| Taiwan DVD Makers See Losses Following Price Cuts
April 1, 1998 (TAIPEI) -- Some Taiwan DVD player makers are
losing money after cutting prices to compete in the market.
|The makers have been working hard to catch up with foreign
heavyweights in the manufacturing of second-generation products.
In an effort to boost sales, some have even been setting prices
lower than their production costs.
While DVD players debuted in world markets in 1996, the local
market did not begin to form until early 1997.
Prices of products from Matsushita Electric Co., Ltd. have served
as an indicator to other competitors.
Since both Matsushita and Pioneer Electronic Corp. have recently
introduced to the market models that sell for about NT$23,000
(US$701), other companies are expected to follow suit and reduce
the prices of their products.
For example, Acer Sertek Inc. decided to sell a new DVD player
model that will debut in early April at a price of NT$22,900.
Esonic Corp., which plans to begin offering DVD-ROM players in
June, is likely to follow suit.
However, DVD player makers here said that as costs of key
components and technology royalties vary from manufacturer to
manufacturer, some local companies are actually selling products
at prices that cannot cover production costs.
Currently, prices of key components for DVD players are still in
Hardware production costs may thus account for anywhere from 50
to 70 percent of a manufacturer's overall production costs, while
royalties may account for anywhere from 7 percent to 10 percent.
As a result of these great differences in key component prices
and royalties, there are also great gaps in overall production
costs among various companies.
But since vendors are hesitant to set prices higher than its
rivals, some companies have been forced to cut prices and accept
low profit margins, or even losses, in order to follow market
Related story: DVD Player Sales in Taiwan Won't Increase Soon
OR: (Commercial Times, Taiwan