The European Union (EU) is likely to place an anti-dumping tariff on CD-R discs starting in 2002, and many European distributors have decided to buy now while unit prices are still low. As a result, Taiwan·s CD-R sector is running at full capacity and first-tier manufacturers have begun to outsource to smaller companies to fulfill all incoming orders. The sector has entered another period of heightened activity that may last through the first quarter of 2002.
Because of the waning global economy CD-R disc manufacturers have been carefully controlling inventory levels, making it impossible to fulfill the sudden influx of rushed orders. Since mid-October European distributors have been doing some serious shopping, even purchasing from companies other than their usual suppliers.
Sources say that buyers are asking for delivery in three weeks, but it actually takes about four weeks from the time the order is placed to the preparation of materials, production, pressing and shipment of the finished product. This has created an order pile-up that has forced first-tier manufacturers like Ritek, CMC Magnetics, Prodisc Technology and Gigastorage to subcontract to Po Hsin Multimedia, Princo and Digital Storage Technology.
Of course first-tier manufacturers still have the upper hand, not only in capacity but also in pricing. At the moment they offer a blank CD-R disc for between US$0.18 and US$0.25. Even if capacity is strapped, they can still make a small profit by outsourcing production. Prices offered by second and third-tier manufacturers are varied – some have gone as low as US$0.165. These companies, however, are mainly producing low-grade, low-speed CD-R discs, so a lower price is expected.