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Monday, January 28, 2002
 CD-R disc production moving overseas
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Message Text: Although Taiwan is still the world’s largest CD-R disc manufacturing hub, new factors like the EU anti-dumping tariff and higher cargo fees have made overseas production sites more and more attractive. Domestic CD-R capacity should stay above overseas capacity in 2002, but by 2003 a major percentage might be relocated to other countries.

Recent rumors that CMC Magnetics plans to close its Taiwan CD-R disc production lines have been denied by the company. However, it does not plan to increase domestic capacity any more.

In the past, both CMC and Ritek avoided the topic of overseas expansion, but now that market conditions have changed they have revealed a little more. Bob Wong, chairman of CMC Magnetics, said they have already established production sites in the UK, Ireland, the US, Mexico and Hong Kong. Chwei-jing Yeh, CEO of Ritek, said they are currently expanding at facilities in Europe to achieve a monthly capacity of 20 million CD-R discs.

Yeh also mentioned that Ritek will not increase capacity in Taiwan. According to sources, its factory in Hukou, Taoyuan County, will shrink monthly CD-R disc capacity by 20 million units, falling between 80 million and 100 million units. Its new factory in Miaoli County can produce 50 million to 60 million units a month. In the future, Ritek will prioritize overseas expansion. Production lines that are left open in Taiwan will be used for high-end DVD-R and DVD-RW discs.

Both CMC Magnetics and Ritek explained that the EU’s anti-dumping tariff is just one of many reasons they have decided to move overseas. The most important reason is the need to offer local supply and services to major customers.

Nevertheless, market insiders say the anti-dumping tariff has a lot to do with the set-up of new facilities in Europe. Furthermore, recent price hikes in sea cargo fees – especially after the September 11 terrorist attacks – have also eaten into manufacturers’ slim profits.

The price for a 16x speed CD-R blank disc is about US$0.12. Although the price has gone up, 24x speed discs are still only US$0.15 – very close to production costs. Add up the royalties for related technology, and many companies are already producing at a loss. Most orders are still shipped by sea. On average, shipping a standard crate to Europe, holding about 80,000 CD-R discs, costs US$3,000 or about US$0.04 per disc. For first-tier manufacturers that move more than 100 million discs a month, total monthly shipping costs are at least US$4 million.

In contrast, once CD-R disc factories reach a certain scale, labor costs drop to only US$0.01 per disc. By establishing automated facilities closer to the customer, Taiwan’s CD-R concerns can avoid major shipping fees altogether and provide faster service.
 
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