China, the world's largest manufacturer of digital versatile disc (DVD) players, has launched a new format to end its dependence on foreign technologies, but insiders question whether the so-called enhanced versatile disc (EVD) players will be financially viable and/or accepted globally.

Jiangsu Shinco Electronics Group, one of China's largest DVD player producers, promoted the first high-definition disk players just days ago.

Some 100,000 EVD players have entered China's market. They are available in 18 cities, including the Hong Kong Special Administrative Region.

The players cost up to 1,998 yuan (US$241), compared with an average 800 yuan (US$96) for a DVD player.

The image quality of an EVD player is reportedly five times better than that of a DVD player. Also, the discs can store a greater amount of data.

Eight other major makers of DVD players, such as Shanghai-based SVA Electronics Group, will eventually unveil their own EVD players.

Liu Dan, sales manager of E-word Technology Co Ltd, said high patent fees for DVD prompted the company to switch to EVD technology.

Chinese enterprises must pay the 6C patent licensing alliance - Hitachi, Matsushita, Toshiba, JVC, Mitsubishi and Time Warner - US$4.50 for each DVD player they produce.

China produced more than 30 million DVD players last year, which accounted for about 70 per cent of the players in the world market.

E-word Technology is creating the national standard for the production of EVD players, Liu told China Business Weekly.

The first draft will be handed to the Ministry of Information Industry (MII) for approval within two months.

The company has applied to the 6C alliance for 20 EVD patents. Seven have been approved. Since late 2001 when China entered the World Trade Organization, Chinese enterprises have expressed increasing interest in holding their own intellectual property rights (IPRs).

Lopez-Claros Augusto, chief economist with the World Economic Forum, said China in 2002 spent 60 billion yuan (US$7.2 billion) in research and development of new technologies. China became the third-largest country, after the United States and Japan, in terms of its investment - at 2.5 per cent of its GDP - in research and development projects. Augusto said the country's technological competitiveness will come to the fore within six years.

While seeking to hold their own IPRs, producers are being driven by demand in the high-end market to develop and enhance EVD players, which are specially designed for high-definition TV (HDTV).

"With improvements in people's living standards, the consumption of HDTV has increased dramatically," said Chen Changfeng, manager of Shinco's advertising department.

China Audio Industries Association (CAIA) statistics indicate the sales volume of HDTVs has captured 20 to 30 per cent of the overall TV market.

It has doubled in recent years.

"Consumers can only enjoy the high image quality of an HDTV with an EVD player," Chen said.

Higher prices (compared with DVD players) will not make it difficult to promote the EVD players.

"EVD players are aimed at high-income people or super fans of audio-visual products. They are able to pay three times the price of a DVD player," Chen said.

People questioned the viability of DVD players a few years ago when they first entered China's market.

Now, DVD players are an important part of modern people's daily lives, a CAIA official, on condition of anonymity, told China Business Weekly.

An estimated 1.8 million EVD players will be manufactured this year; in 2005, 3 million; and in two years, 9 million.

Analysts doubt EVD players will be widely adopted in the rest of the world.

The international market has adopted DVD players as the standard.

"Compared with Chinese consumers, who tend to follow trends, European consumers are more rational in terms of products' functions," said an industry observer, who asked not to be identified.

"It is not an easy job to persuade them to give up their DVD players and buy an EVD player, which has many of the same functions."

Also, it is too early to say if Hollywood studios, which drive the world's video software business, will release their films on EVD.

Negotiations between MII officials and several large Hollywood film distributors, to have about 100 movies released on EVD, are going well, the SVA spokesman said.

"The first film on EVD will be available in Chinese shops by year's end," he said.

(Business Weekly 01/13/2004 page8)