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Media The Almighty Buck

DVD Player Maker's Margins just $1 397

Posted by CowboyNeal from the buyer's-market dept.
callipygian-showsyst writes "This news.com story tells how Chinese DVD player manufacturers are only making $1 margins per player! The story says that 'Commoditization is hitting China's DVD player manufacturers hard, according to researcher iSuppli, Between January and May, the average selling price of a DVD player exported out of the Guangdong province came to $40.80, leaving just about $1 in profit margins for the manufacturers.' You wonder if other business, like low-end PCs hardware, are in similar trouble."
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DVD Player Maker's Margins just $1 More

DVD Player Maker's Margins just $1

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  • Wonderful (Score:5, Funny)

    by awaspaas ( 663879 ) on Saturday August 14, 2004 @04:08PM (#9969310)
    And all so that some trailer trash lady can get trampled for an Apex DVD player the day after Thanksgiving...
    • Actually it's been suggested that she faked it for money.

      http://www.cbsnews.com/stories/2003/12/05/nation al /main587049.shtml

  • blast! (Score:5, Funny)

    by true_majik ( 588374 ) on Saturday August 14, 2004 @04:08PM (#9969315)
    i knew i should have waited 10 years instead of getting that $300 dvd player!
    • 300 ? cheapskate !

      I recall my previous employer buying one of the first, SINGLE SPEED CDI-writers (when CD-rom was nonexistant due to lack of players in PCs) 15 years ago or some...I Think the price was around 7500$ or somthing like that. Slow as hell, tons of failures and 20$ per blank disc. Fortunately, pr0n images were usualy black&white dithered RLE BMPs at 5K or so :-)

  • Cell phone makers would be jealous... (Score:5, Insightful)

    by datastalker ( 775227 ) on Saturday August 14, 2004 @04:08PM (#9969316) Homepage
    ...since they sell their hardware at a loss. (Granted, they get money from the service subscription.) Microsoft loses billions of dollars on the XBox, to sell games. This is common, and will be getting moreso. It won't be long before hardware is essentially free, and the software/services you buy are where the money is generated.

  • Its all about volume (Score:5, Insightful)

    by nurb432 ( 527695 ) on Saturday August 14, 2004 @04:10PM (#9969325) Homepage Journal
    That is the 'new' economy.. Forget the days of high profit items for most industries that
    are technology related.

    This is a byproduct of more efficient manufacturing, and in many cases, *fair* competition..
    ( something that we don't currently have in this country , but that is a different subject )

    Don't expect this trend to change any anytime soon either...

    Too bad it also means fewer jobs to make the money to buy the cheap items... Since it takes fewer people to make the same # of items it did 10 years ago.

    • Re:Its all about volume (Score:4, Insightful)

      by Anonymous Coward on Saturday August 14, 2004 @04:23PM (#9969422)
      That is the 'new' economy.. Forget the days of high profit items for most industries that
      are technology related.

      This isn't "new" at all. $1 on a $40 COGS is 2.5% NET margin. Dell gets by on 4% NET margin. NET margin is what you get after you've paid all your bills. It's what goes in the bank at the end of the month. Most households get by on 0% NET margin. In other words, they spend everything they make each month.

      Your local HEB, QFC, Safeway, King Soopers, Piggly Wiggly or whatever your local supermarket is called is also living on 1% net margins.

      Nothing big, nothing new.
      • Most households get by on 0% NET margin. In other words, they spend everything they make each month.

        A lot of households get by on a negative margin each month. With mounting credit card debts it can't last forever, and I'm not looking forward to when it ends.

    • Dangerous extrapolation (Score:3, Informative)

      by siskbc ( 598067 )
      Too bad it also means fewer jobs to make the money to buy the cheap items... Since it takes fewer people to make the same # of items it did 10 years ago.

      If you had made that analysis 200 years ago, then we'd have 99% unemployment by now since it currently takes 1 person and a lot of machines to do the work of 100 1800's laborers. The long term outcome isn't fewer jobs, it's more stuff since demand will keep up and lower prices mean a better-stretched dollar.

      In this way, low margins are a sign of a very

    • Too bad it also means fewer jobs to make the money to buy the cheap items... Since it takes fewer people to make the same # of items it did 10 years ago.

