NEW EDIG

[cksla]

Chinese companies wet their feet in digital disk player manufacturing world

Life After the DVD
11 January 2004

By NI YANSHUO

Few urbanites can imagine life without video playing machines. China’s disk player market has forged new ground that no one had imagined. While the digital versatile disk (DVD) player is still the gadget of choice among most video watchers, signs indicate that the king of the digital disk kingdom may have to answer calls to share his throne with a new generation of disk players or abdicate.


IT’S EVD: Shinco pushes its new generation of disc player after DVD to the market nationwide

New Products Show up

On the first day this year, Jiangsu Shinco Electronic Group Co. Ltd., one of China’s major DVD producers, spun its latest generation of disk players into Beijing markets. The high-definition product, deemed enhanced versatile disk (EVD) player, was developed in China with home grown intellectual property alleged to have improved upon the definition of its predecessor, the DVD, five times over.

EVD technology was developed by Beijing E-World Technology, a company established in 2000 by China’s nine major disk player producers, such as Shanghai General Electronic Digital Technology Co. Ltd., Shinco and Amoi Electronics Co. Ltd.

“So far, 10 enterprises have adopted EVD technology. These enterprises are the backbone of China’s disk player market with a combined market share of more than 80 percent,” Hao Jie, President of E-World Technology, told Beijing Review.

However, the next-generation post-DVD disk players have yet to produce a clear heir apparent. Only 16 days after EVD debuted in Beijing, Haicheng Gaoqing, another digital device manufacturer in Beijing, announced it had successfully developed a high-definition digital videodisk (HDV) player. According to the company, HDV has similar definition quality with that of EVD but is priced cheaper. Meanwhile, Beijing-based IT product supplier Tsinghua Tongfang declared they have also independently developed the IDVD (Internet DVD) player, further throwing China’s digital disk player market into uncertainty.

“I am glad to see more and more home-made products in the market. This indicates a great demand of high-definition disk players and domestic enterprises are making their own efforts to meet the need,” Hao added.

“Presently, only EVD players are available in stores. We can sell up to 150 EVD players a day in all the Gome chain stores in Beijing,” Yan Qinghai, Manager of the Information Department of Gome, told Beijing Review. Gome is one of China’s largest chain stores specialized in retail of household electric appliances. The company has invested several million yuan in Haicheng Gaoqing for HDV development, according to sina.com, one of China’s leading portal.

“The industrial standard of EVD has been drafted and submitted to the Ministry of Information Industry (MII),” said Hao, adding it is very likely to be approved and become the national standard.

Besides the 10 major DVD producers in China, EVD also gets strong governmental support. According to Liu Dan, Chief of the EVD Standard Drafting Panel under the MII, the National Development and Reform Commission, the Ministry of Science and Technology, the Ministry of Commerce, the State Intellectual Property Office and the MII had agreed to coordinate support to and guide EVD development through policy.

Out of the Shadow

China’s DVD industry develops quickly and maintains high growth in export. In 2001, China became the world’s largest DVD production base largely due to low labor costs. In 2002, the export value of China’s disk players, mainly DVD players, exceeded that of color TVs for the first time to reach $3.5 billion, making the sector a highlight of China’s electronic industry. Figures from the National Bureau of Statistics show that in the first eight months of last year, China exported a total of 34.04 million DVD players, a rise of more than 90 percent year on year. Presently, market demand for DVD players worldwide is approximately 40 million, 90 percent of which are produced in China.

The rapid development of China’s DVD industry greatly affected the interests of foreign DVD producers. In 1999, 6C (the patent protection alliance formed by six technology developers: Hitachi, Panasonic, Toshiba, JVC, Mitsubishi Electric and Times Warner) claimed that it owned the patent rights of DVD core technology and required all DVD producers worldwide to pay patent fees to it. Chinese DVD producers are required to pay $20 for each DVD player produced.

The claim greatly truncates the cost advantage of more than 100 DVD player producers though the patent fee was finally reduced to $13.8 per unit after hard negotiation.

China started its development of core technology for the post-DVD generation of disk players only half a year after the 6C imposed the patent fee on Chinese DVD player manufacturers. In 2002, E-World Technology developed the high-definition disk player, EVD, followed by HDV initiated by Haicheng Gaoqing and IDVD by Tsinghua Tongfang in 2004.

China Going Digital

The EVD player is designed to multiply by five DVD picture definition. However, high quality pictures can only be enjoyed with high definition TV sets.

“China currently has over 100 million analog TV sets and these TV sets will be gradually replaced by high definition digital TV sets in the near future. The large digital TV set market will feed the high definition disk player market,” said Chen Hua, Manager of Marketing Department of Amoi.

“Major TV producers are energetically promoting their high definition TV sets including LCD digital TV sets and rear projection TVs,” said Fan Wenjian, Deputy General Manager of Shinco, which produced China’s first EVD player. A salesman at Suning Appliance Chain in Beijing told Beijing Review that starting last August, high definition TV sets sales in his store has picked up, accounting for 60 percent of TV sets sold.

Prevalence of digitalized TV program production also adds to the consumer enthusiasm in high definition TV sets. During the 2008 Olympic Games in Beijing, high definition sport programs are expected to be broadcasted digitally. Sources from the State Administration of Radio, Film and Television say that China will stop all the analog TV programs by 2015. So it’s only a matter of time before digital TVs will replace most analog ones.

“In the near future, all TV programs will be sent by high quality digital signals and, accordingly, TV sets will be upgraded. It makes sense to have high definition disk players to go with this trend,” added Chen.

Battle of Red and Blue

EVD and other disk players in current Chinese markets still use a technological standard to read discs adopted originally in DVD players referred to as red laser. Meanwhile, nine electronic multinationals including Sony, Panasonic, Hitachi, Sharp, Samsung, LG, Pioneer, Philips and Thomson put forward a totally new disk memory format—blue laser format. The competing technologies read discs that are mutually incompatible. But the consortium hopes to apply the new one to the next generation of DVD players.

In early February, Hewlett-Packard Co. and Dell Inc. announced support of blue laser technology. Dell says it will use the technology in future products because of its superior memory capacity—six times that of DVDs. One blue-laser disk can continuously play high definition programs for 4 hours.

“It is still too early to say that Chinese customers will prefer blue laser disk players. The Chinese market will speak for itself. Gome responds to those consumer needs,” Yan Qinghai of Gome told Beijing Review.

Since blue laser technology is totally new and cannot read red laser disks, consumers would have to trash all their red laser discs based on VCD, SVCD and DVD standards and restock their video library with blue laser discs. Their choice of disks would be reduced. Producers would have to establish a totally new product line for blue-laser disk players. Costs would rise, at least initially.

“The main advantage China-made products have is their low production cost and we must give play to this,” said Hao of E-World Technology. According to Hao, EVD player producers can keep investment stable while shifting production from DVD to EVD players. Selective upgrading will enable DVD producing lines to produce EVD players.

Hao told Beijing Review that E-World Technology has successfully developed a new EVD model that has comparable memory to blue laser product [16G] but features much lower costs. The new product will be put into market according to the demands.

“Research and development of new-generation EVD players has been completed and we will gradually introduce them into the market to meet consumer demands. A product series that can meet market demand will thrive in the market,” said Hao.