Taiwan. Tatung and Acer must still use C-Cube. Sampo uses LSI.......................
globalsources.com
Cover story: DVD players
Taiwan's IT firms move into burgeoning DVD market
Taiwan's audio industry looked to have died on its feet in the last decade. DVD has given it a way back.
The continuing convergence of computers with consumer electronics, embodied here in the DVD player, has given Taiwan's IT industry leverage into DVD-player supply. Acer Inc., Tatung Co. and Sampo Corp. have notably moved into the line, and CD-ROM manufacturer Comjet Information Systems Corp. has also crossed over.
Production for most of these newcomers began only this year, and while most expect to increase output by at least 50 percent by 2000, lack of capacity is currently a problem for Taiwan. Acer produces about 1,500 to 2,000 players per month, all for domestic consumption. Sampo makes about 5,000 units monthly, about half of which are exported.
The total monthly output for the whole of Taiwan has averaged only 20,000 DVD players this year, mostly for the local market: The island is a long way from competing, as it hopes to, with Japan.
Manufacturers plan to expand into foreign markets and need the capacity to support the move. Acer expects to have a new factory online in mainland China by the end of the year, with the capacity to produce 100,000 DVD players per month. The factory will only OEM in the beginning, DVD director Dany Yang said, but the firm also hopes to brand its own products.
Sampo also expects to increase exports to 80 percent of output next year, according to William Chiu of the DVD department. Like Acer, Sampo is focusing on developing its OEM business.
Reducing costs
By increasing output, Taiwan's makers should also be able to lower overheads and reduce FOB prices. Additionally, the island's makers expect to have full domestic component support by the fourth quarter this year. Manufacturers currently rely on Japanese components, paying out high royalties for the use of patented drive motors and laser heads. Imported parts account for almost 60 percent of the total cost of a DVD player.
Using local components, makers expect to bring prices down dramatically. "I offer a player for $200 FOB. With domestic components, that could drop by half by the end of the year," said Chiu at Sampo. "When we are able to locally manufacture parts it will be a more profitable industry for us here in Taiwan and a much better market for the buyer," adds Jeff Lin, spokesman for Tatung.
Tatung and Sampo both believe the local components industry will be able to serve their needs, and see this as an opportunity to become much more competitive internationally. "Taiwan will be able to control its own prices without facing restrictions imposed by Japan," Chiu of Sampo said. Both companies see prices falling below $200 by the end of the year.
Comjet and Acer are a little more circumspect. For an emerging industry, quality is a big issue, they believe. "It will take at least one year before Taiwan's component quality can compare with that of Japan," said application manager Jackson Chang at Comjet. Out of every 100 locally made drives, three or four are defective, he said. Both firms expect to maintain their close relationships with Hitachi for key components.
With prices ? even for imported components -- falling quarter by quarter, FOB quotes will inevitably continue to decline. One sticking point that remains, however, concerns licensing fees. According to Lin at Tatung, the manufacturer must purchase up to eight licenses to complete the development of a DVD player. Royalties for the patents purchased amount to about 7.5 percent of the final sale price of the player, he said.
Taiwan makes DVD core component of home entertainment system
Taiwan's vendors are counting on their strength in computing technologies to win market share from the leading Japanese suppliers. "Most other companies have no sense of the computer," said Chang at Comjet. Comjet's vision is for a DVD player that integrates PC functions within a home theater system, he said. "We believe the PC can be replaced by a digital TV, DVD player and set-top box," Chang said.
Comjet has applied its software expertise to develop the DV-TI-NET, a DVD player with 56K onboard modem, Internet browser and email functions. DVD specifications include 550 TV-line resolution, full digital sound and karaoke and echo functions. The unit is scheduled for release in September, and will have a 500-piece minimum OEM order.
Comjet also has a DVD system with 3D gaming, and is developing a DVD player with onboard telephone answering system and fax capability. The firm is implementing these functions through high-performance chip design, Chang said.
Acer is also leveraging its expertise in chip design to develop new products. Ali, a subsidiary of Acer Inc., designs and supplies chipsets to the parent company. The firm's latest innovation is the Easy Play, a function that automatically selects the subtitle library from the DVD that matches the preprogrammed language of the TV set. It also enables manual override.
Chipset functionality is becoming increasingly important. The basic functions of early DVD players have been augmented in particular by digital sound control, which enables the DVD system to read and reproduce DTS and Dolby Digital and Pro Logic audio. The falling cost of chipsets and increasing consumer awareness mean that almost all makers now include these sound functions, Acer's Yang said.
Many makers are also adding surround sound spatializer effects, which adds depth to stereo sound, and are beginning to add MP3 audio, he said. The next step, currently available only in Japan, is recordable DVD.
|