      10 years ago, nobody had a DVD player. People will just invent something that will be the equivalent of the cheap 40$ DVD player 10 years from now. If things are cheaper, people can afford to buy more stuff. Instead of a 500$ DVD player, I can now afford to buy a DVD player, a portable mp3 player and a bunch of other things.

    • Re:Its all about volume (Score:5, Insightful)

      by Waffle Iron ( 339739 ) on Saturday August 14, 2004 @04:37PM (#9969533)
      Since it takes fewer people to make the same # of items it did 10 years ago.

      That's not necessarily so. I read an interesting article a while back (I don't remember where, sorry), that covered Ohio Art's outsourcing of Etch-A-Sketches to China. It said that it now takes significantly *more* labor to put together each Etch-A-Sketch because the factory in China is less automated than the American one was. However, the labor is so much cheaper that the overall production cost is still lower.

      IMHO, the US is being lazy and shortsighted by trying to move so much manufacturing overseas instead of focusing on better automation. The manufacturing jobs will be lost either way, but at least with automation we wouldn't be allowing our national capabilies for making anything other than lawsuits or french fries atrophy. We wouldn't be building up such massive trade deficits either.

      • Re:Its all about volume (Score:5, Insightful)

        by foidulus ( 743482 ) * on Saturday August 14, 2004 @04:54PM (#9969647)
        It is also bad for corporations in the long run, but by that time the "geniouses" who engineered this will be out with a golden parachute. Low labor costs really hide the true cost of your product, esp. if you price everything in dollars. It takes more resources to make thsoe etch-a-sketchs in China than it does in the US, but since there doesn't seem to be the need to make labor cheaper, the costs just get hidden(or more likely, passed along to everyone else in the US in the form of higher prices for commodoties like oil and steel). Eventually, those workers won't be so cheap anymore(would happen sooner if China didn't enforce such an deflated yuan), and then the company will be faced with high labor costs and virtually no advances in automation. If they try to fire people, the factory will probably just pump out a ton of rip-off etch a sketches and beat them with their own product.
        But once again, it won't matter to the executives with the golden parachute....

    • Re:Its all about volume (Score:5, Interesting)

      by 7-Vodka ( 195504 ) on Saturday August 14, 2004 @04:42PM (#9969573) Journal
      Quote: Too bad it also means fewer jobs to make the money to buy the cheap items... Since it takes fewer people to make the same # of items it did 10 years ago.

      Well that is good news, because all of those unemployed people can get jobs making even more things efficiently and we can have more choice and variety. There is no shortage of things to discover, invent or build.
      Efficiency isn't a bad thing in itself, it actually leans more to the good side of things. What is bad is when the upper strata of society dominates the gains from our newfound technological wonders and keeps the standard of living for everyone else in a different ballpark to theirs.

      When it only takes 10 workers to make something where it used to take 1000, those 10 workers should be well paid and have decent benefits.

    • I know....it's called "progress". I hate when that happens.....especially in Khazingtibnul or some other obscure state that demands world rights based on a history of oppression. UN......WAHOOOO!

  • And that, my friends... (Score:5, Insightful)

    by Meat Blaster ( 578650 ) on Saturday August 14, 2004 @04:10PM (#9969330)
    Is why outsourcing is such a fantastic idea.

    You play to the strengths of the manufacturing of each country, take out the middleman, and we no longer have to pay inflated costs for everything.

    Kind of wierd to think that it's cheaper to get something made and shipped halfway around the world than it is next door, but if it makes a dollar go farther in this economy I'm all for it.

    • Except that the out of work middleman now has no money to buy these "cheaper" products.

      Everyone is obsessed with cheaper stuff, but no one pays attention to the fact that when you're out of work, "cheap" is still too expensive.
    • It is interesting how this works. GM just announced the "World Engine". Essentially, they will be manufacturing the parts in outsourced countries all over the world, shipping them back to the US, and doing final assembly here. Scary to think that it is more cost effective to ship parts thousands of miles from dozens of suppliers than to make them at home. Even then, GM's margin on autos is razor thin.

