MP3 player market at full volume
(China Business Weekly)
Updated: 2004-11-03 10:34

China's market for MP3 players is on a good roll, thanks to increasing demand for on-the-go entertainment.

About 10 million MP3 players are expected to be sold this year in the Chinese mainland, said Michael Chang, deputy general manager of Taiwan-based AT Chip Corp, a major designer of MP3 chips.

That would represent a 250-per-cent increase year-on-year.

In contrast, 50 million MP3 players are expected to be sold globally, up 25 per cent year-on-year.

Chang said his bold predictions are based on projections by his company, research house IDC, In-Sat and Taiwan Engineering Institute.

"With continuous price drops, the mainland's MP3 player market will witness explosive growth," he said.

Chang projects annual shipments of MP3 players in the Chinese mainland will reach 20 million units next year, and 50 million units in 2007.

In 2008, shipments are expected to hit 70 million units, which will account for 70 per cent of the global market.

Global shipments of MP3 players are projected to reach 50 million units next year, and 80 million units in 2007.

Prices of MP3 players in the Chinese mainland continue to fall.

The average price of an MP3 player fell from 1,100 yuan (US$133) last year to 700 yuan (US$84) in the first half of this year, indicates Beijing-based data tracking firm CCW Research.

MP3 players that can hold up to 128 megabytes are being phased out of the market.

In the year's second half, 256-megabyte MP3 players have become the mainstream, CCW said.

In recent months, the price of an MP3 player with 128 megabyte capacity fell as low as 250 yuan (US$30).

MP3 players with hard disks with a capacity up to 60 gigybytes, such as the iPod made by US-based Apple Computer, are gaining steam in the Chinese mainland.

Chang said more dramatic price drops are expected, given decreasing costs of chips, which will boost the MP3 player market.

A chip for MP3 players usually costs US$5-10, Chang said.

"It can be even cheaper," he said.

AT Chip last week unveiled a new semiconductor for MP3 players. The firm said it is the least expensive chip of its kind in the industry.

Chang said the new chip costs much less than US$5.

"When the cost of a chip is lower than US$5, the MP3 player market will undergo snowballing growth," he said.

Taiwan's electronics manufacturers have a major advantage in cost-cutting, said Henry Chen, president of AT Chip.

"We are confident we will capture a 10- to 15-per-cent share of the global MP3 player chip market next year," he said.

To ride on the explosive growth of the Chinese mainland's MP3 player market, AT Chip is pondering establishing a design and technical support centre, Chen said.

The company also plans to set up a mainland subsidiary around 2006 to cement its foothold in the mainland.

The drastic growth of the Chinese mainland's MP3 player market has also been fuelled by the increasing penetration of broadband Internet, which accommodates faster downloads.

Applications of MP3 players will be more diverse in future, Chen said.

MP3 functions increasingly are being found in mobile phones, CD players, PDAs (personal digital assistants), clocks and digital recorders, he said.

Major handset makers have launched a raft of new mobile phones capable of playing MP3 music.

South Korea's Samsung has even introduced a mobile phone with a built-in hard disk, which can store more songs.

Enhancements to handsets' functions and capacity expansions pose threats to manufacturers of MP3 players, CCW said.

However, that will result in enormous business opportunities for storage product manufacturers and chip designers and makers.

"We are quite confident our shipments of chips for MP3 players will soar in the coming years," Chen said.

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