why is a major paper manufacturer producing components for a rival product like an electronic reader?" our reporter asked.

Liu looked tired. His bloodshot eyes seemed to betray a lack of sleep. He had just returned from a business trip to the United States, and was due to fly to mainland China the next day. However, his expression softened when he heard the question.

"We've certainly come to dominate the Taiwanese market for all varieties of paper. But, in the digital age, we should have another option. So, we decided to create one ourselves," he said.

One of the first to spot the e-reader trend was YFY group former chairman Show Chung Ho. He established PVI in 1992, with the aim of becoming Taiwan's first maker of LCD panels.

Ho took an early interest in e-readers but the back-lit LCD panels then available seemed to have significant disadvantages compared to books printed on paper.

In 1997, Liu and Ho came across the technology they had been searching for at the MIT (Massachusetts Institute of Technology) Media Lab in the United States: electronic ink. Liu recalled, "We were both excited. We had found a technology with tremendous potential."

They waited for the right moment. After researchers left the Media Lab to form E Ink, PVI purchased parts from the company and began manufacturing electronic ink display panels from 2005. When they learned that E Ink itself was going on the market in 2009, they immediately decided to acquire it.

E Ink had intended to raise funds by going public, but the financial crisis of 2008 paralyzed the securities market and stopped them cold.

The e-reader display market was moving extremely quickly. The Kindle, which went on sale in 2007, had been a breakthrough product. E-readers were going mainstream. The development of color and large-screen displays was continuing apace but E Ink needed access to capital to maintain its lead in the market.

Sriram K. Peruvemba, E Ink vice president, said: "Then, PVI's proposal fell into our lap. Finance and technology. It was a perfect match that utilized our mutual strengths."

Peruvemba said the fact that PVI was a Taiwanese company was a plus for the deal. "Today, most display industries are located in Asia. By becoming affiliated with a leading manufacturer, we would be able to utilize their vast supply chain. It would also provide us with greater access to new technology. The synergy factor was considerable."

Did shareholders or staff at the company's headquarters in the suburbs of Boston object to E Ink becoming an "Asian company?"

"That's an everyday occurrence in the United States. We had the technology, but not the money. The acquisition was much preferable," he said. "Thirty percent of our staff can speak a language other than English. I myself was born in India. After all, this country is a melting pot."

Backed by PVI's financial muscle, E Ink's research and development is accelerating. Last year it shipped around five million electronic ink displays in around 50 varieties, both large and small. The company plans to start selling a much anticipated color version of its displays in late 2010.