e-Book & Kindle Suppliers Merging (AMZN, SNE, GOOG, QCOM)

Amazon.com Inc. (NASDAQ: AMZN) has received much publicity from its e-book reader, the Kindle.  It has also taken criticism.  Sony Corp. (NYSE: SNE) has let its e-book reader get lapped up in the wake as yet another great entrance into a market that looks like it is getting away.   The notion that Google Inc. (NASDAQ: GOOG) was getting into the game of e-book readers was yet another tell that there might actually be a business here beyond a tiny niche market.  But if you are still having doubts, then ask yourself why the back-end companies behind the e-book movement are starting to merge.

Taiwan’s Prime View International announced late yesterday that it is making a small acquisition of a company called E Ink Corp.  This buyout is for $215 million, and the reason is simple: E Ink hold some of the key patents needed by e-book readers, mainly in their displays and the look of ink on paper.

It seems as though these patents are the patents used in both the Amazon Kindle and in Sony’s Reader.  It also seems that these two companies combined supply 20 e-book manufacturers.  There is even a Qualcomm Inc. (NASDAQ: QCOM) angle here as well.  Prime View is in collaboration the chipset designer.

There is a simple reason that this is being done: price protection and market share.  It is hard to know if this will really be able to keep e-readers from Samsung or from LG, but owning the “look of ink on paper” patents will be a hurdle to those who just want a “me too” e-reader.  It seems unlikely that either company would actually start boxing manufacturers out yet at this juncture, particularly as the field is young and no dead-set winners and losers have been formalized.  There is also room for many more than a handful of e-book makers if the fields growth continues.

If you will recall the newspapers in the movie Minority Report, that is one of the goals of the e-book sector.  Prime View has invested in many aspects in this operation.  It is easy to  pan the notion that e-books are going to rule the world.  But it is also easy to see the trends in smaller and smaller computing.

Reading a novel on a cellphone is too geeky and too tedious to be a winning trend.  But some believe that the market of e-readers will grow from more than 1 million to 20 or 25 million in the next 3 to five years. Prime View noted in the release that it sees the ePaper display market will grow to $3 billion by 2013, and Prime View noted a figure of 20 million e-book readers by 2012.  The company has also taken a 74% stake in Hydis Technologies in Korea to quadruple its capacity for the backplanes in the ePaper market.

Prime View does have a stock that trades in Taiwan under the ticker “8069.”

JON C. OGG
June 2, 2009