Home theater system (HTS) production in mainland China, Hong Kong and Taiwan is picking up after a slowdown in 2004, fueled by the increasing popularity of digital entertainment and digital home concepts, as well as wireless technologies such as Bluetooth. From an output level of 7.5 million units worth US$1.65 billion in 2004, Greater China is foreseen to manufacture up to 10.8 million units worth US$2.12 billion in 2007, according to Global Sources' Consumer Electronics China Industry Outlook report in 2005.
For 2006, more aggressive manufacturers forecast that growth in production and exports will reach up to 50 percent, exceeding the estimates in the Global Sources report.
This report covers 48 companies: 30 from mainland China, five from Hong Kong and 13 from Taiwan. The respondents comprise a sizeable segment of the estimated 100 manufacturers on the mainland and Hong Kong, and 30 makers in Taiwan.
Production Center
The Pearl River Delta, mainly Guangdong province, is the manufacturing center not just for mainland China-based makers, but also for those whose headquarters are in Hong Kong or Taiwan.
Manufacturing Capability
This report discusses key manufacturing capability indicators for industry players. Among these are key manufacturing processes, output volume, length of manufacturing experience, factory sizes and production capacities.
• HTS makers are divided into three tiers based on annual output volume. Companies considered small-scale manufacture up to 100,000 units annually; midsize makers produce up to 200,000 units; and the largest ones manufacture up to 500,000 units.
• Mainland China and Hong Kong companies average six years' experience in HTS manufacture while Taiwan makers average eight years.
• Production processes that are done in-house typically include cosmetic design, R&D and woodworking, while raw speaker production, mold making and plastic injection molding are typically outsourced to other facilities.
• Mainland China and Hong Kong companies invested more in equipment than Taiwan companies, on average, in 2005. This is because many Taiwan companies are seen to be shifting their focus away from the traditional HTS to higher-end product lines in the A/V sector.
Industry Overview
The home theater system (HTS) sector in mainland China is picking up speed after a recent slowdown. Mainland China is becoming the leading HTS production center in the world. Based on industry statistics, over half of HTS products under famous worldwide brands are made in mainland China factories.
Generally, most mainland China manufacturers of HTS products enter the overseas market through OEM contracts. Most Taiwan makers also generate most of their revenue from OEMs, although many of these companies also provide ODM services. In-house brands generally represent only 5 percent of revenue.
For 2006, a greater number of surveyed companies from mainland China have forecast an increase in production and exports by up to 50 percent over 2005.
Even Taiwan makers, who face stiff competition from mainland China makers, are optimistic about an increased output, especially as they target developing markets.
Industry Composition
Mainland China's HTS industry has over 100 makers with varying production capacities. Most of the makers are based in the Pearl River Delta, mainly Guangdong province.
The active makers include mid- and large-scale professional mainland companies; new players mainly from other product lines such as DVD players, TVs and other home appliances; and professional makers mainly servicing world foreign brands. These also include medium and large companies that are joint ventures between mainland and foreign investors, or are foreign entities with manufacturing bases on the mainland. There are also small-scale enterprises.
In Taiwan, there are about 30 HTS makers. The estimate is 95 percent of Taiwan-based companies have moved their production sites to the mainland, mainly in Shenzhen and Dongguan, for these regions' lower labor cost and strong support industries.
Supplier Profile
A-Zone International Co. Ltd
A-Zone International Co. Ltd is a Taiwan-based producer of HTS and other A/V products. When it was established in 1994, the company focused on producing conventional speakers. Today, in addition to HTS, which still represent about 50 percent of the company's total sales, A-Zone provides surround sound speakers, LCD PC monitors, industrial monitors and MP3 player peripherals.
A-Zone's headquarters are in Taipei, Taiwan. The ISO 9001-certified maker has two factories, one in Hsinchu, Taiwan, and the other in Dongguan, Guangdong in mainland China. The company has a total of 200 employees. It achieved sales revenues of US$17.65 million in 2004. All of its sales are derived from exports.
According to A-Zone, its export market experienced a significant shift from 2004 to 2005. In 2004, the company's major export markets were Europe and North America, which accounted for 50 percent and 15 percent, respectively, of the company's total sales. Asia accounted for 25 percent, while the Middle East and Central and South America accounted for 5 percent each.
However, in 2005, Central and South America has become the company's major market, which takes up 60 percent of its total sales. Europe now accounts for 25 percent and Asia, 15 percent.
OEM services account for 50 percent of A-Zone's business, while ODM services account for 45 percent. The company also provides own-brand products, which represent 5 percent.
A-Zone noted that its customers include channel distributors and brand companies. PodGear, for example, is one of the company's major clients. Other channels that A-Zone serves are Dixon, UK, and Computer USA. The company has also partnered with brands such as Provision, X-View, Sanyo and Beep on multimedia products.
Looking at the future, the company disclosed that it would enhance its R&D efforts on iPod-compatible speakers. The company introduced its first iPod speaker in July 2005. It claims to have produced 70,000 units of this type by the end of 2005. A-Zone targets to produce 500,000 units of iPod speakers in 2006.
Each year, the company joins several tradeshows such as CeBIT and Computex to showcase its latest releases.
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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