Even with this improvement in DVD write-once demand, most of the producers of write-once optical disc media, including CMC and Ritek, the two largest, lost money during the first quarter of 2005. Many producers lost heavily in 2004, Ritek alone losing over U.S. $200 million. With losses continuing in the first quarter of 2005 at most of the major suppliers, the improvement in demand has apparently not yet been of much help to the bottom line. Everyone of course is hoping for a better year financially in 2005, with major improvement in the second half, but that can only be gained if prices for all types of write-once optical media can be increased again by between 15 and 20 percent, and the producers? product mix includes a much higher share of high-speed (8X and especially 16X) DVD write-once discs. Given the competitive nature of the write-once optical disc business, both for CD-Rs and DVD-Rs, raising prices by 15-20 percent and keeping them there, has in the past at least proven to be an almost impossible task. Perhaps this time will be different.
Nan Ya Plastics, Taiwan's largest producer of plastic resins, is a relatively recent new producer of write-once optical disc media. It implemented a large-scale program for the production of CD-Rs and DVD-type write-once media in early 2004, predicting that it would soon become one of the three largest manufacturers in the industry. However, the company found the going so difficult in 2004, and during the first several months of 2005, that it has now decided to cease production altogether and sell its manufacturing facilities.
Moser-Baer in India is another large optical disc producer that has found the going extremely difficult over the last year or 18 months. It is one of the half-dozen largest producers of write-once optical media in the world and has strong OEM customers. Even so, Moser Baer suffered grievously in calendar 2005, and continued to lose money in the first quarter of 2005.
On the brighter side, Moser Baer reports that the situation appears to be improving. Its main OEM customers agreed to accept increases in prices during the fourth quarter of calendar 2004, and these price increases, some as much as 20 percent, have held throughout 2005 to date. Demands for DVD-R/+R discs also began to increase during the fourth quarter of 2004, and have continued to increase steadily in 2005, according to the company. These improving conditions have also been reported by CMC, Ritek, Prodisc, and other suppliers in Taiwan. Demand is indeed accelerating, and recent price increases have indeed been accepted by most OEMs and appear to be holding.
According to some surveys, write-once DVD demand was running at an annualized rate of three billion units at the end of 2004, suggesting that 2005 shipments could approach four billion discs. Mr. Gordon Yeh, the CEO at Ritek, sees worldwide DVD write-once media shipments reaching 4.2-4.5 billion units this year, and 5.5 billion in 2006. These are all very large numbers, and one wonders if they are not, as in 2004, based on hope rather than reality.
There is general agreement that there are today about 400 million CD-R drives in use worldwide. The installed base for DVD-R drives is of course much smaller, and will probably reach 100 million by the end of June 2005. Even if another 50 million DVD-type drives are added in the second half of the year, it is a bit difficult to believe that a population of 150 million drives could generate a market for four billion rewritable DVD discs in 2005, but that is what most Asian industry sources are predicting. If demand does reach four billion or more, a very significant portion of that demand will have to have come from the huge piracy application that has developed worldwide now that low cost and easy to use duplication equipment is readily available, and media prices are low enough to make duplicating movies and other video programming to DVD-R a very profitable business.
Moser-Baer suggests that the installed base of DVD-type write-once drives will peak out at around 300 million in 2007, with 2008 showing very little decline. They note that the installed base of CD-R drives is already in decline, and will fall to 25 million or less by 2010. Of course, most DVD-R drives can write to and read CD-Rs, so this will have little effect on the demand for CD-R media. Moser Baer also believes that the working population of high-definition blue-laser optical drives using write-once media could reach 200 million by 2010.