      Perhaps we should start looking at why it is so expensive to manufacture here instead of gnashing our t

      • Re:And that, my friends... (Score:5, Insightful)

        by Travoltus ( 110240 ) on Saturday August 14, 2004 @04:36PM (#9969526) Journal
        It's more expensive here because of nasty evil socialist edicts like
        *workplace safety regulations
        *environmental pollution controls
        *the 40 hour work week restriction
        - And that sort of stuff. That is far more expensive than just business taxes alone.

        Global outsourcing is absolutely nothing more than big business's way of saying "this country cares about its environment and its workers and as such we choose to do business where such concerns are nonexistent."

        Corporations do not care about you, or the air, water or soil that they might pollute. They care solely about profit, and when the good of humanity, or its very survival, is at odds with their profit margins, they decide profit margins must win. Thus they threaten us with foreign outsourcing - either we cave in and give them what they want (regulation and lower cost of doing business - which includes eliminating environmental laws and ALL workers' rights), or they leave for another country who will.

        To steal a Rush Limbaugh quote, America is being held hostage.

        • Re:And that, my friends... (Score:4, Insightful)

          by aelbric ( 145391 ) on Saturday August 14, 2004 @04:46PM (#9969603)
          Not to sound degradating, but do you really believe that the people who all run a corporation are trying to do nothing but poison the environment and put us all into economic slavery?

          What I was talking about was a rational approach to reducing the cost of doing business in this country. What do I mean by that? Perhaps we should examine:

          *The ridiculous salary and bonus options paid to company officers of major corporations.
          *Torte reform
          *Healthcare reform
          *Tax reform. Not just changing the rates, but changing how the whole system functions.
          *Sanity in labor contracts.
          *Sanity checks in unemployment benefits.
          *A wholistic view of subsidies, Tarrifs, and duties paid on goods.
          *Intelligent and strategic reviews of foreign aid and grants.

          A business is a living being run by people. It will do whatever is necessary to insure its survival.

          Yes they need to be regulated, but regulated in such a way they can can continue to grow without forcing them to do it at the expense of employees or shareholders. This is something that responsible government should be able to accomplish if we could just stop screaming at each other long enough to focus on it.

          • What I was talking about was a rational approach to reducing the cost of doing business in this country. What do I mean by that? Perhaps we should examine:

            [ ... ]

            *Torte [m-w.com]reform


            You keep using that word. I do not think it means what you think it means.
        • Perhaps you should ask Bush why he consistently favors not imposing trade policies to help the situation:

          hongkong.usconsulate.gov/uscn/trade/general/ustr /2 001/071001.htm
          japan.usembassy.gov/e/p/tp-2003012 2b1.html
          japan.usembassy.gov/e/p/tp-20040305-25.h tml
          www.manufacturingnews.com/news/03/0603/art1.h tml
        • Which is why those "nasty evil socialist edicts" should also apply to anyone who manufactured goods _imported_ into a country. If you can't show proof that whomever made the stuff has the same rights and conditions, you have to ship it back. Would change a whole lot of stuff very very quickly.

          But I guess our goverments will be sufficiently bribed || gotten nutcase agendas before that will ever happen.
    • That's because the cost of oil and highway/air infrastructure are subsidized by taxpayers already to make the cost of the item only appear cheaper.

      Factor in the costs of road/airport maintenance and building, land clearing, emergency funds for things such as oil spills and trucking accidents, political costs associated with maintaining a reasonable oil price, lowered tariffs, and later dollar-value loss from free trade and the prices at your local Best Buy might not feel so cheap.

      • roads aren't subsidized (Score:2, Informative)

        by Trepidity ( 597 )
        The highway infrastructure, at least in the United States, is not subsidized by non-users at all: it's entirely paid for by the approximately $0.30/gallon taxes on gasoline (in some areas supplemented by local gasoline taxes and/or tolls).
        • Really?

          That 0.30 pays for the increased police presence required? Increased medical costs due to crash injuries and pollution?
          (Just to name a couple of usually unnoticed costs.)

          The problem with your statement is, there are no non-users of the road system. Just about everything you buy is delivered by truck, and that delivery cost is part of the purchase price.

          I'd love to see a tracking of the gas tax income, and a reporting of the actual costs of the road system. I think you'd find quite a large dispa

    • Re:And that, my friends... (Score:4, Insightful)

      by Eric Damron ( 553630 ) on Saturday August 14, 2004 @04:23PM (#9969423)
      "(And that, my friends)... is why outsourcing is such a fantastic idea.

