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Friday, December 02, 2005
Taiwanese Makers of Optical Discs Continue to Dominate the Market, Despite Losses

According to data published by Fujiwara-Rothchild, a consulting organization in Japan, Taiwanese producers of recordable optical discs continued to dominate worldwide production in the third quarter of 2005.

For CD-R discs, Taiwan's share was down to 53 percent, reflecting the shift to DVD write-once media by the largest Taiwan producers. It is essentially impossible at this time to produce and sell CD-R discs at a profit, and while the situation is very little better in the recordable DVD side of the business, major producers such as CMC and Ritek have chosen to convert many of their existing CD-R production lines to DVD write-once.

Taiwan?s share of DVD-type write-once media was estimated at 67.8 percent for the third quarter, and at 59.8 percent for DVD-Rewritable media formats. Moreover, the Japan Recording-Media Industries Association (JRIA) estimates that "Japanese makers" will account for 28.6 percent of CD-R production in 2005, and 39 percent of DVD write-once production.

Both CMC and Ritek have recently reduced their OEM prices for 8x DVD-R/+R discs by just over two U.S. cents ($0.02), to around $0.18 on average, claiming that they wanted to clear out 8x inventory because of stiff price-competition from smaller producers. If there were any kind of shortage for DVD write-once media in 2005, such reductions would have been completely unnecessary. CMC and Ritek are both anxious to increase their profit levels in the fourth quarter, but their recent price reductions for their 8x products resulted in either no revenue growth in October, or a slight decline. October is usually the largest volume month for optical media sales. It is very likely that both companies will end up in 2005 either losing money or generating the tiniest of profits from their optical disk operations.

None of the manufacturers of optical media will make much of a profit in 2005, based on available data for the first three quarters of the year. Only CMC in Taiwan has managed to turn a profit to date in 2005, but its before-tax profit was a pathetic 32.4 million NT dollars (less than U.S.$1.0 million). Ritek managed to lose U.S.$19 million, Prodisc $80 million, Princo $62.5 million, and Gigastore $13 million. Moser-Baer, an Indian company and the largest optical media producer outside Taiwan, lost U.S.$1.76 million over the first three quarters. In Japan, Taiyo-Yuden appears to have lost money for the first half of fiscal 2005. One wonders why anyone would want to continue producing present-generation optical disc media of any kind, given the fact that no one has made any money from their disc operations in either 2004 or 2005..

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