E Ink's Q2 sales and gross margin decline, net loss increases

The Taipei Times reports that E Ink, the supplier of the electrophoretic displays used in most black & white eReaders, released its second quarter financial results yesterday. Revenues were approximately $149.5 million, down 35.37% from $231.3 million a year earlier. Gross margins were 0.6% vs. 32.5% a year ago. The company posted a net loss of $27.3 million vs. $26.3 million a year ago.

The fact that gross margins have collapsed (they were 1.1% in Q1) suggests that eReader manufacturers are putting tremendous pressure on E Ink to lower the price of its displays, and E Ink can't drive its manufacturing costs down fast enough to compensate. The Taipei Times report doesn't indicate how many eReader displays E Ink shipped, so it's difficult to figure out how to read the decline in revenue--but it's likely a combination of lower sale prices and lower demand.

Surveys in the U.S. suggest that the market for eReaders has peaked, and that color tablets will likely take the majority of the market in units over the next 12 months. (They already represent more revenues than eReaders.) There's still probably several years of life in the worldwide black & white eReader market. However, according to the article, E Ink will focus on other, more profitable applications for its displays, such as shelf price displays for supermarkets and convenience stores.

Apple's U.S. margins for iPad about half those of iPhone

As part of the myriad lawsuits between Apple and Samsung, Reuters reports that a statement from an Apple expert witness in a case going to trial in San Jose reveals Apple's margins on the iPhone and iPad. According to the statement, between April 2010 and the end of March 2012, Apple's gross margins on U.S. iPhone sales were 49% to 58%, generating revenues of more than $33 billion, while gross margins on iPad sales were 23% to 32%, generating revenues of more than $13 billion. The numbers reflect the fact that iPhone prices are heavily subsidized by mobile carriers, while most iPads are sold without broadband connectivity and are thus unsubsidized. Apple has chosen to accept lower margins on iPads in order to avoid creating a price umbrella for competitors.