The world's biggest makers of chips for DVD players, MediaTek Inc (
While second-half sales usually rise from the first-half, "this year, the difference isn't going to be that much," Tsai Ming-chieh (
Chin Wu (
DVD player sales soared following the Sept. 11 terrorist attacks after people canceled travel plans and spent more on home entertainment, analysts said. This year, consumers in the US have less disposable income after taking advantage of zero-interest loans from automakers to buy new cars, investors said.
"Christmas is going to be far below expectations," said Samir Mehta, who helps manage US$2 billion in stocks for Lloyd George Management in Hong Kong and is planning to sell his stake in MediaTek. "The spending pie has now been taken away by cars."
MediaTek and Ali, both based in Hsinchu, sell most of their chips to Sichuan Changhong Electric Co (
Those price cuts caused an explosion in DVD player sales at the end of last year, benefiting MediaTek and Ali. Shipments of DVD players this year will rise to 49 million units, or 48 percent, from 33 million sets last year, US-based market researcher iSuppli Corp said last month.
Signs indicate the surge in sales is now stalling.
Fremont, California-based ESS Technology slashed its third-quarter sales forecast yesterday to between US$60 million and US$64 million from an earlier estimate of US$86 million to US$90 million. The company also said it expects fourth-quarter sales of between US$53 million and US$57 million.
Second-half sales may decline as much as a third from the first half, ESS Technology said.
"As we go into the Christmas season, we are now finding that worldwide demand has slowed down surprisingly in the latter part of the quarter," ESS Technology President Robert Blair said in a statement. "We expect fourth-quarter prices to fall 10 percent to 15 percent from the third quarter." Some of its largest customers are based in Japan and South Korea, ESS Technology said.
"The third quarter has slowed down," said Ali's Wu. "Last year, we saw a pickup at this time. This year we haven't seen that happen."
Second-half sales, which typically account for 60 percent of full-year revenue, may be about 50 percent this year, the companies said. The slowdown indicates that consumers in the US aren't willing to spend even the US$80 to US$100 that inexpensive Chinese-made DVD players cost, investors said.
That puts pressure on the price of DVD chips. "Some prices are going lower," MediaTek's Tsai said. "Customers are still working down inventory."
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