The company that makes parts for popular electronic reader devices, including the Kindle, is buying out the company behind the technology used in the displays. Though the two firms say it will be good for consumers, there are some claims it might limit competition.

The deal involves Prime View International of Taiwan, which is set on buying E Ink, based in Massachusetts, for $215 million. Prime View is today responsible for the display screens on both the Amazon Kindle and the Sony Reader.

Electrophoretic Film: Otherwise Known As Electronic Paper

E Ink, a company started by Massachusetts Institute of Technology (MIT) scientists, created the technology used to produce electrophoretic film displays, otherwise known as the leading form of 'electronic paper', or ePaper.

This technology helps produce displays with the appearance of paper that consume little power compared to traditional computer displays. The company made its money by licensing this technology, with Prime View its biggest client.

Stock Market Flotation Not An Option

The sale price is only around three times E Ink's annual revenue, a fairly small price for a flourishing industry. When announcing the deal, the two firms predicted sales of electronic reading devices would rise twenty-fold between last year and 2012. (Source: gigaom.com)

The low sale price -- which means a poor return for several venture capitalist groups that helped fund E Ink -- may be a sign that the market still doesn't see electronic readers as a competitor to traditional books and magazines. However, the firm's chief executive says sale options were limited because confidence on the U.S. stock market is so weak that there was little prospect of taking the firm public. (Source: wsj.com)

Pricing In Question

The big question is what this means for consumers. At best it would mean Prime View was able to produce displays more cheaply, sell them to manufacturers at a lower price, and have some of the savings passed on to consumers.

But there's also the possibility that it could exploit the market. Now that Prime View controls two of the major components in electronic readers, the firm will wield more power when it comes to deciding how the retail price is set. It could also make sure that no other display manufacturers are allowed to use E Ink's technology, further reducing competition.