      You play to the strengths of the manufacturing of each country, take out the middleman, and we no longer have to pay inflated costs for everything."

      It's not that simple. Out sourcing may in the short run be good for some consumers but it is a two sided sword. For the people that lose their jobs because of out sourcing it is very bad.

      It is also very bad for the small "mom and pop" companies. Only large corporations can afford to do out sourcing so by supporting it you are playing into their hands. They want to squeeze out the smaller companies so that they can better control the market. Once they succeed the prices won't stay cheap anymore.

      Out sourcing is NOT good in the long run for most people.

    • Re:And that, my friends... (Score:5, Insightful)

      by dourk ( 60585 ) on Saturday August 14, 2004 @04:25PM (#9969435) Homepage
      You, apparently, don't work in the manufacturing industry.

      I do. I produce my products in Southern California, even though I pay a huge penalty in wages and insurance and taxes to do so.

      One of my largest competitors is literally around the corner. His products are made in Taiwan/China.

      Even so, MY retail price is lower than his. And my '05 model products are already stocked on the shelf. If he's lucky, his are in a container on a ship waiting to get through customs.

      Your dollar isn't going any farther. It's just increasing somebody's profit rather than paying wages of my American neighbors.
    • It's fun while it lasts... make stuff where it's cheap, sell where things are expensive and people have money. But of course those are equalizing forces at work. China's economic growth has been putting ours to shame for some years now, which is to say... they're catching up. So maybe we will eventually be able to export to them, which is nice, but I predict natural resources will be getting mighty scarce.

      • china (Score:5, Interesting)

        by zogger ( 617870 ) on Saturday August 14, 2004 @06:16PM (#9970202) Homepage Journal
        Increasingly over the next ten yearts currency won't be as important in international trade as commdoities, especially energy. Soon china will have a large enough domestic market that it won't need US dollars or us as a market, they will only need massive amounts of raw materials and energy sources, which we can't supply much of. Our dollar has been dropping steadily the past several years. that makes our exports cheaper, but we are exporting less, and what we have been exporting is more in the line of factories/machine tools, etc, things to make manufacturing easier to china. They are also heavy into double digits into force-projection styled military buildup, and a buck there goes a lot further than here. A million bucks in china actually gets stuff done, here it forms a few committess to decide if more committes are necessary to study the project at hand. They are also pumping out engineers like we pump out wannabe pro sports starts and musicians.

        It's gonna get ugly sometime, and we stand a good chance of losing.
  • Just like in other industries, a good amount of producers and a huge amount of consumers, but limited distribution (Walmart, McDonalds, Home Depot, etc.) I can't remember the last time I saw clothing may in the US. At the same time, almost everything I see (not buy) is really expensive despite the 'cost savings' the distributor gets from outsourcing to Vietnam, China, etc.
    • There's a lot of clothing being made in Los Angeles. In the area where I grew up every available space seems to be housing a garment maker. It's very, very low pay, they cheat the workers, etc. My friend worked for an agency that essentially crashed these places looking for abuses. They always found them. I guess the question is, what's the point? even by cheating workers they're still paying fifty times for for thw labor than they would in China. I think these are small-rrun operations, where they just can

  • Manufacturing in China (Score:3, Insightful)

    by foidulus ( 743482 ) * on Saturday August 14, 2004 @04:13PM (#9969354)
    is kind of like the dot com bubble of sorts. A few people made the risky investment, and made a lot of money off it due to the availability of cheap labor, lots of natural resources, an interested government etc. Then the gold rush started, and people just poured money into China without thinking in the long term, they were told that China was a guarenteed gold mine. This led to a glut of over production(not just in DVDs, but almost any commodity you can think of), and now people have to fight eachother off with lower and lower margins to survive. That is what happens in a commodity market. They knew that getting into the business, and now we are supposed to feel bad for them?
    I for one will not be crying because they were too stupid to plan more than a month ahead.

  • Welcome to capitalism (Score:4, Insightful)

    by BillsPetMonkey ( 654200 ) on Saturday August 14, 2004 @04:14PM (#9969357)
    Enjoy your stay.

    If those players were made in the US or even Japan they would start at $100 a piece. If you're an unemployed electrical engineer in the US / Western Europe (and I know there's quite a few), relieve the boredom with a $35 multi-region DVD player.

