Global demand for e-reader devices is booming from San Francisco to Shanghai as bibliophiles around the world turn to digital books. As many as 5m e-readers are being produced this year internationally, and analysts say that could double in 2010.
A rush in orders is prompting suppliers to ramp up production capacity and is forcing manufacturers to reconfigure factories to meet orders.
At the centre of the manufacturing cycle for the devices is E Ink, the Boston-based producer of the majority of e-reader displays. E Ink holds about 90 per cent of the market, according to analysts, making displays for Amazon's Kindle, Sony's Reader and Barnes & Noble's Nook.
“The supply chain is concentrated and starts with one company,” says Sarah Rotman Epps, an analyst with Forrester Research, in reference to E Ink.
The deluge of orders E Ink has received in the second half of this year has forced the relatively small company to expand rapidly. It opened a factory near Boston this month and has increased revenues 250 per cent to $96m in the past nine months.
That the e-reader is in demand during the economic downturn makes it an especially compelling product. In search of a rare recession-defying hit, producers are investing in their technology and electronics manufacturers are turning over space for production.
“The demand is coming at a time when other non-e-reader categories are experiencing a decline, so there has been available factory space,” says E Ink vice-president of marketing Sri Peruvemba.
This is most apparent in Taiwan, where a number of big manufacturers have begun gearing up production plans for e-readers, an indication that companies believe the devices will become a mainstay in the broader consumer electronics industry.
Asus, the netbook pioneer, began preparations to enter the e-reader market in February, and plans to have its first, own-branded model ready by the end of this year at the earliest.
Wistron, the former contract manufacturing arm of Acer that was spun off in 2000, signalled its interest in the e-reader market when it last month acquired Polymer Vision, a Dutch e-paper company specialising in flexible, rollable displays.
Karl McGoldrick, chief executive of Polymer Vision, says there is “critical mass in potential volumes, critical mass in actual available content and attractive cost-price points” for e-readers. “To the extent that when a new industry has proven its growth potential, it is always a ripe time to get in,” he told the Financial Times.
Evidence of increasing investment came with Taiwan's two big flat panel makers, AU Optronics and Chi Mei Optoelectronics, both saying they have begun producing display panels and modules for e-readers.
AUO and CMO's entry into the market significantly eases mass production of e-readers because it ensures a readily available supply of a key component, analysts say.
“In terms of hardware, everything is ready, technology-wise,” said David Chen, senior industry analyst at Market Intelligence and Consulting Institute, a Taiwan government-backed think-tank.
The sudden popularity of e-readers has arrived in spite of the devices being short on sophistication. But the surge of interest has also forced E Ink and other producers to innovate rapidly in an effort to keep up with consumer expectations.
E Ink only distributes black and white displays so far, but says it will have a colour display on the market late next year. It will also soon face competition from several companies working on alternative display technologies.
Among them is Qisda, the contract manufacturing sister company of AU Optronics, which is planning to mass produce e-readers by the end of the year using its own displays. AU Optronics has unveiled a six-inch, flexible screen that it says will go into mass production next year.
At the same time, E Ink is having to work with a growing number of manufacturers. “Because it is a new category, it is not as easy to forecast the space as it is a more mature market,” said Mr Peruvemba.