E Ink Holdings (EIH) Chairperson Johnson Lee recently revised the firm's revenue outlook for 2023 for the third time in its earnings call on November 15. The firm's projection went from the previous forecast of no growth or single-digit decline to a high single-digit or low double-digit decline this time. He also extended his projection for the industry downturn, with the lowest point anticipated in the first quarter of 2024.
Lee opened the earnings call with the announcement. However, he explained that this is due to the long transition period of the various e-ink devices and clients destocking inventory purchased preemptively during the pandemic in case of shortages. He said that electronic shelf labels (ESLs) are transitioning from three to four colors, and the clients are depleting their excess inventories. This destocking is expected to extend into the first quarter of 2024, and Lee anticipates a return to normality in the second quarter.
Furthermore, the firm had expected that clients would be introducing color e-ink reading devices and e-ink note-taking devices in the third or fourth quarter of this year, but now the projection has been pushed back to 2024, prolonging EIH's challenges.
Lee said he expects that the firm will see sequential growth after the lowest point, and he is still optimistic about the long-term potential of the e-ink industry. EIH highlighted that the firm's revenue grew significantly beyond expectations in 2022. Demand for e-ink devices surged since 2020, driven by the rise of the contactless economy and global ESG initiatives. Moreover, clients stockpiled in advance during the pandemic when the supply chain was disrupted and production capacity was insufficient.
Lee also mentioned that the performance of consumer electronics (CEs) in 2023 has been better than expected, though not as strong as in 2022. The penetration of e-paper products in China's education market, particularly for college entrance exam preparation with AI integration, has been well-received. Additionally, color products have also performed well, helping to slow the decline in the CE segment.
As to accreditation for its driver ICs, Lee said that relevant suppliers are expected to be ready by the end of the year or the first quarter of next year.
Future outlook and expansion
Despite short-term headwinds, EIH remains optimistic about future prospects. Chairperson Johnson Lee emphasized the importance of increasing the penetration rates of e-ink devices in the long run, and he believes that the penetration rate of ESLs will very likely grow from single-digit to double-digit.
The company expects steady yearly growth in CEs, ESLs, and outdoor e-ink signage and will focus on these three areas as the foundation for future growth. In the CE segment, products are transitioning from black and white to color. Lee pointed out that the shift to color products led to a 30–40% growth rate in 2023 for EIH's clients.
EIH is pushing for full-color e-ink signage, with mass production slated to begin in the first quarter of 2024. Lee said that he hopes to rapidly expand the electronic paper signage market and enter the retail sector with ESLs.
Regarding expansion, Lee stated that the Hsinchu factory in northern Taiwan is progressing as planned and is expected to be completed by mid-2024, with production starting in the fourth quarter of 2024 and contributing to revenue in the first quarter of 2025. However, the start of construction at the Guanyin factory in northern Taiwan has been delayed due to construction costs and labor shortages in the construction industry. Nonetheless, the Yangzhou factory in eastern China is on schedule.
Performance
E Ink's consolidated revenue for the third quarter of this year was NT$6.821 billion (US$213.20 million), a 16% decrease on-year. Net profit attributable to the parent company was NT$2.4 billion. Cumulative revenue for the first three quarters of 2023 reached NT$21.287 billion, a slight 1% decrease on-year. Operating profit was NT$5.773 billion, and net profit was NT$6.576 billion, the second-highest record in the company's history.
Article translated by Julie Chang
