New tech complicates disc player market
By Li Yan (China Daily)
Updated: 2004-08-02 13:45

When Lin Hao was choosing a video player in an outlet of home appliance retailer Gome, he hesitated.

Digital video disc (DVD) players are cheap and popular. But, the newly debuted enhanced video disc (EVD) players are clearer, more modern, but also more expensive. This is common in China's video player market: DVD players still dominate the market because of their low price, but new kinds of video players have been emerging.

Several leading video player manufacturers are turning to explore more advanced products, such as EVD players, high-definition versatile disc (HVD) players and high-definition video (HDV) players.

China, the world's biggest maker of DVD players, is preparing to welcome a new generation of the machines.

An official at Jiangsu Province-based Shinco Electronic Group Co Ltd said: "Our new product, the EVD players, is a technological breakthrough. Although more expensive, it is five times clearer than DVD players."

Shinco is the largest video player manufacturer in China.

The company's targetted consumers are residents of big cities who have high-definition television (HDTV), said the official, who refused to give his name.

China is the world's largest manufacturer of DVD players.

However, in recent years, rising patent charges from foreign companies, heated competition and repeated price wars have squeezed the profit margins of DVD player manufacturers.

China doesn't have the intellectual property right (IPR) for the manufacture of DVD players. In order to buy the core technologies, Chinese manufacturers have to pay high patent fees -- around US$5 per set -- to foreign companies who have the IPR, such as Sony Corp, Royal Philips Electronics and Matsushita Electric Industrial Co Ltd.

The price of an average DVD player is about 600 yuan (US$72.29) in China.

As a result of low profits, more than 30 small DVD player manufacturers in Shenzhen went bankrupt in May 2004.

"Products of small manufacturers are mainly for export to overseas markets, and their major competitive edge is the low price. With high patent fees, they can only make profit from the assembly process, which is too little to carry a whole company," said Lu Renbo, a home appliance expert at the Development Research Centre of the State Council.

The low profits have pushed major Chinese disc player manufacturers to focus on EVDs, to which Chinese firms have full IPR.

The Chinese Ministry of Information Industry announced EVD as the national electronics industrial standard in July this year.

Lu suggested that, this standard would definitely help the development of the video player industry.

He said: "In order to promote China's video player industry, the country should expand production scope, but not depend only on two or three companies."

But industry officials also said lack of EVD discs and HDTV are hurting development of the EVD player market in China.

"There are not enough EVD discs out on the market. Without EVD discs, EVD players are of no use and certainly sales will suffer," the Shinco official said.

Shinco plans to bring 500 new EVD discs onto market by the end of this year.

Zhang Baoquan, a Beijing-based real estate tycoon, declared in June that he would invest 200 million yuan (US$24.2 million) to establish an EVD film production company.

Another barrier slowing development of EVD is that at present, HDTV has no industrial standard, and it only occupies 20-30 per cent of the domestic TV market.

Without HDTV, the high quality of EVD signals is largely lost.

However, Lu is optimistic about the future of EVD.

"The electronic home appliance industry is regenerating rapidly. With their own IPR on EVD and their ability to lower production costs, EVD player manufacturers certainly have a brilliant future."

On the other hand, despite the bright future awaiting EVD, DVD players haven't lost the video player market. Like Lin Hao, most Chinese consumers are attracted by the low price of DVD players.

An EVD player will go for at least 1,300 yuan (US$156.63), more than twice the price of a DVD player.

The low price and abundant DVD discs help DVD continue to dominate the Chinese video player market.

Wang Feng, a salesman at Gome explained: "At present, consumers cannot withstand the lure of the low price of DVD players."

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