Optical drive and disc manufacturers must expand to survive in view of the ferocious competition in the industry, the head of a major local optical disc manufacturing company said yesterday.
CMC Magnetics Corp (
Noting that the optical media industry has a clear boom-to-slump cycle, Wong said the industry's well-being hinges on the supply and demand situation. In the past few years, Wong said, CD-Rs have been in oversupply because demand has shifted to DVDs.
Global demand for CD-Rs is estimated at around 9.5 billion units, while supply is expected to drop to between 8.5 billion and 9.0 billion. In contrast, the demand for DVDs has been rising, Wong said, adding that global demand for DVDs amounts to 4 billion units this year, with the figure expected to grow to 6 billion units next year.
There are about 400 CD-R manufacturing firms globally, but only 20 DVD makers because of the high technological barriers to production. At the moment, Wong said, only three companies are capable of producing double-layer DVDs and CMC Magnetics is the only one that can produce 8x double-layer DVDs.
According to Wong, the optical media industry has undergone structural changes in the past couple of years, including the rise of the DVD market. With CD-R demand shrinking rapidly and prices for petrochemical raw materials skyrocketing, many CD-R makers who have failed to shift into DVD production have been forced out of the market.
Wong said petrochemical material prices account for 40 percent of the cost of a DVD, crude oil price hikes have seriously affected DVD makers' profit margins.
Wong predicted that petrochemical prices will begin to drop in the fourth quarter of this year. This trend will help cut DVD production costs and contribute to market growth, he said.
Wong added that his company's earnings in July and last month covered all of its losses in the first half of the year, and that profits for this month will hit an all-time high.
"We believe our company's profits will grow by leaps and bounds from the second half of this year through next year," Wong said.
Taiwan has been the world's biggest supplier of optical drives and discs for several years. Taiwanese manufacturers produced an estimated 105 million drives last year, according to the Taipei-based Market Intelligence Center (
The Industrial Economics and Knowledge Center (IEK), another market research firm based in Taiwan, estimated that the nation shipped 6.8 billion optical discs last year, with a value of US$1.9 billion.
Taiwan accounts for a majority of the global output of the major optical disc formats: CD-R, 69 percent; CD-RW, 84 percent; DVD-R, 75 percent; CD-ROM, 47 percent; and DVD-RW, 62 percent, according to the IEK.
There are about 10 manufacturers of optical drives and 15 suppliers of optical discs in Taiwan. CD-ROM and CD-RW drives, and CD-R and CD-RW discs remain the bread-and-butter for most manufacturers. Because of thinning profit margins for CD-based products, leading suppliers have been shifting their focus to DVD rewritable drives and discs.
Some of Taiwan's top optical drive manufacturers concentrate on R&D and subcontract production to electronics manufacturing services companies.
Taiwanese manufacturers expect the monthly output of optical drives to increase by an average 27 percent this year. DVD drives account for more than half of suppliers' output, a trend that is expected to intensify this year. DVD dual drives, at the top of the line, account for 18 percent of total output.
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