Colour eink displays work just fine. The resolution problem that JSWolf refers to is just an implementation issue, not an eink limitation.
The problem of washed out, low contrast images is a fundamental limitation of any imaging system that relies on reflected light. My Kodak Darkroom Dataguide shows that the darkest black that you can get with a brilliant white semigloss paper surface has a reflection density of about 1.6. This is a contrast ratio of about 40 to one. A reflection density of 1 would be 10 to 1 and a density of 2 would be 100 to 1. I doubt that most current eink screens do much better than 10 to 1. This about the same as printing on cheap newsprint. Get the contrast up to 30 to 40 to 1 and the screen will look like a glossy magazine page.
All current printing processes, ink as well as photographic, use subtractive dyes (yellow, magenta and cyan). I don't think that is possible with eink. Instead, each pixel has to be made up of three additive primaries (red, green and blue). This will requires a much higher pixel density and will also reduce the maximum contrast possible.
There are both led and lcd screens that can be read in full sunlight. The active advertising displays and screens that now appear everywhere in store windows and bus shelters are proof of this. Of the two technologies, led (specifically oled) are the better choice, especially in anything portable. An lcd display draws constant power regardless of the image while an led display draws power only in proportion to the pixels lit and their intensity. Led displays will also have a much wider dynamic range. Lcd displays never have a true black.
I would love to have a colour eink screen, even with the poor contrast of the current displays. I would be even happier with an eink display, colour or monochrome, with a 30 to 1 contrast ratio. I suspect that an oled tablet that can be read in sunlight is more likely to appear first and I would be happy with that.
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