To be fair, it's helpful to post the whole link. Or if you're only going to post part, be kind and post a link to the whole thing.
Here's where that quote came from:
techweb.com
China spends big to get local DVD industry spinning
Sunray Liu
Beijing - China is stepping up efforts to kick start a domestic DVD industry, investing in such key technologies as laser diodes for optical heads, MPEG-2 decoder development and the improvement of DVD manufacturing capabilities, in the hopes of building demand among consumers for the emerging but so far relatively expensive technology.
In anticipation of the new market that the Chinese government's investment in DVD technology will open, such foreign companies as C-Cube Microsystems, ESS Technology, STMicroelectronics, Panasonic and LSI Logic Corp. are offering their own single-chip DVD solutions to Chinese OEMs.
Manufacturers and industry analysts who gathered here last month for a government-sponsored symposium predicted Chinese consumers will buy 15 million video CD (VCD), super video CD (SVCD) and DVD players in each of the next five years. Demand for DVD players is expected to take off next year, with as many as 10 million players sold annually beginning three to four years from now.
The two-day symposium sponsored by the Ministry of Information Industry (MII), the Ministry of Science and Technology and the China State Press and Publication Administration drew more than 70 VCD manufacturers, components and device suppliers and software developers.
Despite the flurry of activity on the DVD front, VCD and SVCD players remain the most popular and affordable products here. Industry watchers, skeptical of government forecasts, said it will be several years before China's DVD market takes off.
Peng Fu, chief analyst for market researchers Advanced Forecasting-HuiCong (Cupertino, Calif.), said relatively cheap video CDs and VCD players will make it tough for DVD manufacturers to crack the Chinese market. "At least for the next two years, the DVD market in China will not grow so fast," Peng said. "After two or three years, maybe the [DVD] market will be better."
To make that happen, Peng said Chinese companies will have to invest heavily in more complex DVD technology and manufacturing capabilities. Chinese government ministries have been working with domestic manufacturers to develop a DVD manufacturing infrastructure as they attempt to stimulate domestic demand for the video technology.
The key to boosting demand will be producing DVD disks and players at prices comparable to VCD and SVCD products. VCD players sell for around $150 in China while CDs cost between $3 and $6. Peng said DVD titles will have to drop below $20 before Chinese consumers will pay $250 or more for new DVD players.
Nevertheless, Chinese companies are reported by the government to be involved in DVD manufacturing (see chart). Domestic output is expected to be less than 100,000 players, while market demand will be lower than 200,000 players in 1998.
Chinese officials at the DVD symposium confirmed reports that the government continues to invest in DVD production by opening a disk-production line. The investment figures to help improve manufacturing capabilities and stimulate consumer demand.
Electronic publishing
The China State Press and Publication Administration "is supporting the new products in electronic publishing," said Mao Xiaomao of the Administration's Department of A/V and Electronic Publishing. "We approved the importing of seven DVD manufacturing lines and a mother disk [production] line."
Despite progress on several fronts, the nascent Chinese DVD software industry faces other barriers. The biggest is the lack of national DVD standards to support the software industry. Another is the lack of high-quality titles that can drive demand for DVDs. As things stand, most domestic films must be reproduced to improve their audio to international standards like 5.1-channel sound.
Industry observers agree that Beijing is trying to increase domestic demand for DVDs while prodding manufacturers to develop a DVD infrastructure. "They want to construct a backbone of industries" around DVD, Peng said.
The Ministry of Science and Technology is meanwhile supporting research and development on DVD technology, having discovered that the growth of the Chinese VCD industry was based on foreign technologies. All Chinese VCD manufacturers did was assemble and sell equipment. Meanwhile, lower prices and higher marketing costs squeezed profit margins on VCD players.
[yes, even ESS supplies foreign technologies to China - Dave]
Consequently, the Chinese government is pumping funds into research on key technologies in the hopes of seeding a home-grown DVD capability. Supported by the government, the Semiconductor Institute of the Chinese Academy of Science has developed a new 650-nm red lightwave laser diode. The laser's power, optical and temperature characteristics appeared promising in tests in which it was used as an optical head. Researchers at Tsinghwa University are developing other parts of the optical head, including work on a lens, actuator and other components.
