The success of digital audio players, particularly Apple's iPod, and portable media players (PMPs) has spawned an entire industry for compatible accessories. Global sales of accessories for iPod alone are projected to exceed US$500 million in 2005. This figure can easily double within two years as digital audio players become as commoditized as mobile phones. Many accessory suppliers in Greater China are taking notice of this potential market. New entrants will be lured into this profitable product line to expand the supplier base from about 200 suppliers in 2005 to more than 250 in 2006. Based on our survey of 13 mainland China makers and 15 Taiwan makers, Global Sources presents the following industry findings in this report:
Manufacturing Capability
• Majority of iPod and PMP accessory suppliers in mainland China and Taiwan are seasoned manufacturers of computer, A/V and mobile phone accessories.
• All the surveyed suppliers carry out R&D by themselves.
• Outsourcing is generally carried out, particularly for processes requiring special equipment in order to save on capital investments.
• Thirty-six percent of the suppliers focus solely on OEM services.
Output and Unused Capacity
• The surveyed suppliers have a combined annual production capacity of 178.93 million units. Their projected output for 2005 is78.77 million units, or 44 percent of capacity.
• The supplier base for PMP and iPod accessories is not yet as saturated as that for older product lines such as mobile phones. Thirty-six percent of the surveyed mainland China suppliers reported 50 percent or higher capacity utilization in 2005. Among Taiwan suppliers, 65 percent revealed at least 50-percent utilization for the year.
• Mainland China suppliers are expected to turn out 24.39 million accessories in 2005, out of a production capacity of 65.65 million units.
• Taiwan suppliers are expected to produce 54.38 million units by the end of 2005, out of a production capacity of 113.28 million units.
Export Capability
• Mainland China manufacturers of PMP/iPod accessories expect exports to reach US$18.2 million in 2005, accounting for 86 percent of iPod and PMP accessory sales.
• Exports by Taiwan makers will hit US$51.3 million in 2005, higher by 51percent than in 2004.
• The combined exports of the profiled mainland China and Taiwan makers will amount to US$69.5 million in 2005, representing a 48.5-percent y-o-y growth and accounting for 86 percent of total sales.
Product and Price Trends
• Sixty-eight percent of mainland China and Taiwan makers produce cables and chargers. Speakers and docking stations also feature prominently in most makers' product lines.
• Mainland China makers invest heavily in R&D, with 42 percent of the companies allotting 6 percent to 10 percent of annual sales to various R&D projects.
Industry Overview
According to a report by research firm In-Stat, the exploding market for HDD and flash-based portable audio players is expected to reach over 104 million units by 2009, up from 27.8 million units in 2004. Apple Computer Inc., the worldwide leader in portable audio players, has 30.2 percent share of the combined HDD and flash-based portable audio player market.
Assuming Apple maintains its share of the market leading up to 2009, the global shipment of its iPod-branded portable audio players in 2009(approximately 31.4 million units) will exceed the total 2004 shipment of all HDD and flash-based portable audio players combined.
In Q1 2005 alone, Apple shipped 5.3 million units of iPod, which represents more than half the numbers old from the time it first hit the market to the end of 2004. Apple expects to see another 5.5 million iPods fly out the door by the end of 2005, many of them accompanied by a wide range of accessories.
The "IPod Conomy"
With approximately 22 million units of iPod sold so far, Apple has single handedly defined the portable audio player category and created a huge aftermarket dubbed the "iPod economy."
Apple's tailcoat effect has created opportunities for aftermarket suppliers, such as Belkin Corp., which takes up more than 50 percent share of the global market for iPod accessories.
Belkin has surpassed the 2.5 million mark in accessories shipped for Apple's hard disk-based iPods, and the figure is expected to reach 4 million units by the end of 2005. The company estimates that the global sales value of such accessories will top US$500 million in 2005, in line with predictions made by most market analysts.
Makers Express Optimism About Market Potentials
In mainland China, about five makers have released iPod accessories since H2 2004. Currently, there are about 15 makers and most of them are located in Guangdong province, with a heavy concentration around Shenzhen and Dongguan.
It is impossible, however, to estimate how many makers of iPod and PMP accessories there are in Hong Kong. This is because all makers involved in the product segment produce generic devices that can be used with any portable A/V product. These devices include earphones, wireless stereo headphones, speakers and wireless dongles.
A ballpark figure of such makers can easily exceed 100, the majority of which are makers of traditional wired earphones. The smallest denomination in this segment would be taken up by makers of licensed Bluetooth audio dongles and stereo headphones.
Hong Kong makers of iPod and PMP accessories are optimistic about the market, given the global trend toward portable audio entertainment.
Depending on the sales performance of iPods going forward, all the surveyed mainland China makers in this report expressed optimism that the production of iPod accessories will grow further. For 2005, the sales value is projected to reach US$10 million.
Supplier Profile
Action Star Enterprise Co. Ltd
Action Star Enterprise Co. Ltd started out as a manufacturer of computer switches and peripherals. Its product lines have expanded to include a variety of computer peripherals and accessories such as USB hubs, cables, USB phones, card readers, FM transmitters and speakers.
The company started producing iPod accessories in 2004. The iPod accessory line covers speakers, FM transmitters, docking stations and cables for iPod and iPod Shuffle.
Sales revenue of iPod accessories reached US$2.5 million in 2004, and Action Star expects to double this to US$5 million in 2005.
Exports account for about 95 percent of its total iPod accessories revenue; the rest is generated from domestic sales. Export sales posted US$2.37 million in 2004, and it is anticipated to climb to US$4.75 million in 2005.
The company boasts vast experience in computer peripheral production, R&D and manufacturing capability as its main competitive edge. It also puts effort in sales and marketing activities.
To increase its exposure in the international market and showcase its newest products, Action Star attends several major trade shows including iFA, Computex, CeBIT, CES and China Sourcing Fair.
The company's iPod accessories are distributed in North America, which accounts for about 35 percent of overseas shipments, and East Asia, which accounts for 40 percent.
Other markets include Western and Eastern Europe, which account for 20 percent and 5 percent of shipments, respectively.
All of Action Star's products are distributed under its customers' brands. The company's sales is mainly driven by its ODM and OEM businesses. Its customer base comprises major distributors and branded companies.
OEM business accounts for 95 percent of the company's sales revenue while ODM business accounts for the rest.
Delivery lead time of its product stakes about four to five weeks, depending on order quantity and material procurement status.
Manufacturing Capability
Headquartered in Taipei, Taiwan, Action Star has 1,100 employees and maintains two factories in Shenzhen, Guangdong province in mainland China. One factory is for cable production and the other is for manufacturing electronics devices. Both factories have a total workspace of 5,000 square meters and a total of six assembly lines and two SMT lines.
The factories' in-house production lines can produce 200,000 iPod accessories per month.
R&D, PCB making, plastic injection, assembly, quality control and packaging are conducted in-house. To save on production costs and ensure quality, only mold making and silkscreen printing are outsourced.
Action Star has secured various quality management approvals, including ISO 9001 and ISO 9002. Its products are all certified by CE, FCC and are UL-listed and RoHS compliant. The company employs 60QC workers.
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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