E-Readers' new chip could drop cost to $150

A new microchip that combines an applications processor and display controller could soon drop the price of e-readers by $30, according to reports.

Freescale Semiconductor, which supplies chips to both Amazon.com's Kindle and the Sony eReader, says it supplies 90% of the market, and some analysts say the innovation could mean some e-readers may wind up retailing for less than $150. Aside from lowering cost, Freescale's new i.MX508 processor will double speed, support larger screens and improve battery life. Sales this year are expected to reach around 8 million units, the Austin, Tex., company reported.

"There's a big, unsaturated market out there, and price is a big factor," Glen Burchers, Freescale's marketing director, told Bloomberg. "We do see the price of e-readers coming down this year, and Freescale is trying to facilitate that."

Currently, the Kindle retails for $259 to $489, while Sony's three models range from $199 to $399. Both readers use E Ink, which replicates ink on paper, or in other words, black and white. If e-readers with color displays, like the iPad, become more popular -- than Freescale's lower cost won't be of much help.

"We think that the e-reader is a distinct product from the tablet and will remain so for a while," Burchers told the New York Times. "E-reading devices are used for leisure reading, by a demographic whose primary entertainment is leisure reading. That is less than 10% of the U.S. population, but it is still a big market, and for them E Ink is an ideal display."

Freescale's new processor will be inside e-readers by the end of the year.