Having achieved a coup by releasing leading-edge technology ahead of its competitors, Taiwan's largest designer of DVD player chips, MediaTek Inc (
MediaTek recently released a single combined chip that will replace the two chips currently used inside DVD players.
"MediaTek holds over a 50 percent share of the DVD-player chip market, including single-chip and servo chip solutions," said Benny Lo (
DVD players include a servo chip that helps to read the data on a DVD disk, and an MPEG-2 chip that decompresses video data that has been stored on the disk.
The release of the new chip has boosted MediaTek's sales. The company reported yesterday that its third-quarter net income rose 40 percent on the second quarter, making a profit of NT$2.6 billion. This is 37 percent higher than the same period last year.
Other Taiwanese DVD chip designers are struggling to reverse MediaTek's lead.
"We are trying to catch up. The single chip is a major issue as MediaTek was first to market," said Gina Chao (趙蕙文), public relations manager at MediaTek's closest local rival, ALi Corp ([揚智科技], formerly Acer Laboratories Inc).
ALi's own single-chip solution will go into mass production by the end of this year, she said.
ALi's delayed entry into the market has already impacted its revenue. ALi posted strong sales results in the first two quarters, but has seen revenue slip in the third quarter -- down over 13 percent on the second quarter, and down 3.4 percent over the same quarter last year.
DVD chips make up around 60 percent of the company's sales.
"ALi has already missed cashing in on the holiday season and has to catch up in the Lunar New Year [February 2003]," Lo said.
The reason for ALi's delay in releasing its single-chip solution was not a lack of technological expertise.
"ALi has more experience in MPEG-2 technology, and they have waited longer to perfect their single-chip solution," Lo said.
MediaTek launched its first product without specific features, such as a TV-encoder and progressive scan, which ALi included in its first generation chip. MediaTek has since added these features to its products.
ALi will need time to recover, pundits say.
"It should still take some time -- I would say next year," said Arthur Hsieh, analyst at ABN AMRO.
"The design-in process takes three to nine months, and ALi launched its single-chip solution only at the end of September. DVD vendors in China may not have the incentive to ship ALi's solution because the cost advantage that MediaTek's single chip can provide is too attractive."
Some non-MediaTek customers may adopt ALi's solution, he said.
"The two will not compete directly until the second quarter of 2003," Hsieh said.
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