Lite-On has outbid competitors to win Dell's orders for sub-US$600 computer CD-ROM drives, further expanding the two companies' alliance. Dell unveiled the US$599 SmartStep 100D personal computer on Oct. 29 in the United States, temporarily gaining the advantage over its rivals in low-priced computer competition. The less-expensive computers are assembled at a factory in China run by the Taiwan-headquartered Mitac International Corp., and mostly equipped with Taiwan-made devices and peripherals.
Lite-On IT, Taiwan's largest CD-ROM drive manufacturer owned by Taiwan's opto-electronics giant Lite On Group, confirmed reports that the company has acquired orders from Dell and Mitac, and had already begun shipping the outsourced products from two of its factories in China. Lite-On IT noted that the contracted amount is considerable. For a long time, Dell had depended on Samsung for 40 percent of its supplies and Gold Star for a further 20 percent. Although Lite-On IT also has been a minor supplier, it has not so far received major orders from Dell until now. Taiwan's industry watchers believe that the shift of Dell's orders suggests that Taiwan's manufacturers are more competitive than their South Korean rivals in production costs.
Lite-On IT also beat Korean and Japanese rivals to acquire Dell's orders for 16x DVD-ROM players, the first batch of which were delivered in August and September. So far, Dell has emerged as Lite-On IT's second-largest OEM-based customer, contributing nearly 11 percent of Lite-On IT's revenue. Sony Corp. is Lite-On IT's second-largest OEM-based customer. Lite-On IT expects to produce 1.8 million DVD-ROM players this year, more than double the 628,000 players it made last year. The company shipped 755,000 DVD-ROM players in the first half, making it the world's seventh-leading supplier. It plans to become the world's largest or second-largest supplier next year.
The company has set a goal of snatching up 15 percent of the global DVD-ROM player market next year, at which time the market volume is forecast at 40 to 45 million players. The market volume is estimated at 37 million players this year, compared with last year's 32 million systems. The company's executives point out that many computer manufacturers have begun to roll out systems equipped with DVD-ROM players instead of CD-ROM players, because the price of DVD-ROM players has dropped to between US$40 and US$45, moderately higher than the average CD-ROM player's US$20.
However, the expensive US$10 royalty charge per machine on DVD-ROM player manufacturers by DVD Forum and the inadequate availability of software have constrained the growth of the DVD-ROM player market, according to Lite-On IT executives. However, Lite-On IT President S. F. Liao notes that his company has felt less pressure on this issue, because the Hong Kong branch of Japan's JVC has agreed to grant it a license following negotiations between the two companies held in early October.The reduction on royalty spending is one of Lite-On IT's advantages over its rivals in the competition for Dell's contracts, Liao stresses. The Lite-On IT president points out that the company's output of CD-ROM drives will gradually decrease, whereas its output of DVD-ROM players and CD-RW will surge next year. He adds that his company will introduce combo-type drives and slim DVD-ROM players next year.