    Welcome to globalisation too - those Chinese manufacturers _are_ in it for the money

  • Oh no! (Score:2, Insightful)

    by vuvewux ( 792756 )
    The CEO can only give himself a -1- million dollar bonus this year, and the stockholders are barely taking in any dividends! They better start cutting wages!
  • we should cut out the middle man?

    Lets start buying right from the source, offer him $15 profit on his DVD players. I can't think of many companies who would say no to a 150% increase in profit
    • we should cut out the middle man?
      Lets start buying right from the source,...

      Unless you get on a plane, fly to China, show up at the factory and hand the guy $55, you can't buy direct from the source. Unless he wants to change his business model, and sell it to you. Which requires a big adverising budget (to get you to buy from him and not the factory next door), storefronts everywhere (down the street from you), big customer management outlay (call center, warranty handling, etc), capitol outlay for del

  • Different way of thinking compared to US businesse (Score:2, Interesting)

    by Anonymous Coward
    My last company was shopping around for various parts for one of our products. Wiring harnesses to be specific. We shopped a number of companies in the US, most of the harnesses were pricing out at around $16 each. When a board of director for the company called around to some of the smaller factories in his native land, we was able to get pricing on the harnesses in the $2 range. Why the big difference?

    I asked the same question of him, and this was how he put it. Some of it is labor. A lot of it is
    • Maybe it's not just a different way of thinking, maybe it's no thinking or foresight at all.

      My (current contract) Indian boss called a staff meeting at 4:45 PM Friday (!). Announced he was under a mandate from headquarters to reduce his budget costs by outsourcing a percentage of work. Then he asked us for suggestions on what parts of our work could be outsourced.

      This is definitely the right way to motivate your staff before a weekend. Management greed and stupidity know no bounds.

      I wanted to suggest "How

  • I got some 512MB PC3200 DDR RAM modules for $75 or so each online, from a reputable warehouse/discount outlet. Everyone else wants at least $100 for them. Since I have a motherboard that has two DDR slots and two SDRAM slots (you can use one or the other but not both simultaneously) I also looked at SDRAM, since I figured it'd be cheaper. Nope! Same prices.

    If commonly-needed computer components were being sold at such low profit margins, we wouldn't be getting ripped off so badly (last time I upgraded my
    • The difference is that a DVD player is a DVD player, while RAM standards change every year or two. In the case of DRAM, manufacturers have reduced production on SDR (using that production capacity for DDR instead) because of lower demand, which causes the price to stay the same. It appears that these Chinese DVD player manufacturers can't easily shift to some other, more profitable product, so they just keep cranking out DVD players at lower and lower prices.
    • RAM is actually sold at a loss as often as not. Manufacturers temd to go through cycles where they'll bleed huge amounts of money for a couple of years, then make a nice profit for a few years.

      As far as pricing right now goes, last summer memory prices were the lowest I can remember having seen. I bought a stick of 512mb DDR for $58. Then Hynix got slapped with a major tariff by the US and EU for receiving multi-billion dollar subsidies from the Korean government, and prices shot up. IE: The market was flo
  • Most new DVD players at Wally World right now (using Wal-Mart as an example because their shit is cheap) are between $70 and $100. Thats a far cry from the $700 and $900 DVD players from 1998.

    How low does a price have to drop for an item for it to be commoditized? $200? $100?

    If that's the case, PCs certainly havent hit that commoditization point yet... unless you count those crappy Wal-Mart ones with no OS.

    So, how long until we see PCs for $50?
  • Isn't this the scenario that Ayn Rand dreamed about? A company that's achieved the ultimate in efficiency now making huge volumes of sales as a reward because no one can become more efficient than them and make a cheaper product?

    Actually, someone will but they'll cut even more corners to do that and humorous customer stories of Apex's power buttons falling off will become "Remember when things weren't that bad?" tales of the past.

    Maybe I'm slippery sloping but things already are pretty crappy in terms of
    • "Maybe I'm slippery sloping but things already are pretty crappy in terms of low-end DVD players."

      I'm tempted to agree with you. These multifunction DVD/receiver/surroundsound kits for $100 are really cheap pieces of shit. I've seen physical problems with the machines pop up over a short time, and I've seen software problems causing playback issues. They don't have the duty cycle that better equipment has, either.

