Chinese manufacturers do not own any intellectual property (IP) for the core technologies involved in DVD players, so companies that export DVD players need to pay royalty fees to patent owners. Due to increasing competition in China, the price level of DVD players has dropped to a point where paying royalties on the products eliminates profits.
Shinco Electronic and Malata Group, two large makers of electronic appliances in China, stated that they have stopped exporting standalone DVD players and are instead exporting portable DVD players, which are more profitable, and LCD TVs. Another maker, Shanghai General Electronics (SVA) argued that makers of DVD players do not earn any money on their products but continue producing simply to hold their position in the market.
In Shenzhen, where about 70% of China's DVD player manufacturers are located, the number of OEM makers has decreased from a peak of over 140 to 30-40 currently.
The China Audio Industry Association (CAIA), on behalf of Chinese makers of DVD players, has been negotiating royalty rates with the respective patent holders over the past few years.