Industry News
Blu-ray takeoff tied to ICs from Taiwan
Posted : April 24, 2008
Blu-ray player
The higher cost to develop Blu-ray products, lack of high-definition content, and small penetration of Blu-ray players and discs are still major obstacles for suppliers.
Taiwan – Now that Sony has won the battle for the high-definition DVD standard, the million-dollar question is: when will the makers in mainland China, Hong Kong and Taiwan join the Blu-ray bandwagon? The answer boils down to one simple fact: when chipmakers in Taiwan will have the IC solutions ready for Blu-ray players.
Although a few makers in mainland China have already launched Blu-ray DVD players based on IC solutions from the US chipmakers, by their own admission, these are first-generation products and require significant overhaul in terms of design and cost structure.
The end of the format war between Sony’s Blu-ray Disc and Toshiba’s High-Definition Disc has dispelled the uncertainty for high-definition standards and inspired more manufacturers to develop Blu-ray products. However, the higher cost to develop Blu-ray products, lack of high-definition content, and small penetration of Blu-ray players and discs are still major obstacles for suppliers.
Although there is a keen interest in high-definition content at the moment, big volume shipments are still a long way off. Makers agree that there is not much potential of mass production until they see support from solution providers, especially from chipmakers and design houses in Taiwan.
The main handicap is the cost difference with standard DVDs, which have seen a price drop over time. So the takeoff of Blu-ray is not likely anytime this year. Most DVD makers in mainland China, Hong Kong and Taiwan have pushed their Blu-ray manufacturing plans to 2009.
Cost barriers
There is clearly a market for suppliers in Hong Kong, mainland China and Taiwan, but solutions are still under development and a greater level of technical support is required, both in terms of cost and hardware/software features.
According to Albert Tam, executive director at Coby Electronics Co. Ltd, the bill of materials for Blu-ray DVD is around $100 and that is too high.
The good news is that MediaTek Inc. is planning to launch its IC solutions in August this year. Given MediaTek’s history of bringing down DVD chipset costs, this is being seen as a crucial development.
Blu-ray is a brand-new industry that requires new hardware and software solutions, so makers are relying on their component providers for developing Blu-ray players.
Currently, Broadcom Corp. and Sigma Designs Inc. of the United States are the key suppliers of Blu-ray chips, and their chips and accompanying design solutions come with a higher price tag.
“Small and midsize makers will follow the trend and there is no pressure either from the buyer or the consumer side,” said Coby’s Tam. “Consumers are not likely to pay a higher price for low content.”
For starters
Dalian-based China Hualu Group Co. Ltd and Hong Kong-invested Gowell Enterprises International Ltd recently showcased working samples of Blu-ray players in Hong Kong. Winbase Electronics Corp., one of the major DVD players in mainland China, is planning to release a Blu-ray player in the second half of this year.
“We have designed several cabinets for the Blu-ray player to meet the requirements of different customers,” said Max Han, marketing executive at Gowell. “Our chip supplier Broadcom provided necessary support on software solutions while we carry out board layout and cosmetic design in-house.”
Hualu is also backed by Sigma Designs, a major supplier of decoder ICs for Blu-ray players, and Sony, which dominates production on Blu-ray pick-up heads.
“We develop application software in-house with a team of 40 engineers dedicated for Blu-ray product design,” said Steven Liu, vice director of R&D center at Hualu.
One of mainland China’s largest DVD player makers, Hualu has a strategic partnership with Panasonic on A/V products in the region. The company is also planning to produce Panasonic’s Blu-ray players through their joint venture, Hualu-Panasonic Audio and Video Co. Ltd.
Beginning not end
According to Taiwan’s Market Intelligence Center (MIC), the readiness for high definition on the equipment side is less than 25 percent for respective product lines (see table). The figures indicate that the demand for a high-definition visual experience may still be lukewarm.
The end-users seem satisfied with current video standards and are reluctant to switch to high-definition, especially when it costs more to purchase high-definition products -- Blu-ray movies, Blu-ray players, etc. -- than to get standard DVD ones.
The Blu-ray industry’s main enemy, therefore, may be the standard DVD. In a press conference in Taipei on April 3, Sony Electronics president and CEO Ryoji Chubachi indicated that DVD and Blu-ray account for about 80 percent and 20 percent, respectively, of global demand for movie discs.
Sony obviously recognizes that winning over the HD-DVD format is only the beginning of the war. It will soon release a comprehensive line of Blu-ray products, from entry-level to high-end, to boost the global market.
Content dearth
Besides video players and recorders, makers need to make some progress on other Blu-ray products. The lack of content is among the key impediments.
Liu of Hualu acknowledges that there is not sufficient content, adding that discs are expensive and not available in higher volume. However, he expects Hollywood to drive the content and provide necessary impetus for efforts from Sony and Panasonic.
“We will launch the first Blu-ray Disc production line in mainland China in April 2008,” said Chuanfeng Ren of Hualu. The company is also cooperating with film producer and importer China Film Group Corp. to release Blu-ray movie discs in mainland China.
IPR no big deal
In an interview with Taiwan’s Economic Daily News, CMC Magnetics Corp. president Ming-Hsin Weng said that high licensing fees for Blu-ray will influence manufacturers’ inclination. CMC Magnetics is one of the leading suppliers in optical storage media -- CDs, VCDs and DVDs.
Surprisingly, however, Blu-ray royalties seem to be the least of the worries for DVD makers in mainland China. Alexander Kupfer, managing director at Nextbase GmbH, says that intellectual property rights (IPR) will not be a big deal as the cost structure would be similar to standard DVDs. “It is going to be the same business model.”
Until now, the Blu-ray Disc Association (BDA) has not announced fees while DVD’s licensing fee has been reduced gradually. If the BDA is able to offer a win-win policy for both IP owners and manufacturers, it will increase Blu-ray’s market penetration.
Blu-ray DVD makers in mainland China estimate a license cost of $20, while the overall manufacturing cost could amount to $190.
Gowell’s Han notes that the similar product evolution curve took five years for DVD. He reckons it could be a similar story for Blu-ray players.
