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Wednesday, May 28, 2008
China's DVD Industry Faces Role Changes

Chinese research firm CCID Consulting claims that Blu-ray and another HD format based on red laser may enter in dual-format battle in China.

With a single high definition format currently supported by the industry, Chinese DVD industry should be able move towards "innovation" along with its strong presence in the DVD manufacturing segment.

CCID believes that China's DVD industry is challenged by fierce competition, patent fee's compression, and a great in industrial profits.

Transforming "Made in China" to "Innovate in China"

China's DVD manufacturing position has further strengthened in 2007. CCID Consulting's data shows that 94% of global DVD players are made in China. The DVD content providers are based in the U.S and Japan; chip providers centralize in U.S., Japan and China Taiwan and disc manufacturers centralize in China mainland.

The export volume of DVD players shrunk in 2007, with 143 million sets, down 6.4% over 2006, which the export volume was 153 million sets. High patent fee becomes the major factor of restricting exports. China is also suffering from lack of efficient technical services. CCID believes that China's DVD industry needs to establish an independent technical industrial chain and devote to the development of new products. Only breakthroughs in core technology and technical innovations could transform China from a producer to a creator.

Transforming Specialization to Diversification

Sales volume of DVD players in China were decreased in 2007. CCID Consulting's data shows that the growth of sales volume of China's DVD player slowed down in the period of 2003 ~ 2006. In 2007, the sales volume was 18.6 million sets, down 3.9% over 2006. This shows that after many years of rapid development, China SD DVD market has been saturated and the demand gradually decreases.

Meanwhile, unfair competition results in the vicious competition in pricing of DVD players. Pressure in profits have forced some enterprises to give up DVD player manufacturing. In 2006, the number of enterprises engaged in DVD manufacturing and trade was 830, but in 2007, the number went down to 460. Manufacturers of DVD players are focusing in different products. BBK, Wanlida, Shinco and Amoi now pay more attention to the LCD TV and mobile phone fields.

Transforming SD to HD

The demand for China's SD DVD player market has a slow growth in 2007. Competitors centralize, SD DVD players have become a popular product and the industrial profit shrinks. Industrial period has entered a ripe latter stage.

The close relation between DVD players and TVs drives the transformation from SD to HD. Flat panel HDTV becomes a gradual trend instead of CRT TV. The sales volume of China's flat panel TV reaches 7.888 million sets. The sales volume of China's HDTV accounts for 33.8% of the total color TV market. Consumers' demand for HD increase year by year.

Replace and Coexist

Toshiba's withdrawal from HD DVD business last February gave Blu-ray the absolute advantage to enter the Chinese market. The Blu-ray Disc Association has been evaluating new audio and video codecs specially designed for the Chinese market, in an effort to approach the Chinese OEMs that plan to release Blu-Ray players for the domestic market.

Sony Blu-ray comes into market in China's 60 cities in 2008, but the high prices of players/media as well as the shortage of Blu-ray discs are still restricting Blu-ray's development. China's independent developing Red-ray HD format has great progress on the aspects of resolution and capacity, according to CCID. Compared with the Blu-ray format, Red-ray is cheaper but it lacks of content support.

CCID claims that success of the Red-ray format depends on whether Chinese will be able to build a complete industrial chain that will output cheaper optical heads, chips, and media for the Red-ray devices. Nevertheless, CCID believes that Red-ray and Blu-ray are now the two major camps in China's high-definition DVD market.

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