E Ink Holdings Inc (元太科技) yesterday said it would further expand capacity to cope with robust demand for e-paper displays used in e-readers, e-notes and electronic shelf labels, as the COVID-19 pandemic and rising inflation have not dampened consumer demand.

Although rising inflation is weakening companies’ purchasing power, E Ink said that its customers have not scaled down orders for e-paper displays used in e-readers.

“Reading is still the most affordable leisure activity that people have,” E Ink CEO Johnson Lee (李政昊) told an online investors’ conference in Taipei.

Photo: Chen Mei-ying, Taipei Times

As e-books are less expensive than paper books, “we have so far not seen a slowdown in demand,” Lee said. “We are seeing quite robust demand.”

Demand was also aided by E Ink’s launch of better-performing colored e-paper display technologies to replace e-readers with monochromatic displays, Lee said.

Large-scale retailers are more rapidly adopting electronic labels due to price volatility and inflation, as well as higher labor costs and worker shortages, he said.

E-papers used in electronic labels, which replaced those used in e-readers, became E Ink’s biggest revenue contributor last quarter, accounting for 52 percent of the company’s total revenue of NT$5.96 billion (US$200.61 million), the company said, adding that this was a significant increase from 40 percent a year earlier.

To meet demand, E Ink said that it would double this year’s capital expenditure to more than NT$4 billion.

The firm is to launch three new production lines for e-paper displays this year, Lee said, adding that another new production line would be postponed until the first quarter of next year because delivery of the equipment had been delayed.

To boost production, E Ink might convert part of a new office building into a manufacturing site, he said.

The office building is to open next year, he added.

Lee said that the impact from COVID-19 lockdowns in China has been negligible.

The large-scale shutdowns in Shanghai did not spread to Jiangsu Province’s Yangzhou, where E Ink operates an e-paper display module factory, he said.

Transportation snarls have elevated logistics costs, but that is manageable, he said.

E Ink reported that net profit in the first quarter increased 25 percent year-on-year to NT$1.46 billion — the second-highest in the company’s history — compared with NT$1.17 billion a year earlier, while earnings per share rose to NT$1.28 from NT$1.03 a year earlier.

Operating profit margin jumped to 24 percent, from 22 percent a year earlier.

Gross margin this quarter is likely to decline, as shipments of lower-margin e-reader modules would increase ahead of the peak season in the third quarter, the company said.

Revenue in the first quarter rose 14 percent annually to NT$5.96 billion, the highest in 11 years, it said.

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