MediaTek Inc (聯發科技), the world's largest maker of chips for DVD players, and rivals face their first drop in sales next year as demand growth slows, an analyst said.
"Excessive inventory combined with traditionally slow first-quarter sales will put a damper on DVD player and recorder semiconductor sales well into next year,'' said IdaRose Sylvester, an analyst with market researcher IDC Corp.
Sales of chips used in players will slip for the first time to US$1.55 billion next year from US$1.6 billion this year, she said.
Average selling prices for a DVD player will drop to US$55.49 next year from US$67.78 this year, she said.
Third-quarter profit at Hsinchu, Taiwan-based MediaTek slipped to NT$4.2 billion (US$124 million), or NT$5.52 a share, from NT$4.5 billion, or NT$5.91, a year earlier. Net income fell for the second straight quarter following a series of gains after the company listed its shares in July 2001.
The company sells most of its chips to Sichuan Changhong Electric Co (四川長虹電器) and rival DVD-player makers in China. MediaTek's customers captured the bulk of the market more than two years ago.
Average selling prices for chips used in DVD players will fall by about 16 percent next year compared with about 2 percent this year, Sylvester said.
MediaTek's market share for DVD controller chips in the first half this year slipped to 39 percent from 65 percent, according to Merrill Lynch & Co. Zoran Corp, a Sunnyvale, California rival, raised its share to 17.7 percent from 4.5 percent in the same period, Merrill Lynch said in a report.
Zoran has excess inventory that it needs to write off, Sylvester said.
During the second quarter, Mediatek's profit dropped for the first time after the company lost market share and prices fell.
Gains in sales of DVD players may diminish this year as consumers switch to models that can record television and other video programs, some analysts said.
"Growth will slow to 22 percent in 2004 and to a marginal 2 percent in 2005," ISuppli Corp analyst Jonathan Cassell said in a Sept. 2 report.