Sichuan Changhong, Konka use C-Cube. Shinco must still use ESST. Shenzhen Super Industrial does not have AC3 decoding, not C-Cube. DVD in China..................
globalsources.com
Cover story: DVD players
Mainland suppliers gear up for mass production
China's first large-scale production of DVD players is expected to start in the fall, with Shenzhen Konka Electronics Group likely to lead the way. "We will start batch production in September, when we expect demand to start rising for the new year," spokesman Yao Feng-lei said.
The inexpensive and massively popular VCD player has thus far suppressed the development of a local DVD market, but with DVD prices tumbling the first makers have adjudged the time right to move out of trial production. There are at least a dozen makers ready to begin large-scale production.
"DVD technology is improving very quickly, and we have to keep pace with developments," said Zhan Shi-feng, chief of the technology department of Jiangsu Shinco Electronic Group Co. Ltd. "We don't expect development to catch up with VCD players either this year or in 2000, however," he said.
The potential for production growth in China depends in large part on how quickly VCD production lines can be turned over to DVD players. Confidence is running high.
"All of our VCD production lines are ready to produce DVD players. There's only a small revision needs to be made to the lines," Zhan said. Jiangsu Shinco is China's biggest producer of VCD players. According to Zhan, the company has the capacity to produce 300,000 DVD players per month. "We will start to increase output from September on," Zhan said.
Sichuan Changhong Electronics Group Corp., the TV manufacturing giant, is also poised to enter this market, with an estimated an annual production capacity of 3 million DVD players. Batch production started up in August; at least 100,000 units will be manufactured within the next six months, said Chen Shi-chao, vice president of the firm's A/V department.
A recent release is the DVD 6000, which is fully compatible with SVCD, CVD, SVCD, DVCD, VCD, CD, DVD-R and DVD-RW. Resolution is 500 TV lines. The unit supports DTS output and AC-3 decoding. Measuring 430x282x89mm, it weighs 3.6kg. Power consumption is below 25W. Price is about $240 FOB.
Xiamen Republic Electronic Co. Ltd, which started batch production early last year, reports a monthly capacity of 30,000 units. Little of that is utilized as yet, owing to fears that the market is not yet sufficiently ready, but R&D manager Zhang Rui says that it is only a matter of waiting for the market to warm up.
In the meantime the company is busy getting its products ready. It is set to release two to three new players within the next six months, Zhang said. One will sell below $240.
DTS is a key function and is likely to figure prominently in the firm's DVD player range, Zhang said. He downplayed the importance of built-in laserdisc playback, which some makers are playing around with: "It will add greatly to the cost," Zhang said.
Focus on basic functions
The early models from China are likely to be fairly basic. Although digital surround audio is a standard feature of the latest DVD players for the US and European markets, there is no significant market yet in China for home theater products.
"There is a sourcing trend that says the simpler, the better," said general manager David Tian of Shenzhen Super Industrial Ltd. "That means suppliers only need provide the basic functions, such as MPEG-II decoding, 500 TV-line resolution and CD and VCD compatibility. There's no need for Dolby Digital for families that only have two-speaker stereo systems," Tian said.
Given the abundance of VCD software in China and elsewhere in Asia, backward-compatibility with VCDs is essential. Other technology development is focused on chip design, and the integration of multiple functions onto single chips, said Zhan of Jiangsu Shinco. Shinco is also following the growth of MP3, Zhan said.
As in the early stages of VCD player development, however, Chinese makers are obliged to source critical components overseas, primarily from Japan and the United States. The most advanced work done locally is probably the development of DVD player mainboards, to reduce production costs.
Prices crash
With production costs coming down and chipset costs also falling, finished-product prices in China are tumbling. The growth of a domestic market, catalyzed inevitably by software piracy ? counterfeit DVDs can already be found for as little as $2.40 ? should support that trend.
"DVD prices have fallen by at least 30 percent since the start of the year," said Tian of Shenzhen Super Industrial. They can be expected to fall further, although perhaps at a slower rate, he said. "In the next six months, prices shouldn't fall by more than another 10 percent," Tian said.
The fall is nonetheless significant. DVD players from Chinese makers are now priced as low as $240, and may hit $220 by October. In the longer term, they should reach $180, Tian said.
Zhenjiang Jiankui Group Co. was among the earliest to achieve a price point lower than $240. It now makes about 1,200 players daily, said vice sales manager Jin Ye-tao, and has the ability to produce 4 million units per year.
"My view is that DVD player sales will explode in 2001 and reach their peak in 2002. Price will settle down at roughly $144 to $180," said Chen of Sichuan Changhong.
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