Wed, Jun 05, 2002 page17

• Ritek enters DVD market

  • BLOOMBERG
  • • 
    • 
    • 

  Ritek Corp (錸德科技), the world's biggest manufacturer of blank compact discs, said it will counter an expected 50 percent decline in first-half profit by shifting from discs that contain music to those that hold feature-length films.

  "Our first-half profit will be less than half that of a year ago," Daniel Yao (姚鍾智), Ritek's chief strategic officer, said in an interview. However, second-half net may be up as much as 30 percent, he said, an estimate he called "very conservative."

  His forecasts signal profit of about NT$700 million (US$21 million) in the first half and NT$1.9 billion in the second. The company's ability to deliver depends on how much competition in its bread-and-butter CD business suppresses prices and on how quickly the company can lower production costs in its new flat-panel display business.

  Ritek's entry in the DVD disc market comes as Japanese manufacturers of home movie players are phasing out videotape systems in favor of players that can air a full Hollywood blockbuster from a single disc. Prices of DVD players have dropped to as little at US$80, putting them within reach of more consumers.

  "Recordable discs are a fast-moving industry," said Mark Mobius, who manages about NT$4 billion he manages in Asia for Templeton Asset Management Ltd. "Recordable DVDs are expanding at a very rapid pace."

  Indeed, Ritek expects sales of the digital video discs to account for 10 percent of revenue this year, surging from less than 1 percent last year. That's good news for a company that makes a 50 gross margin on each sale. By contrast, margins on blank compact discs almost disappeared in the last year as more rivals entered the business, Yao said. A blank disc sells for as little as US$0.23 in Hong Kong.

  He said Ritek will ship about 80 percent of this year's production of DVD discs during the second half. He said he expects profit margins to rise to as high as 30 percent in its mainline CD business. Persistent competition from the likes of CMC Magnetics Corp (中環) of Taiwan and Moser Baer India Ltd may dash those forecasts.

  Ritek isn't counting on DVD discs alone to reverse poor profit. It's also developing its flat-panel display business, with investment from Intel Corp, DuPont Co and General Electric Co.

  "We expect sales of the displays this year to be worth NT$20 million to NT$30 million," Yao said. ``Next year, sales will be over NT$100 million.''

  That may rank Ritek second to Japan's Pioneer Corp in world production of a new Eastman Kodak Co technology -- called organic light-emitting diode technology -- to be used in dashboard displays, cellphones and hand-held electronics.

  "There's going to be terrific competition," Mobius said. "The jury's still out on that. The key is how fast they get mass production up and running and bring down production costs."

  Yao said the company shipped its first displays to an unidentified cell-phone maker in Taiwan that supplies handsets to American and European customers. By the end of this year, the display unit will add two production lines to one already in operation. One of the lines will make full-color screens and the other will use DuPont know-how called poly-organic light-emitting diode technology, which produces brighter and thinner panels than those sued in notebook computers.

  Yao said Ritek will spend as much as NT$200 million this year on expansion of disc and flat-panel businesses.

  Comments will be moderated. Keep comments relevant to the article. Remarks containing abusive and obscene language, personal attacks of any kind or promotion will be removed and the user banned. Final decision will be at the discretion of the Taipei Times.
• Most Popular

  • 1

    F-16 Block 70 jets to arrive this month, official says

  • 2

    Taiwan-Tokyo travel pass launched

  • 3

    Chinese man captured on a rubber boat

  • 4

    Manila pulls ship from Sabina Shoal

  • 5

    US, EU joint statement backs Taiwan