PC makers delay move to DVD-ROM
By Mark Hachman
Electronic Buyers' News
(11/25/98, 01:30:15 PM EDT)
Analysts may have picked 1998 as the year of the DVD-ROM drive, but
the rise of the low-cost PC has caused industry watchers and suppliers
alike to rethink the transition from CD to DVD.
The high price of the technology, combined with the dearth of DVD-ROM
software, has caused some to predict that 1998 sales of DVD-ROM
drives will not meet earlier forecasts. And the revision, they say, will push
out the crossover from CD-ROM to DVD-ROM until late 1999.
For much of the past three years, Japan's CD-ROM drive vendors have
been marshaling their resources for a shift toward higher-margin
DVD-ROM products in the belief that the CD-ROM drive is reaching its
performance limit. The entrance of Taiwanese vendors into the CD-ROM
market-and the subsequent price collapse-appeared to fuel the industry's
desire to make a fast transition.
But Japan's strategy has stalled so far this year, leaving suppliers in that
country to juggle a growing range of CD-ROM devices even as they try to
stimulate demand for their DVD products. Furthermore, the end-of-life
claims leveled at the CD-ROM drive market have proved premature as
suppliers continue to issue new performance specs.
Analyst Ted Pine of Info- Tech Inc., a market research firm in
Woodstock, Vt., originally predicted 6 million DVD-ROM drives would
be sold during 1998, but recently stepped down his estimate to 5 million
units. InfoTech is now projecting that quarterly sales of DVD-ROM drives
will not outstrip those of CD-ROM until the third quarter of 1999, about a
year later than initially forecast.
“Matsushita and Toshiba bet on a more rapid transition [to DVD-ROM],
but they were blindsided by the sub-$1,000 PC, I think,” Pine said.
InfoTech anticipates that 22 million DVD-ROM drives will be sold next
year, down from an earlier estimate of 24.2 million units.
Interviewed separately, representatives of Matsushita Electric Corp. of
America and Toshiba America Information Systems Inc. said they will
continue to manufacture CD-ROM drives until their customers dictate
when the final transition should occur. Executives at Hitachi America Ltd.,
however, said the company's withdrawal from the CD-ROM drive market
is under way.
Hitachi is already promoting its DVD products and will stop making its
high-speed, 32X CD-ROM line in about three months, according to
Werner Glinka, director of marketing for the Brisbane, Calif., company's
computer division.
“We're about in the middle of the transition,” Glinka said. “We're still in
32X CD-ROM products, but the future is very clearly DVD.”
Part of the uncertainty surrounding the transition to DVD-ROM concerns
the price of the drive itself. According to Pine, a 32X CD-ROM drive
costs about $50 in OEM quantities, roughly half the price of a 2X or 4X
DVD-ROM drive that plays CDs at near-32X speeds. In addition, OEMs
must buy an MPEG-2 decoder chip or software from a separate supplier
to take advantage of DVD-ROM's video capabilities.
In short, the net cost of DVD-ROM optical storage can exceed 10% of a
low-end PC's bill-of-materials budget, a ratio that many OEMs find
unacceptable, according to Pine.
Executives from Toshiba disagreed with the contention that a DVD-ROM
drive is beyond the reach of a sub-$1,000 PC.
Maciek Brzeski, director of optical marketing for the Irvine, Calif.,
company's disk products division, declined to discuss specific drive
pricing, but claimed that prices for older DVD-ROM drives will continue
to fall as newer, faster products are introduced.
This price erosion appears destined to follow the same path that has
squeezed margins from the CD-ROM drive market, according to
observers. The phenomenon is known within industry circles as the “X
race,” the process through which vendors push out ever-higher-speed
drives.
While DVD-ROM technology was originally viewed as a way to escape
the speed contest, industry executives concede that new 4X and 5X
DVD-ROM drives prove the X race is simply being run on a new track.
Even within the maturing CD-ROM drive market, the need for speed is still
great. A year ago, suppliers claimed that CD-ROM drives had peaked at
32X, having hit what was believed to be an insurmountable physical limit.
At higher speeds, imperfections in the disk media caused the device to
wobble and forced the entire drive to spin down in order to read the data.
However, innovations such as Zen Research Inc.'s multitrack read
capabilities now allow CD-ROM drives from Kenwood Corp. to claim
“true” 40X status. And Toshiba's Brzeski said his company's 32X and
40X drives use motors that automatically balance the media, compensating
for the wobble and spinning drives at a faster constant rate.
The result is that 32X drives are now grudgingly giving way to 40X
speeds, while component suppliers such as Cirrus Logic Inc. have
developed controllers that allow data to be transferred at up to 45X
speeds.
The problem, according to some suppliers, is that the innovations required
to achieve such high speeds may mean little to the end consumer.
“We can call it 'super this,' or 'ultra that,' but that's only for the techie
multimedia-upgrade kits,” said Jim McCaffrey, vice president of sales and
marketing for Mitsumi Electronics Corp. in Irving, Texas.
For DVD-ROM suppliers, the most frustrating roadblock to a wholesale
industry technology conversion is the software. To date, only 30 or so
consumer software titles have been designed for the new DVD-ROM
format, according to Pine, with about 100 enterprise software creators
distributing their wares in DVD-ROM form.
Furthermore, popular consumer video- game consoles such as Sony
Corp.'s PlayStation and the forthcoming Dreamcast console from Sega
Ltd. are based on CD-ROM technology, not DVD-ROM. |