      I'm still looking for a Pioneer DVL-700, DVL-909, or DVL-919 for my DVD player. I hav
    • Isn't this the scenario that Ayn Rand dreamed about?

      Not likely. Two themes she expressed regarding capitalism were morality and accountability.
      21st (and late 20th) century capitalism has neither. At least in the days of the 19th century robber barons there was accountability; they weren't hiding behind diaphanous boards of directors.

    • Maybe I'm slippery sloping but things already are pretty crappy in terms of low-end DVD players.

      They are? My crappy low-end Chinese DVD player is all-region, and has way more features than my $350 JVC player. The JVC broke down after a year of light service, while the Chinese player is still going strong. Heh, the thing cost less than a color cartridge for my HP inkjet printer (ok, maybe that isn't saying much...)

      Nope... so far I'm quite pleased with the products from China.

  • It's this called perfect competition? (Score:4, Insightful)

    by nmosfet ( 770062 ) on Saturday August 14, 2004 @04:30PM (#9969474)
    At least close to perfect competition since in perfect competition, the profitsare zero. I don't really see how this is a problem.

  • The answer (not 42 this time) (Score:5, Insightful)

    by RAMMS+EIN ( 578166 ) on Saturday August 14, 2004 @04:33PM (#9969500) Homepage Journal
    ``You wonder if other business, like low-end PCs hardware, are in similar trouble.''

    Yes, they are. This is why they try to squeeze every cent out of everything, leaving us with motherboards with leaking capacitors, harddrives with 1 year MTBF, memory errors, etc. Those of us who run cheap PC hardware, anyway.
    • The leaky cap thing, while generally a property of cheap boards, was actually a result of industrial espinioge gone wrong. A Chinese company stole an electrolyte formula form a Japanese manufacturer, but failed to steal the stabilising formula. Hence, the caps developed flaws. They were able to sell them cheaply, having slipped on R&D in favour of theft.

      As a side note, if you check for Panasonic or Nichon caps on a motherboard, you are pretty safe. They both are rather reliable brands. As one might exp

  • Artifically cheap (Score:5, Interesting)

    by appleLaserWriter ( 91994 ) on Saturday August 14, 2004 @04:33PM (#9969501)
    Those DVD players cost $40 only because the Chinese government keeps the Yuan artifically pegged at roughly 8 yuan to 1 US Dollar. Floating the currency will bring the ratio up to 4:1, maybe even 2:1.
    • Isn't it kind of the Chinese government to subsidize US consumers this way? What you are basically saying is that everytime I chip in $40 for a DVD player, the Chinese government chips in between $40 and $120 towards the cost of that DVD player.

      How is this a bad thing again?
      • If your currency is weak, in relation to another, it's easy to export to them, hard to import from them. Strong currecny goes opposite.

        So let's say I'm an American manufacturer and I have something I want to sell to China, like maybe Intel. Well, if they fix their exchange rate artifically low, I have trouble competing since that makes my prices (from their view) artifically high.

        With currencies there's no right or wrong way, strong and weak currencies both have advantages. If they get too strong or weak

      • Re:Artifically cheap (Score:3, Interesting)

        by Anonymous Coward
        The Chinese government does this by by printing yuan and buying dollars with them. This means that the Chinese commies are storing up a lot of dollars. At somepoint, say when the growth rate begins to level off or if the depression fully kicks in after a Bush win in November, the Commies will start using those dollars to prop up that economy, thus putting them back into circulation; the resulting inflation will be from a source that Greenspan can't adjust.
    • So what's the long term effect of that?
    • Actually, the Chinese yuan (renminbi) is soft-pegged to the US dollar. It is exchange-traded between in a floating range of 8.25 and 8.3 to the US dollar. This has been the case for over five years now.

      There is very little evidence that a free-floating renminbi would drop to the levels you suggest. My own research shows that a value of between 7.2 and 9 (yes a depreciation!) would be the likely mid-term outcome from a more freely exchanged yuan.
  • That's pretty much what selling a commodity is all about: scraping by on pennies of profit and hoping for lots of volume. When your product is completely interchangable with somebody else's, it's very hard to compete on anything but price. That's why premium brands go to so much trouble to differentiate their products, even if the difference is as minor as a cosmetic flourish and a $100 million branding campaign. If you can't afford a $100 million branding campaign, you're stuck racing all your competito
  • This is a standard shakedown. So what?