Feng Jichun, vice director at the High-Technology Development and Industrialization ministry, called the laser-diode work a "breakthrough of key technologies," adding that the focus now is on volume production. "Our scientists and engineers are paying more attention to the innovation of technologies that will help our enterprises release the pressure of [intellectual property rights]," Feng said.
Elsewhere, fabless design houses like the state-sponsored China IC Design Center and other domestic chip makers are focusing on developing MPEG-2 decoders. VCD player makers are also investing in similar video technology. Some are working independently, while others are cooperating with U.S. partners.
300 titles so far
As the number of DVD titles in the Chinese market grows to about 300, so does the list of foreign companies announcing single-chip DVD solutions. Among the first was C-Cube Microsystems (Milpitas, Calif.). C-Cube announced it will supply fully tested chip sets that will enable DVD manufacturers here to quickly incorporate them into their players. The company also said it will help Chinese OEMs produce DVD cameras based on its DVD-RW technology.
[Interesting, I missed that when I first read this last week- Dave]
One of C-Cube's chief rivals in China, digital video chip vendor ESS Technology (Fremont, Calif.), is also trying to help manufacturers ease the transition from SVCD to DVD production. Its ESS 4408 solution aims to provide audio functions like 5.1-channel sound and karaoke via software. The 4408 integrates 32-bit RISC video and a 64-bit DSP, allowing developers to use high-end C language programming to develop DVD functions. ESS' programmable multimedia processor also allows OEMs to offer other capabilities through DVD players, including video telephones and teleconferencing.
France's STMicroelectronics and Japan's Panasonic have also jumped into the Chinese DVD market, promoting themselves as one of the few IC makers offering manufacturers a complete line of DVD design solutions. STM announced a low-cost DVD-on-a-chip based on a 32-bit RISC processor. Meanwhile, Panasonic's solution includes the necessary chip sets and a kit that were originally released in Japan. Panasonic's DVD chip sets are now attracting Chinese partners through its joint ventures here as well as through its national support network.
LSI Logic (Milpitas, Calif.), which set up a facility in Beijing, has announced design wins for its DVD decoder chip, and expects to announce more before the Consumer Electronics Show in January (see Nov. 30, page 14). LSI Logic's Hong Kong-based partner has also developed DVD solutions for the Chinese industry that are expected to help China meet its goal of producing 1 million DVD players next year.
Indeed, China's ability to produce over 30 million video CD players is expected to serve here as the basis for the emerging Chinese DVD industry. "The VCD industry [is well prepared] for DVD, especially the manufacturing technology, which has the advantages in cost-effective production," said Bai Weiming of MII's Department of Electronic and IT Products. Moreover, "80 percent of the VCD market has been acquired by the top 10 manufacturers in the past two years, [which] will be another help for the DVD industry for marketing and scale."
Some DVD makers are claiming the ability to produce more than 1 million players next year. Backed by foreign chip and kit makers, many are also planning to sell DVD players at prices below $250-a key price point in China. By comparison, locally made players cost about $400 and Japanese systems are much higher in price.
[The $250 cost point can be met today. The problem is really lack of titles. Pirates will start supplying titles sooner rather than later, since there's more money in DVD titles. VCD chip suppliers will have no choice but to drop prices will continue to erode reduce margins.
- Dave]
According to MII's Bai, the wealthy as well as the growing middle class in the cities will be the first purchasers of DVD players. These audio- and videophiles tend to own large-screen TVs that include ports for digital audio and video inputs. DVD is also expected to become the heart of all-important home theaters-there are few movie theaters in Chinese cities-which will boost the market for high-end A/V appliances.
Meanwhile, lower-income consumers in cities and towns are expected to opt for SCVD players, Bai predicted, with the cheapest VCD players hanging on in poorer rural areas.
Game players, DVD cameras and DVD-RAM are also expected to make inroads here.
Software distribution is also seen as another key factor in the success of DVDs in China. The state-run Xinhua Bookstore, China's largest, said it would use its chain of stores to form a network for renting DVD titles.
-George Leopold contributed to this report.
Copyright ® 1998 CMP Media Inc. |
