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.

E Ink expanded rapidly
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 first own-branded model
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.

Qisda plans to mass produce
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.

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