CD-ROM drive contract manufacturers, already beset with slim profit margins, are bracing for further price cuts amid price drops in key components. Price quotes per unit, which had hovered between US$21 and US$23 for much of the past year, have dropped to a surprising low of under US$20, some manufacturers reported.
Prices of key CD-ROM drive parts – pick-up heads, chipsets and mecha/loaders – have long been declining, but the changes were small, keeping component costs stable for CD-ROM drive makers. With contract prices ranging from US$21 to US$23, Taiwan’s manufacturers usually fetched a razor-thin profit of US$0.50 per unit.
The price trend was reversed after chipset maker VIA Technologies recently slashed its chipset price by as much as 20% and Mediatek, its main rival, followed suit. According to sources, the resulting price war has lowered chipset prices by half to US$2, bringing down costs and pressuring CD-ROM drive prices. As unit contract prices approach US$20, CD-ROM drive manufacturers say they nonetheless have managed to maintain their previous profitability, thanks to a new drive design that reduces production costs.
Some CD-ROM drive makers caution that the below-US$20 ticker does not apply to the industry as a whole, possibly only a bargain price negotiated by large clients like Dell Computer, Hewlett-Packard (HP) and Compaq Computer. The price quoted to middle and small-sized distributors is between US$21 and US$22.
In contrast to price cuts in desktop CD-ROM drives, prices of their slim-type counterparts for notebooks remain stable at roughly US$30 per unit.
CD-ROM drive manufacturers also noted that prices of other optical storage devices – CD-R and DVD-ROM drives, for instance – could track a similar course, as the price war between VIA and MediaTek escalates.