As prices for blank DVD-R/+R discs fall with increasing supply, CMC Magnetics is hiking the speed of its products to maintain its gross margin at about 50%, according to Taiwanese Digitimes. In the fourth quarter of last year, 90% of CMC Magnetics’s DVD-R/+R disc shipments were 4x discs, with the remainder being 8x discs, Wong said. Following production expansion, the proportion of 8x discs shipped will rise to 50% this month and over 80% by the end of this quarter, she added.

The price of 8x discs stands at about US$1 while that of 4x discs has dropped to US$0.70, according to Wong. CMC Magnetics plans to upgrade the speed of its DVD-R/+R discs to 12x in the third quarter and 16x in the fourth quarter, Wong said. The higher margins available at higher speeds will offset the decreasing profitability of DVD-R/+R discs at lower speeds, Wong explained.

While raising the speed, CMC Magnetics plans to expand its monthly production capacity of DVD-R/+R discs to 60 million units by year-end from 30 million now. However, actual expansion will depend on market conditions, Wong said.

As other Taiwanese companies also plan to expand their DVD-R/+R disc production capacities this year, the total full-year capacity may exceed two billion discs, far more than projected 2004 global demand for 1.6 billion to 1.8 billion discs, according to Wong. Thus, Taiwanese makers are likely to face intense price competition this year, she pointed out.