E-paper makes its own headlines
By Peter Marsh 2009-12-30

Scott Liu believes the “wow factor” for electronic forms of paper kicked in around 1997.

“We felt this was a striking technology that could affect our whole business,” says Mr Liu, chairman of Prime View International, the Taiwanese company that is the world's biggest supplier of screens for electronic books.

Mr Liu saw the year as a key point when the development of electronic forms of paper started to appeal to PVI, as well as to PVI's parent company – Yuen Foong Yu, Taiwan's largest producer of conventional paper.

“We [at YFY] saw a technology that could affect the whole future [of orthodox paper]. We could have ignored it or tried to destroy it, but we decided to jump in,” says Mr Liu, who was working at TFY at the time, in an interview with the Financial Times.

 After investing about $1bn in developing the technologies behind e-paper and related acquisitions, the Taipei-based company accounts for more than two-thirds of the supply of small screens for electronic books.

According to industry observers, electronic forms of paper – based on screens that provide displays based on “digital ink” – could turn into one of the big technology hits of the coming decade.

Current versions of e-readers are expensive, normally costing hundreds of dollars.

However, they have a big advantage over ordinary paper in that they are capable of being updated electronically with huge amounts of information stored in computer memories, for instance from libraries of books or text and graphics sent over the internet, such as from newspapers.

Sales of existing versions of e-books such as the Amazon Kindle or the Sony Reader – both of which rely on PVI screens – could reach 10m units in 2010, double the expected figure in 2009, say analysts.

Mr Liu says the biggest supporter of e-paper technology at YFY was Ho Show-Chung, the company's former chairman and now chairman of SinoPac, a leading Taiwanese financial group.

“When Mr Ho saw the [early e-paper] technology he was amazed; he thought it could turn into something very big,” Mr Liu says.

It was Mr Ho, one of Taiwan's most influential business people, who decided to start PVI in 1992 as a technology offshoot of its parent. In the early days, the company concentrated not on e-paper but other electronic products, such as flat screens based on liquid crystal displays, a speciality of Taiwanese manufacturers.

The 60-year-old Mr Liu, who was formerly TFY's chief finance officer, took increasing responsibility for the group's new subsidiary, becoming its chairman in 2005.

Listed on Taiwan's over-the-counter GreTai stock exchange in 2004 but with YFY still holding a large stake, PVI's shares have risen strongly in recent months, giving the company a market capitalisation of about $2.1bn.

PVI recently boosted its position in the e-reader world through a deal to buy E Ink– a US company with which it had collaborated for several years and which was an early pioneer in electronic paper developments.

Started in 1997, E Ink is the world's biggest supplier of the tiny chemical capsules that go into digital ink, which move under the control of an electric field.

PVI started talking to the Massachusetts-based company last year about a potential takeover.

“We had been their largest customer. So it was natural to see if there was a way to put the companies together.”

PVI has agreed to pay $215m in cash for the US company plus a portion of shares that at PVI's current stock price are worth about $300m.

Other deals by the Taiwanese group since 2005 have included the purchase of the e-paper business of Philips of the Netherlands, and also of Hydis, an LCD screen manufacturer based in South Korea that gave it extra production capacity.

Last year, PVI had earnings before interest, tax, depreciation and amortisation of $2.1m on sales of $381m.

Mr Liu says PVI will operate E Ink as a separate company.

 However, the two businesses will collaborate particularly closely on new projects, such as creating colour and video displays.

Another effort under way is to reduce the weight of the screens used in current forms of e-books and make them flexible, so they resemble real paper more closely.

In the next few months, PVI plans to introduce a new screen based on plastic rather than glass.

This should cut the weight of existing e-readers based on glass screens by about a third.

Mr Liu acknowledges that there is still a long way to go before electronic forms of paper become anything like as easy to use – or as cheap – as conventional paper.

But he says PVI's development of plastic screens – based on a process invented by Philips – is an “exciting” step that could hasten the day when e-paper satisfies his company's long-term aspirations for the technology.