DVD Production Grows Outside Japan

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March 18, 1999 (9:56 AM EST)

By Yoshiko Hara ,

Although the DVD format originated in Japan, its production is headed offshore as its market grows.

The global DVD market is expected to double to 4.2 million units this year from 2.1 million units in 1998, according to estimates by the Electronic Industries Association of Japan.

Expansion is expected to be much steeper for DVD-ROM drives, jumping from about 9 million units last year to about 30 million this year, according to estimates by Toshiba, based in Tokyo.

Toshiba will begin DVD-ROM production at its factory in the Philippines in May. When the factory is fully operational, Toshiba said, it will make 1 million units per year in Japan and another 500,000 in the Philippines.

As the video market grows and more players join, pricing is expected to become more competitive. An analyst said he predicted player prices would soon hit the $299 range. Cutting costs is the first priority for Pioneer, Sharp, and Sony as they prepare to begin production in Malaysia for DVD players, and for Toshiba as it readies its Philippines operation.

Pioneer, which said it holds a 50 percent share of the DVD market in Japan, as well as 15 percent in the United States and 20 percent in Europe, will begin production this summer at Pioneer Video Malaysia, with a start-up capacity of 12,000 units a month that will soon double to 24,000 units.

The company also started production of DVD-video players in Shanghai, China, late last year. The China factory has a capacity of 4,000 units a month, which will be doubled by autumn to ship products to the United States in addition to supplying the Chinese market.

"We will shift whatever DVD products that can be made overseas to outside of Japan," a Pioneer spokeswoman said. "In Japan, high-end products such as LD/DVD combo players will be the main products."

Sharp Electronics began pilot production of DVD-video players in January at Sharp Manufacturing Malaysia and has just begun volume production there. Capacity is 20,000 units per month. The company's domestic capacity of about 5,000 DVD units per month will be devoted to value-added DVD products, a spokesman said.

Sony, which said it expects to carve out about a 30 percent stake in the DVD-video market, will launch production at Sony Video Malaysia in April. The operation will have a capacity of 60,000 units a month. Sony's domestic production base in Kisarazu has reached the full capacity of 80,000 units a month, a Sony spokesman said.

Matsushita Electric Industrial will soon expand production at China Hualu Matsushita Video, in Dalian, China, to about 70,000 units a year, up from last year's 8,000 units, to cope with the market expansion in China.