Manufacturers grapple with dilemma of selling in conflicting arenas
Mainland electronics makers are lining up behind Chinese technology standards, despite higher manufacturing costs and doubts about whether home-grown products can succeed.
Efforts to promote mainland-developed standards are aimed at reducing dependence on foreign technology and, hence, licence fees. But this could fragment the global market for technology goods, requiring manufacturers to make two sets of products: one for China and one for the rest of the world.
'Following the Chinese standard can help you gain access to the China market, but it will also increase your costs, such as qualification costs... R&D costs,' iSuppli analyst Byron Wu said.
'If companies want to ship their goods out of China, they must follow international standards instead of merely their own.'
One company pushing into the market for enhanced video disc (EVD) players is Shinco Electronics, which has produced 100,000 machines. The company's EVD player, the EVD-8830, sells for $1,888 in Hong Kong and carries a similar price on the mainland.
'Although EVD is a mainland technology, customers who have bought EVD players are Hong Kong people,' said a saleswoman at Jusco, the only department store in Hong Kong to sell the machines. 'They have higher acceptance towards the new technology and want to be trendy.'
She said EVD players had been available for about three months, and about one in every four video machines it sells was compatible with the standard. The $1,888 price tag is about double that of ordinary DVD players. Furthermore, to gain consumer acceptance, the player supports DVD, which adds to Shinco's licensing costs instead of lowering them.
DVD royalties are about US$13.80 per machine, while the cost is $2 for EVD.
Another company working in this area is EVD Computer, which recently placed an order with Hong Kong-based Culturecom for one million units of the company's combined central processing unit and motherboard.
EVD Computer will make a 'three-in-one' product combining a basic computer, television set-top box and EVD player.
Beijing-based E-World Technology said its EVD players had been shipping across China since January, targeting big chain stores such as Gome Home Appliances.
'EVD quality is absolutely better than DVD because it has double the line resolution,' an E-World spokesman said.
A source at Legend said the mainland's largest computer maker did not have any plans to sell PCs equipped with EVD players. 'It's still too early to say whether we will use EVD players in future, because we only develop products the market demands,' the source said.
But Legend is pushing ahead in wired authentication and privacy infrastructure (Wapi), the mainland standard for wireless internet technology. The company is one of 24 holding a licence for the standard.
According to reports, Legend has teamed up with BenQ of Taiwan to offer Wapi-compliant notebooks. A spokeswoman confirmed BenQ was planning Wapi products for the mainland but declined to elaborate.
Other companies to express interest in Wapi include United States chipmakers Texas Instruments and Atheros. A recent iSuppli report estimated the mainland market for wireless networking equipment grew 119 per cent to US$35 million last year and should reach $279 million by 2007.
But growth could be hindered by a switch to Wapi from Wi-fi, the global standard. ISuppli analyst Kevin Wang said mainland equipment makers were adjusting to Wapi by adding hardware or updating software, but this could lead to higher prices for customers and interoperability problems.
IDC analyst Adrian Ho said growth in the wireless internet market could slow as companies adopted a wait-and-see approach to Wapi. With opposition from industry giants such as Intel, some market watchers believe China could eventually back down from the standard.
But the Legend source was not worried. 'Even if Intel doesn't follow the game rules, there are other market players such as AMD who haven't decided yet,' he said.
