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Friday, January 28, 2005
Lite-On IT to rely on own-brand sales in China, car-use ODDs for profitability

Lite-On IT, under pressure from price-cutting by Toshiba-Samsung Storage Technology has had to increasingly rely on sales under its own brand Liteon in the China market and production of car-use optical disc drives (ODDs) to maintain its operating profitability.

This, according to the company's Optical Disc Drive Business general manager Michael Gong. Lite-On IT witnessed its average gross margin fall to 20.3% in the third quarter of 2004 and estimated an even lower level, of less than 20%, for the fourth quarter due to continued reduction in OEM pricing, Gong indicated. The OEM price level will drop further, resulting in retail pricing as low as US$50 for 16x DVD burners by the end of this year, Gong noted.

To cope with the situation, Lite-On IT plans to cooperate with Synnex Technology International, the largest Taiwan-based 3C (computer, communication, consumer electronics) distributor, to market its ODDs under the ?Liteon' brand in China after the Chinese New Year vacation (February 8-13), Gong pointed out.

In addition, Lite-On IT has been developing car-use ODDs since last year and took part in the Automechanika (the biennial Frankfurt Auto Parts Show) held in September, 2004, in Frankfurt Germany. The company has shipped car-use ODDs in small volumes for sale in aftermarkets and is making efforts to compete for ODM orders from international carmakers, according to Gong. Gross margins for such products exceed 50% and will be steady, compared with continued drops for PC-use ODDs, Gong said.

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