E Ink, the company behind the e-paper display in your Kindle and Nook, is reporting a loss of NT$787 million (around $27 million) in Q1 2012, with net sales falling 53 percent on Q4 2012 to NT$3.84 billion (roughly $131 million). It also saw its gross profit margin fall to just 0.8 percent as compared to 28.5 percent last quarter, owing to under-utilization of its manufacturing facilities and a shift to lower-margin LCD panels.

It says that a combination of its major customers holding stock of its e-paper displays as well as the overall shift in its product mix towards LCD panels is responsible for the shrinking revenues. Despite this, it continues to invest in new products as heavily as before — it sees a long-term future for e-paper in a market where LCD panels are becoming more commoditized and offering lower margins.

This is the first time that E Ink has made a loss in two-and-a-half years, though company chairman Scott Liu said that he believed that the second half of this year would see a return to previous years performance. The first quarter is always weak for the company, but by Q3 it should see orders recover as manufacturers gear up for the holiday season. Liu also said that R&D remained a focus, with the company spending almost 10 percent of its total revenue on new products, including aiming to improve its color E Ink technologies.