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Tiring of royalties, China seeks compression spec for video
By Mike Clendenin, EE Times
October 03, 2003 (10:47 AM EDT)
URL: http://www.eetimes.com/article/showArticle.jhtml?articleId=18309910


TAIPEI, Taiwan — China is pushing to define a homegrown audio and visual compression technology that would rival MPEG-4 and H.264 and, by various estimates, save Chinese consumers and manufacturers anywhere from $300 million to $1 billion in royalties during the next decade. The video compression spec is due out at the end of this year, followed by basic decoder intellectual property (IP) in 2004.


The standards initiative is part of a Chinese effort to lessen reliance on foreign IP. Increasingly frustrated over clashes with licensing agencies like MPEG LA, China is striving to wean itself from foreign standards and to free itself of royalty payments for high-volume products, such as DVD players and cell phones.


The move could undercut the power and revenue of licensing agencies like MPEG LA, a consortium of patent holders such as Apple and Sun that charge a royalty of $2.50 per system, compared with China's proposal of 1 yuan (12 cents) for its codec. During the past few years, MPEG LA and others have had trouble collecting royalties from Chinese manufacturers of DVD players, who feel the combined fees of $15 to $20 per system are too high.


Since Chinese manufacturers produced 10 million of the world's 50 million DVD players in 2002, the stakes are high. And over the next decade, as Chinese consumers help expand the market for consumer electronics, they will only get higher.


The video compression project is directed by the Audio Video Coding Standard (AVS) Workgroup of China, a consortium of 50 universities, government organizations and companies that has been given authority by China's influential Ministry of Information Industry and placed under the supervision of the Chinese Academy of Sciences. The academy has been working on compression technologies for more than five years, but few details have emerged.


About a year ago, during the height of acrimony between Chinese manufacturers and various licensing agencies, the AVS was formed to help commercialize the research.


"The government was scared by the DVD royalty fiasco," said Mike Yu, chief technology officer for Vimicro, a Beijing-based designer of graphics chips for cell phones. "They understand that there is a new organization working on the next-generation compression technology and they are worried. They don't want to be left alone again."


That fear was a big factor in China's adoption of a little-known mobile-phone standard called TD-SCDMA, or time-division synchronous code-division multiple access. Supported by Siemens AG in Europe more than a decade ago, the technology was once considered a has-been. But the Chinese government rekindled interest in TD-SCDMA and then co-developed the latest iteration with Siemens in exchange for lower royalty payments.


The government has helped build an AVS-like consortium around TD-SCDMA, and foreign chip makers have come together in joint ventures to hedge their bets against the more entrenched standards, wideband CDMA and cdma2000. TD-SCDMA is now one of three international third-generation cellular standards and a contender in China for a 3G license.


Other examples of greater self-reliance are also emerging. Over the summer, China formed a group devoted to networking home appliances and IT products. The Information Gateway Resource Sharing (IGRS) working group consists of some of China's biggest electronics companies, including Great Wall Computer Group, Hisense, Konka, Legend Group and TCL.


IGRS is similar to another standards group founded this summer in the United States, dubbed the Digital Home Working Group, of which Legend is also a member. Although the two groups have similar goals and will cross-pollinate each other's markets with products, it appears that little contact has occurred between them.IGRS is expected to develop a protocol for automatic detection, networking and resource sharing among IT systems, home appliances and communication devices in wired and wireless environments. The standard will use a TCP/IP-based application protocol, which should be out in draft form by year's end. Development tools will follow next year and a final protocol will be ready in 2005, the group said.


In a statement, Konka said, "The establishment of the IGRS working group reflects the desire of Chinese companies to get rid of the dominance of core technologies and standards of foreign big names in the information technology industry."


China has also made forays into new optical-disk technology during the past few years, but nothing concrete has emerged. Part of the problem has been overcoming an entrenched video-CD and DVD industry that carries most of the world's popular content, such as Hollywood movies.


As much as Chinese manufacturers would like to be free of foreign IP, there is little alternative to using it. Even if their systems used a Chinese standard, they would still want to be backward-compatible with DVD and CD technology for domestic and, more importantly, foreign export markets like North America and Europe.


Unlike TD-SCDMA, however, the AVS specification will not require a massive and expensive new infrastructure, so it may be easier to implement over time. The government has no immediate plans to make it mandatory, said Huang Tiejun, secretary-general of the AVS Workgroup. Huang said the group can develop a more efficient compression technology than MPEG-4 or MPEG-2. After that, "the market will decide," he said. "AVS is only a choice — a better choice for markets in China and outside of China."


Foreign companies have taken an interest in the project, but it's difficult to tell whether they think AVS is a legitimate rival to MPEG-4. At this early stage, it is more likely they just want to keep an eye on developments. Philips, Sony, Microsoft and IBM have been members of the AVS Workgroup, and LSI Logic Corp. recently joined.


Huang said the consortium is open to anyone who can contribute research staff and pay the roughly $1,000 annual fee.


As part of the 3C consortium that requires a $5 royalty payment per DVD system, Philips and Sony have had their own problems with royalty collection in China and are viewed by some Chinese manufacturers as part of the problem. Philips believes otherwise and said it is willing to lend its expertise to China-based standards.


"Philips is pushing MPEG-4, but in China I think Philips is doing the right thing to support Chinese efforts and to also try to push our own IP," said Ernest Ma, Philips' representative to the AVS Workgroup.


Even domestically, AVS will have an uphill battle against MPEG compression standards. Vimicro's Yu cautioned, "The difficult part is to convince everybody to take it seriously and come up with product."