Wang Kun charges the equivalent of US$35 to swap a factory-made chip in a Sony Corp DVD player with one that can play discs meant to be shown only in North America or Europe.
From his shack on Nanjing Road, Shanghai's main shopping street, Wang is unapologetic about his role in helping scupper industry efforts to constrain piracy by restricting where and when DVDs can be played. "Consumers in the information age want choices," he said.
Analysts say that kind of attitude isn't limited to freelance repairmen like Wang. It may lie behind the refusal of most Chinese makers of DVD players to pay royalties to Sony and Toshiba Corp on patented technology. It also helps explain why Chinese companies are gaining on rivals in what El Segundo, California- based industry consultant iSuppli Corp calls the fastest-growing consumer electronics market.
"Japanese companies' big fear is when the Chinese will take over the business," said Jay Srivatsa, an analyst at iSuppli who expects global sales of DVD players to quadruple by 2006 to US$14 billion.
The market is tipping in favor of Chinese companies like Sichuan Changhong Appliances Co, which says the 6 million DVD players it makes a year give it 15 percent of the global market.
The more than two dozen Chinese DVD firms include Qingdao Haier Co, the nation's biggest household appliance maker, and Konka Group Co, the second-largest television maker.
The combined global market share of Toshiba, Sony and Matsushita Electric Industrial Co shrank to 42 percent this year from 60 percent in 2000, iSuppli estimates.
Avoiding royalty payments isn't the only reason that Chinese manufacturers of DVD players can sell their products for as little as US$80. Labor costs are as much as 30 times lower in China than Japan, a major factor in the ability of Chinese companies to undercut rivals by as much as 90 percent.
Chinese DVD companies use computer chips made by Taiwanese companies such as MediaTek Inc (
Acer, a Taiwanese chip designer, swung to a first quarter profit NT$95 million (US$2.7 million) on rising demand from China and South Korea.
Chinese players are technologically superior to Japanese rivals in one respect: they can crack codes imprinted on disks that carve the world into three regional markets. The industry developed the codes to allow DVDs to be introduced to select markets one at a time.
Some Hollywood heavyweights see the market potential for such technology. Arnold Schwarzenegger pitches products in China for BBK Electronics Co, helping the Guangzhou-based firm sell phones, electronic learning aids and even DVD players. BBK's machines can play Schwarzenegger's limited-edition Total Recall DVDs -- released only in North America so far -- just as readily as for audiences in China.
Now, Japanese companies, joined by Royal Philips Electronics NV and other patent-owning companies are trying to force Chinese rivals to pay a US$20 fee for each player sold in Europe or the US.
They're also threatening to lobby the government to impound Chinese machines that haven't paid royalties.
In addition, Sony and Matsushita said in February they were developing new technology that can store six times more data on their discs, creating pictures and sounds that are crisper than current DVDs. They didn't say when machines compatible with these new standard would be available.
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