A massive 37 percent drop in the wholesale price of recordable compact disks this year has hurt the bottom line of Taiwan's top three CD-R makers, analysts say.
Ritek Corp (
"Last year's price was so good, but CD-R prices have crashed [since then]," said Shaun Lee, assistant public relations manager at Ritek. Last year CD-R disks were selling for as much as US$0.28, and this year they have hit a low of US$0.14, he said.
Computer users are increasingly using CD-Rs to store and back-up data. Looking like a traditional compact disk, a CD-R disk can only have data "burned" onto it. Alternatives, such as rewritable CDs (on which data can also be erased and rewritten) and recordable DVDs are 10 times as expensive, and have therefore not been widely accepted by consumers.
Analysts said demand had not risen, increasing the problems of oversupply.
"If we compare the prices of CD-R disks in September last year, they were US$0.24 per disk, but now they are only US$0.15 to US$0.18. That's a huge difference," said Nathan Lin (
"Even though production levels have remained the same, demand has not increased, so revenues are down," he added.
Ritek's sales for September were NT$1.4 billion, compared to NT$2.4 billion last year, a 41.7 percent decline year on year. However sales were slightly up on August's, by about 7 percent.
At CMC the decline was not so steep, but still more than a quarter down on last year. In September last year, CMC reported NT$1.97 billion in sales, 27 percent more than this year's NT$1.44 billion figure. It also experienced a slight increase on its August sales, up 1.7 percent month on month.
"Last year's unit price was the best, and our sales performance was the best. Demand was very strong and there was very little effect from the 911 events in the US," said CMC spokeswoman Sammy Luo (
At Prodisc, the drop in year-on-year sales last month was not so great. Taiwan's third largest CD-R producer saw a 22.7 percent decrease in sales from NT$665 million to NT$514 million. Prodisc also saw a drop in month-on-month sales, down just more than 4 percent from August. Prodisc's public relations manager, Jennifer Chien (
Analysts point to a possible light at the end of the tunnel for the industry. Last year all of Taiwan's CD-R producers were taxed by the EU, which was alarmed by effect a huge number of cheap, Taiwan-produced disks might have on its 15 member countries. This year Taiwan's biggest rival -- Microboards India (MBI), a branch of the US conglomerate Microboards Technologies Inc -- will be taxed instead, according to SinoPac's Lin.
"There is an inventory build-up in the European Union at the moment as distributors expect India's MBI will be penalized [by the EU] with an anti-dumping tariff. The distributors expect the contract price of CD-Rs to increase to reflect the tariff and are building up stocks now," Lin said.
However, Lin dismissed the inventory build-up as a temporary effect. He does not expect unit prices to increase next year, even though CMC is planning to hike unit prices by 15 to 18 percent in an attempt to lead the industry out of its present doldrums.
"Ritek is still cautious as it is expecting an oversupply at the start of next year. Real demand will also not increase, so I am not positive about CMC's plan," he said, adding that it would be a major problem for CMC if Ritek and Prodisc don't follow its price increase.
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