Taiwan Continues Opening More Pages in e-Book Industry

Realizing that the market size in Taiwan may be too modest to realistically build an electronic-book sector to achieve a target revenue of NT$100 billion (US$3 billion at US$1:NT$33) by 2013, the Taiwan government has again been looking across the Taiwan Strait for opportunities with globally-enviable scale. The Taiwan side has sent trade missions to China, successfully reaching an agreement to form a common protocol for publishing digital content in Chinese.

Signing the agreement is only the start. Officials and industry executives from Taiwan and China will meet early next year to work out the details of such common standard.

Senior officials of Taiwan's Ministry of Economic Affairs (MOEA) believe in the business potential of digital-content publication, based on not only its increasing popularity but also its valuable advantage of being an emerging product-one that still enjoys relatively less competition due to an overcrowded market. The officials estimate the e-book sector can generate huge demand based on mere price-competitiveness: e-books are typically 30-40% the prices of paper counterparts.

Consumer Sensitive

The same officials also are wary of the idiosyncratic, or perhaps traditionally-rigid nature of Chinese consumers, despite the fact that Taiwan's manufacturers have mastered crucial technologies for making e-books, noting e-books would take off only if Chinese communities develop an affinity for reading materials in e-ink, rather than traditional paper formats.

J.T. Liu, chairman of e-book maker SiPix Imaging Inc., also shares in the bright, constructive prospects of establishing a common e-book standard between Taiwan and China, pointing out that significant numbers of people read Chinese worldwide, so setting up a shared protocol would also facilitate Taiwan-China compatibility in programs and trade platforms for digital content, and digital publication as well as software interface for e-commerce.

Further revealing the ideal scenario for Taiwan-China cooperation, Liu notes that China has set up platforms for digital content, digital publication and telecommunications, with Taiwan having built a complete supply chain for hardware-from e-paper modules to e-book readers.

Director General T.J. Duh of MOEA's Industrial Development Bureau (IDB) notes that, despite Taiwan and China to adopt the open e-publishing standard enabling reading of both Chinese and English texts, the two sides need to work on common standards for Chinese digital publication. Senior MOEA officials point out that China is a critical market for Taiwan's digital-content publication sector, whose entry into such segment would be far easier with a common standard.

China's General Administration of Press and Publication says that the Chinese market for digital publications, including e-books, is projected at 75 billion yuan (US$11 billion at US$1:6.7 yuan) this year and will grow annually at 50% to 80% over the next few years.

Betting on Upbeat Future

Increasingly more operators are betting on the upbeat future of the e-book business in China and Taiwan. Hanwang Technology Co., Ltd. in China, currently the world's No.3 e-book maker with annual shipments of 100,000 units on average and trailing Amazon and Sony, projects to ship over a million e-books annually by 2011, nearly double its 500,000 unit target this year, once the unit price falls to about 1,000 to 1,500 Chinese yuan (US$149-223) from the current 2,500-3,000 yuan (US$373-447). This maker has introduced new e-book readers nearly every two months since rolling out its first reader in August 2008.

The often-reported huge market potential in China and Taiwan has inspired others to join the e-book sector, including Founder Group Corp., Tianjin Jinke Electronics Co. (the supplier of the Hanlin eReader V3 e-book reader) and eREAD Technology Co., Ltd.

China Mobile Chairman J.Z. Wang paints a tempting scenario, saying that 50 million e-book readers would be created if only a tenth of his company's 500 million subscribers buy e-books. The telecom provider contracts Hanwang, Foxconn Technology Group, Huawei Technologies Co., and Datang Telecom Technology Co. as e-book suppliers.

Not to be outdone, China Telecom is partnering with Taiwanese chip designer VIA Technologies Inc. to tap the e-book market.

In Taiwan, the MOEA plans to invest NT$2.1 billion (US$64 million) over the next five years, beginning 2009, to set up two to three platforms for downloading Chinese content into e-book readers, enabling 100,000 Chinese-content e-book readers and perhaps create one million readers to boost the island's e-book revenue beyond NT$100 billion.

To raise the number of e-book readers to one million in five years in Taiwan, the MOEA is targeting schools next year-giving e-books to elementary school students and allowing technology-based universities to rent e-readers to download textbook contents.

Time to Go Global

IDB's Duh stresses it's about time for Taiwan's e-reader makers to go global, notably the Chinese communities, considering the simmering e-book market after Amazon's introduction of the reading device Kindle two years ago, which has attracted other major players into the segment, including telecom-service players as Verizon and AT&T, search engine Google, and IT giant Sony.

The market consultant NetGen says that the global e-book market will grow at compound annual growth rate of 124% between 2008 and 2013, generating revenues exceeding US$2.4 billion by 2013.

Citing a survey recently released by the market watcher Andrew Tribute of Attributes Associates of England, Duh points out that the global shipments of e-book gadgets totaled one million units last year and will rise to 18 million units by 2012. The Market Intelligence Center (MIC), an official think thank for the IT industry in Taiwan, also has similar forecasts, estimating the global shipment of e-book readers to rise 12% to 19 million units by 2013 from 2011's 14 million.

MIC's surveys point out that the shipment grew annually at 120% to last year's 1.1 million systems overall, and will shoot up 177% to 3.05 million this year mostly driven by Amazon's Kindle.

Reason for Success

Duh points out the reason behind Kindle's success: a new reading device offers multifunctional convenience-with an e-reader enabling browsing of digital content, using telecom service, e-commerce and IT hardware as smartphone.

Giving more clout to Taiwan's status as a complete supplier of e-book hardware, Duh says that the island has a host of IT makers engaged in the sector, including major players as Hon Hai Precision Industry Co., Ltd., Asustek Computer Inc., Invetec Corp., Qisda Corp., and Netronix Inc., Prime View International Co., Ltd., SiPix and Delta Electronics Inc. turning out e-readers, LCD displays, e-paper modules, e-paper display materials, as well as publishers as Yuan Liou Publishing Co., Ltd., Cite Publishing Ltd., and United Daily News Group developing a strong presence.

Prime View, whose e-paper sales now account for over half of its its revenues, is reportedly acquiring a stake in LCD drive design house Ultra Chip Inc., and sources chips from Fitpower Integrated Technology Corp. and Seiko Epson Corp. to drive its *e-paper display modules.

Advice From Acer Founder

Acer Inc. founder Stan Shih is another e-book advocate, noting that his "XC" concept in 1997 is related to a dedicated PC that can also function as an e-book. He suggests Taiwan's e-book manufacturers fully tap the island's well developed PC supply chain to achieve cost and scale advantages, believing that the island's e-book manufacturers need to develop software compatible with China's market needs to safeguard success in the global e-book segment.

Such rosy outlook will not last with more newcomers crowding the market. The MIC warns that e-book reader prices will likely dip annually at 5%, reducing the industry's revenue growth to single-digit annually by 2013 from 2012's 16.8%, 2010's 143% and 2009's 170%; while the revenue is projected at US$749 million for this year, US$1.8 million for 2010 and US$3.9 billion for 2012.