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About 100 active makers form the backbone of the industry in mainland China, and the number is expected to increase by 10 percent in 2006. Due to keen competition in the market, the supplier base in Taiwan is unlikely to expand from its current pool of 50 makers. The dominant manufacturing hub is Guangdong province, where production is supported by an ample supply of engineering talent and components such as raw speakers.

This report covers 2ch, 2.1ch and 5.1ch speaker systems that connect to a PC through a 3.5mm analog jack, add-in optical or coax digital connector and USB port for portable speakers. Based on the manufacturing, product development and export statistics from 28 manufacturers, including 19 from mainland China, eight from Taiwan and one from Hong Kong, Global Sources presents the following findings:

• 2.1ch computer speakers will continue to dominate the mainstream market in the next few years, although many makers in Taiwan are starting to focus on wireless and multimedia models.

• North America, Western Europe and East Asia continue to be makers' main export regions, even as many suppliers are increasing shipments to emerging markets such as the Middle East, Southeast Asia, South America and Eastern Europe.

• The industry will remain export oriented, with surveyed makers forecasting to export US$385.5 million worth of computer speakers in 2006, a significant increase from the US$291.2 million shipped in 2005.

• Many makers outsource non-critical processes like wood-working, as this allows lower capital investments, speeds up lead time and enables makers to focus on their core competence.

• Card readers and USB hubs are among the most popular functions that makers will integrate into their upcoming releases. Wireless models that support Bluetooth technology will undergo a spike in production in H2 2006.

Industry Overview

In recent years, most mainland China makers of traditional speakers have jumped into the booming computer speaker business, producing speakers for desktop and notebook PCs. Currently, 2.1ch computer speakers dominate the mainstream market, and this trend is expected to persist in the next few years, supported by continuous developments in space saving, low cost designs with stereo sound quality.

But in Taiwan, where the industry has reached a certain level of maturity, many makers are starting to focus on wireless and multimedia (5.1ch) models. This arises because gamers are buying top-of-the-line computer speakers to get maximum realism and sonic impact from their gaming software. Many are also buying surround-sound satellite/subwoofer systems to deliver a true home theater experience while watching DVD or VCD movies on their computers.

However, the major computer speaker makers in both regions seem to have reached a plateau, while experiments by home audio makers dabbling in computer speakers have been less than successful. One exception is Klipsch, which is an OEM customer of Jazz Hipster, a leading maker covered in this report.

Export-driven industry dominated by experienced suppliers
In mainland China, there are about 100 active computer speakers makers. Predictably, most of them are located in Shenzhen, Guangdong province (see Manufacturing hub for a rundown of Shenzhen's attraction as a production center).

Shenzhen also proved irresistible to Taiwan makers, many of whom have set up factories either in the city or in neighboring Dongguan.

An interesting point to note is that almost half of the makers covered in this report have been in the computer speaker business for more than a decade. More tellingly, over 70 percent of them have at least five years of experience in manufacturing computer speakers.

This probably explains why many makers are able to conduct most of the manufacturing processes in-house. As veterans in the industry, they are familiar enough with the technology and manufacturing requirements of the product line to realize what processes can be effectively outsourced based on cost and quality considerations.

Altogether, the surveyed makers exported close to US$300 million worth of computer speakers in 2005 (excluding companies that did not disclose export data). Going forward, export will continue to be the main growth driver of the computer speaker industry in Greater China.

The major export markets for mainland China makers, in terms of export revenue, are Europe, North America and Southeast Asia. Similarly, Taiwan makers, which focus on OEM and ODM business, export mainly to Europe, the United States and Asia.

Supplier Profile

Beijing Shockwave Electronic Co. Ltd

Beijing Shockwave Electronic Co. Ltd specializes in the development and production of speaker systems. Its product catalog covers computer speakers, home theater systems, in-car speakers, and DVD players.

Beijing Shockwave maintains its own industrial zone in Shenzhen, Guangdong. The company has an in-house monthly capacity of 200,000 units. Monthly output runs at 100,000 2ch and 2.1ch computer speakers and 20,000 4.1ch and 5.1ch speakers. Its 2005 sales totaled US$10 million, of which exports accounted for about 50 percent.

The company's own brand Shockwave accounts for 60 percent of speaker output, 30 percent are OEM brands and the rest are ODM orders.

Most of Beijing Shockwave's computer speakers are for the mid-range and high-end markets. About 75 percent of the company's output are 2ch and 2.1ch units. Wooden speakers account for 30 percent of the output. Almost all of its production processes are conducted in-house. Mold making and SMT are outsourced.

In 2005, sales of computer speakers accounted for 80 percent of the company's total sales. Half of the company's speaker output was exported. Its major export destinations include Europe, North America and Asia. Beijing Shockwave anticipates total sales to climb to over US$12 million in 2006.

Manufacturing Capability

Beijing Shockwave's manufacturing facility in Shenzhen is located at Fuyong. The facility has two areas, one spanning 10,000sqm and the other with 20,000sqm of production space.

The first area has two buildings — the five-story building houses its offices and the three-story building contains production workshops. Twenty-four production workers, utilizing 12 plastic injection machines, handle the plastic injection workshop on the first floor.

The second area houses three three-story factory buildings and a dormitory building. It has two woodworking workshops — one is located on the first floor of the first building and the other is on the first floor of the second building.

The first building has three floors, with each floor spanning 3,500sqm. All non-plastic parts used in the speaker enclosures are manufactured there. The building also contains three cutting lines with four cutting machines, each handled by 16 workers. Three workers operate each of the 10 drilling machines that are used to drill holes and cut panel boards. Sanding of enclosures is done by two automatic sanding machines, while 20 workers handle manual sanding.

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All this column of information contained in China Sourcing Reports is the result of original, independent and impartial research conducted by Global Sources analysts.

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