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The market for red laser diodes used in DVD applications will grow at an annual rate of 7% through 2009 to reach $1.5 billion, claims a new report.

Booming sales of DVD players and drives will spur the market for AlGaInP laser diodes to $1.5 billion by 2009, according to a new report from Strategy Analytics.

The current market, estimated to be worth around $970 million, is dominated by Japanese companies such as Sony, Sharp, Mitsubishi and Matsushita, with a market share of about 75% between them. Samsung in Korea is another major producer, while a handful of Chinese and Taiwanese companies make up the remainder.

While the market will grow at around 7% annually through 2009, stiff competition from new entrants in China and Taiwan will mean that an increasing proportion of the devices will be made in South East Asia rather than Japan. Chinese red laser producer Huaguang has said that it is looking to ramp up production this year, while Mitsubishi is said to be doubling laser fabrication by September.

?Commodity LED production has already moved from Japan to lower-cost countries,? said Asif Anwar, the director of Strategy Analytics? GaAs service. ?Taiwanese and Chinese manufacturers will press for a similar migration of laser diode production and compete on price. Despite the drive towards cheaper production, Anwar does not a see a major switch in the short term, however. He expects that some technical challenges in the design of devices will require the attention of established vendors, and that this will slow the progression to lower-cost sites.

These design challenges include making the chips suitable for high-temperature operation so that they can be used for faster DVD burining. Other uses for AlGaInP diodes include barcode scanners and visible marking applications. More details about the 36-page report "The AlGaInP Laser Diode Market" can be found at Strategy Analytics (http://www.strategyanalytics.com/).