Expanding production volume and use of new technologies are providing momentum to Greater China's mature headphone manufacturing industry. The region, which spans mainland China, Hong Kong and Taiwan, currently accounts for 60 percent of the global supply of headphones. Mainland China alone dominates the worldwide export market for low-end and mid-range headphones with a 90 percent share.
One of the factors driving production and export volume growth is the adoption of new wireless technologies, in particular Bluetooth. This has also boosted product development.
This report covers 35 makers of headphones: 21 from mainland China, and seven each from Hong Kong and Taiwan. Combined, these companies represent some 10 percent of the total supply base across Greater China estimated at between 350 and 400 makers. These companies were selected for this report because they represent a cross section of Greater China's headphone market. Many of these companies have more than a decade of manufacturing experience in this line, with the capability to make both wired and wireless headphones.
The combined output of these makers in 2005 reached 184.48 million headphones, of which 79 percent or 146.15 million units went to overseas markets. In 2006, the projected output and export volumes are 218.74 million units and 171.35 million units.
Based on these companies' data and research by Global Sources, the findings of this report are:
• The applications for headphones from Greater China have expanded from the A/V markets to the computer, automotive, telecom and airline sectors.
• Wired headphones will continue to dominate supply, but output of wireless headphones, in particular IR and RF units, will rise. While Bluetooth units are gaining traction, it will take two to three more years before they break into the mainstream.
• Most makers are not moving quickly to the Bluetooth line due to the huge investments required for production and testing equipment, the high technology threshold, and costly certification requirements for export models.
• Design enhancements, operating range extensions and new technologies are the main R&D priorities for profiled makers.
• To remain competitive, the majority of makers intend to keep prices stable despite rising raw material and labor costs.
The Industry Background section of this report discusses supplier capabilities in mainland China, Hong Kong and Taiwan. It identifies production hubs, types of products available and export capabilities of makers across the Greater China region.
Industry Overview
Greater China's headphone manufacturing industry is poised to maintain its lion's share of the worldwide supply market. The region currently accounts for 60 percent of the worldwide output. Mainland China alone exports about 90 percent of the worldwide shipments of low-end and mid-range headphones.
Headphone supply across Greater China, which spans mainland China, Taiwan and Hong Kong, has transcended the consumer electronics sector and now encompasses the professional A/V, computer, telecommunications, automotive and airline industries. A growing number of makers are expanding their product portfolio to cover multiple industries and further expand their markets, resulting in headphones that combine different technologies and applications.
The trend toward wireless technologies is further driving market expansion. Many manufacturers are now producing both wired and wireless technologies, and although wired headphones are expected to dominate production in two or three more years, wireless headphones are gaining solid ground.
Expanding production volume reflects all these developments across Greater China. The combined monthly capacity of makers surveyed in this report is at least 30.62 million units. The makers' combined monthly output, meanwhile, is at least 13.82 million headphones each month. Almost all of these makers are increasing their production volume this year.
Transitioning From Wired to Wireless
The bulk of headphone supply in Greater China consists of wired models. Several makers have added wireless models to their lineup as well as expanded production lines in anticipation of further increases in the wireless line.
IR and RF models dominate the wireless sector. IR-based models are expected to gradually exit the line due to their limitations in operating range and audio quality. Supply of RF models will continue to grow.
The recent biggest development in Greater China's headphone market is the emergence of Bluetooth-based models. Bluetooth capability, however, will be limited to the high-end sector. The majority of makers, particularly, in mainland China, have yet to establish mass production capability for Bluetooth headphones.
Among the reasons slowing down the makers' entry into the Bluetooth line are the huge investments required for production and testing equipment, the high technology threshold, and the costs of acquiring certifications for export-bound Bluetooth products from the Bluetooth Qualification Body.
Nevertheless, some Taiwan and Hong Kong companies have taken initial steps, targeting to launch Bluetooth models, banking on the technology's promise of longer operating ranges, better transmission and connectivity to other Bluetooth-enabled devices.
Supplier Profile
A4Tech Co. Ltd
A4Tech Co. Ltd was established in 1987 in Taipei, Taiwan. The company mainly produces mice and keyboards. The company started producing headphones in 2004 and plans to focus more on headphones in the coming years.
The company recorded a total sales of US$78 million in 2005. Of this figure, US$900,000 came from the sales of headphones. The company projected that its total sales would reach US$82 million in 2006. Its headphone sales are expected to hit US$2 million, and account for 2.44 percent of the total sales, up from 1.15 percent of total sales in 2005.
A4Tech focuses on the overseas markets. The company has set up branches in the United States, Great Britain, Germany, Austria and Japan. Its major clients include GE and HP. The company ships its headphones to North America, Europe and Asia from the Shenzhen port in Guangdong.
About 60 percent of the company's headphones go to Europe, 20 percent to North America, and the remaining 20 percent to Asia. The company pursues OEM and own-brand sales. About 30 percent of its sales are from OEM sales and the rest comes from own-brand sales.
Manufacturing Capability
A4Tech has a 25,000sqm factory in Dongguan, Guangdong. It has 2,000 employees engaged in the entire manufacturing process — from cosmetic design to final product packaging. The company has ISO 9001 and WEEE certifications, and uses 5S and 6Sigma management systems. The company plans to apply for ISO 14001 in H2 2007.
The factory has eight insertion lines, six auto-tin stoves and 11 solder lines. A4Tech has set up its own plastic injection department. There are 21 computerized plastic shaping machines with pressure ranges of 80 tons to 300 tons. The company has a total of 15 automatic printing machines to do painting and silkscreen printing in-house. It also provides custom-made models.
The factory has eight assembly lines that can provide 50,000 headphones a month.
A4Tech produced 300,000 wired headphones in 2005. The monthly output of wired headphones ran at 50,000 units in H1 2006. It projects its output of headphones will exceed 450,000 units in 2006.
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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