Prices for integrated MPEG-2 chips used in DVD recorders are
expected to drop from about US$40 currently to below US$30 in the
second half of 2004, as a result of intensified competition and
greater pressure from clients to lower costs, according to
The integrated MPEG-2 solution for DVD recorders combines the
functions of a decoder and encoder. While international companies
dominate the market, major Taiwanese optical storage IC design
firms, including MediaTek and ALi, are expected to join the
competition in the second half of 2004, sources said.
The international companies, including ESS Technology, Royal
Philips Electronics, LSI Logic and Cirrus Logic, are selling
MPEG-2 and servo IC chipsets at about US$40-45, but expect the
prices to drop to about US$35 in the first half of next year and
to around US$30 in the second half, sources said.
In addition to rising supply, optical storage drive makers have
faced rising pressure to cut production costs as they see rapidly
falling average selling prices (ASPs). Lite-On IT, a major
Taiwanese optical storage drive maker, has recently priced a DVD
recorder at about US$299, and many industry observers project
market prices for DVD recorders will fall to about US$250 in the
first half of next year.
As Taiwanese IC design companies usually price their products at
10-15% lower than international suppliers, they have a greater
chance to land deals from drive makers.
Anticipating the MPEG-2 challenge from Taiwanese companies, major
international suppliers have geared up to offer more advanced
products. Companies including Philips, Cirrus Logic and LSI are
expected to start sampling MPEG-4 chips in February, with volume
shipments scheduled in the first half of next year, according to
sources at Taiwanese optical storage drive makers.
Currently, most of the companies produce their MPEG-2 chips based
on 0.18- to 0.25-micron processes, sources said. According to
Philips, its MPEG-4 solutions will be produced with a 0.13-micron
process. Other companies are also reportedly considering
upgrading their manufacturing to between 0.13- and 0.15-micron