    The article states a volume of 35 million units in the first quarter of this year, with no sign of slowing down. This isn't trouble -- it's a competitive commodity market, like almost all the markets Chinese companies work in. They're quite accustomed to this sort of phenomenon, and a $1 profit margin ($140M/yr @ volume) really isn't that bad.
  • 1. Just add more feature like "-W" and hike the price.
    2. Bigger profit.

    Adam Smith (clue: economic theory) couldn't have listed it in fewer steps.

    Maybe these businessmen needs to take capitalism lessons that made USA the powerhouse of economy.
  • Comment removed based on user account deletion
  • One thing the article doesn't mention is how often you have to buy one of these things to consider yourself an owner of one :). I had a $40 Wal-Mart Apex player that lasted all of six months - just long enough to surpass the warranty period. No thanks..

    I'm sure the government is subsidizing the manufacturers like they do in other industries to squash foreign competition. They've been doing this on cotton products for years to lock out the Pakistanis and other rival producers.

  • $20 patent fees (Score:4, Interesting)

    by Jah-Wren Ryel ( 80510 ) on Saturday August 14, 2004 @05:53PM (#9970044)
    According to this post [dvdtown.com] the patent fees for a DVD player work out to be about $20. The author is effectively anonymous, so hard to verify, but the DVD 6c fees are listed here [dvd6cla.com] and they are only part of the picture, so $20 may be the real deal.

    Given that half the cost of the system goes to the patent holders (remind anyone of Microsoft?), it is no wonder that China has licensed On2 Technology's VP6 [free-codecs.com] codec for a reported flat $2 a player for there own hi-def video disc standard.

    That should get them out from under the thumb of the big-corp licensing fees at home and lead to a flood of DVD players in the USA that also support VP6. In fact, I wouldn't be surprised if within a year or so we start seeing asian bootleggers who currently do VCDs and SVCDs switch over to bootleg VP6 discs that are higher quality than even any DVD.

    Wouldn't that be some global karma for the pigopolists in hollywood? I, for one, am actually rooting for China on this.

  • Chinese Makers Squeezed by Patent Royalties (Score:5, Interesting)

    by crucini ( 98210 ) on Saturday August 14, 2004 @07:03PM (#9970455)
    The owners of the DVD patents have been battling the Chinese makers to extract very high royalties. They have succeeded in harming this industrial sector. Here's one story. [en.ce.cn] This is a great example of how all the value is moving to IP, and what the stakes are in today's IP wars.

    Just think - of the $50 purchase price, $27 goes to patent owners and only $1 in profit goes to the factory owners!

  • Profit is not the point. (Score:4, Insightful)

    by colonel ( 4464 ) on Saturday August 14, 2004 @07:33PM (#9970679) Homepage
    Really, profit isn't the point.

    The first objective is to create jobs. Especially in a socialist/communist country, it doesn't really matter whether the company makes big profits, it matters that they provide good jobs to the people. So, if the company pays the workers $2 per DVD player more than a US-owned company in China would, and makes a $1 profit per DVD player, then a US-owned company in China making the same DVD player would make three times the profit.

    The second point is to build up specialization. Making DVD players takes much more skill and training than making bamboo furniture for export. This encourages Chinese kids to stay in school longer because better jobs are available, which increases the net national education, which leads to more innovation and development.

    The third, and most important point, is to take over the world. Take a look at the Chinese currency. China's been making more and more stuff for export, and the US has been importing more and more from China. So, you would expect the Chinese RenMinBi to have increased in value compared to the US dollar over the last decade -- but it didn't, really.

    The reason that the RenMinBi has not dramatically increased in value compared to the US dollar is that China has been systematically buying (investing in) US companies with their new US dollars just as fast as those US dollars are coming in from the US. This is called a "balance of trade deficit" for the US. It's not sustainable for China to keep doing this, but very soon the communists will OWN capitalism.

    Forget this cold war shit, the best way to beat the capitalist pigs is to play by their rules (internationally), buy them out, and it's working.

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