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Appeared on: Tuesday, June 04, 2002
Lite-On IT invests in pick-up head production

An optical-storage player venture between Victor Company of Japan (JVC) Ltd. and Lite-On IT Corp. of Taiwan has decided to raise capital by issuing new shares in the second half of this year to fund an investment in a pick-up head factory in China.The factory is to be ready for pilot production by the end of this year.

MediaTek Inc. of Taiwan, the world's largest supplier of CD-ROM player chips, has joined hands with Lite-On to develop pick-up heads for the factory. MediaTek supplies Lite-On with its chips for the latter's players.

The JVC-Lite-On venture was established October 2001 in Hong Kong, and is currently capitalized at US$200,000. The two parties have agreed on a deal under which JVC will retain 51 percent of the joint venture and Lite-On will still hold 49 percent after the capital increase.

When the Hong Kong company was established last year, the two companies announced they would work together to produce pick-up heads for the players. Lite-On confirmed recently reports that it and JVC have begun developing the head in Japan, and the manufacturing venture will be set up at a high-tech industrial park in Guangzhou.

The factory is meant to produce machines for playing digital video discs and related discs. Pilot production is to start at the end of the year, and mass production is to kick off early next year.

For a long time, Lite-On has depended on Hitachi Ltd. for core components. The venture is expected to equip it with a self-sufficient supply.

In accordance with the establishment of the pick-up head factory, Lite-On plans to begin mass production at a player factory in the same industrial park by the end of the year, with output planned at more than four million systems a month. Lite-On has projected selling the players for US$30 apiece, as it has settled the royalty charge problem with collectors, and will gain self-sufficient pick-up head strength.

Last year, the company shipped 1.6 million DVD-ROM players, accounting for around 8 percent of world total supply. The company expects the shipments to triple to five million to six million machines by the end of this year, snatching up 30 percent of world market, as it has formed the alliance with JVC, likely bringing down the royalty charges on its machines far below US$10 a system.

Lite-On will get a jump on its peers in rolling out 48x CD-RW drives in late May. It has boosted output of DVD-ROM players so far to 500,000 to 600,000 systems a month, and plans to increase the output further to 600,000 to 700,000 systems a month by the end of the year.

Lite-On has projected whole-year, pre-tax earnings at NT$5.188 billion, and earned NT$2.1 billion or so in the first quarter. It forecast second-quarter earnings to be the same as, or a little less than, its first-quarter earnings, due to lukewarm global PC shipments.

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