As Taiwan’s government is likely to lift many restrictions on investment in China soon, local CD-R disk manufacturers have become more active in planning their development projects, however CD-R disk production is not necessarily the business companies want to be in when entering the China market.
Ritek is the first and only company that has set up subsidiaries in China: Chongqing Xinhua Multimedia Development, a joint venture with China’s state-run Xinhua Bookstore Group, and Hutek, the company’s solely-owned subsidiary in Kunshan, Shanghai. Chongqing Xinhua is currently able to manufacture 2-3 million CD-R disks per month and its products are mostly shipped to domestic markets. Hutek’s factory is still under construction but is expected to be finished by year-end and should begin volume production early next year, producing CD-R disks for export.
Other manufacturers like CMC Magnetics and Prodisc Technology are still evaluating their investment projects, and have both made central China the first choice for their future production bases. CMC and Prodisc indicated that they are likely to decide before year-end.
Unlike Ritek, Prodisc is considering the manufacture of optoelectronic and optical communication products, while CMC is thinking about producing IAs (information appliances) there. The company believes that the labor-intensive nature of IA manufacture will give companies producing in China a competitive advantage. Due to the Chinese government requirement that CD-R disk producers must have more than 50% local capital and the serious pirating problem, CMC said that developing a CD-R disk business in China is not appealing. Another reason that CMC is considering manufacturing IAs in China is because its Korean OEM partner has recently been failing to meet its requirements.
Ritek pointed out that unlike other industries, CD-R companies moving to China are thinking about the sizable market there, not lowering costs, since CD-R disk production is not labor-intensive. In the future, the company wants to also step into the optoelectronic and optical communication sectors.