The global supply chain makers for electronic shelf labels (ESL) have suffered high inventory levels, however, global demand for ESL has been in a mid- to long-term trend of stable growth mainly because electronic paper is a low power-consuming product in line with efforts to move toward net zero carbon emission and attain ESG (environmental, social, governance) goals.
Taiwan-based display driver IC design house Fitpower Integrated Technology, an upstream supply chain maker for ESL, has seen decreased shipments of such ICs to makers of ESL and e-book reader modules because clients had to clean inventories in the third quarter of 2022. Fitpower's third-quarter inventory turnover rate of 105.57 days was higher than the rate of 96.27 days for the preceding quarter.
UltraChip, a Taiwan-based fellow design house, had third-quarter inventory value rising 16.8% on quarter and expects the value to rise further in the fourth quarter and inventory adjustment to continue until the first half of 2023.
Sweden-based Pricer, one of the globally three ESL system integration service providers, saw its inventory turnover rate of 138.3 days for the third quarter of 2022 increase by 22.6 days sequentially, showing problems with high inventory levels as well.
However, Taiwan-based E Ink Holdings, the globally largest maker of electronic paper (e-paper), has not had substantial inventory problems. E Ink suffered short supply of ICs and TFT back planes in 2021 and has since then cautiously processed orders to prevent clients' double booking as much as possible in a bid to control inventory levels, company chairman and CEO Johnson Lee noted.
According to industry analysts, ESL supply chain makers have been adjusting inventories and the adjustment is expected to continue until the first half of 2023. However, as long as demand for ESL exists, there is no need to worry about inventory problems, analysts indicated.
The global ESL device market value was estimated at US$1.2 billion in 2020 and US$1.8 billion in 2021 and will reach nearly US$3.0 billion in 2022, according to ePaper Insight.
There will be 700 million ESL devices installed globally and potential global demand for 10 billion devices in 2022, implying that the global ESL market has large growth potential, according to France-based ESL integration service provider SES-imagotag. Based on estimation by Pricer, ESL penetrates 70% of all shelf labels in Norway, the highest among all countries and followed by France, Belgium and New Zealand. As ESL penetration is relatively low in the US, China, Germany and UK, these countries will be target markets for ESL system integration service providers in the future.
E Ink thinks that global demand for e-book readers and electronic notebooks in 2023 is still uncertain but ESL will grow significantly, Lee indicated. E Ink has had sales revenues from ESL-use e-paper taking up over 50% of consolidated revenues and such e-paper has become the main source of business growth, Lee noted.
Viewing that introduction of ESL to the Canadian market began in 2022, demand for ESL in the US market is expected to take off in 2023. As the demand in the US market could be 10 times that in Europe, wide adoption of ESL in the US market will benefit e-paper supply chain makers.
