Taiwanese optical disc production reaches near profitless state

April 26, 2005

With the majority of PC owners owning some sort of recordable optical drive as well as the increasing demand for DVD Recorders, one thing some may think is that the makers of blank optical media must be doing very well. However with tough competition between Taiwanese makers of optical media, followed by a fairly high fixed price of polycarbonate material, the main ingredient in the manufacture of optical discs, the production is very near a profitless state, despite increasing orders.

Unfortunately the Taiwanese OD makers expected the pricing of polycarbonate to drop this quarter. However with an annual maintenance period by Teijin Chemical, Mitsubishi Chemical and Bayer which are global producers of polycarbonate and the company Formosa Chemicals & Fibre reducing global supply, this kept the polycarbonate pricing at US$3.5 per kilogram (US$1.59 / lb). As it is unclear if the pricing will fall much, the Taiwanese makers have decided to start raising the quotations of optical media.

Global prices of polycarbonate (PC) are at a high of US$3.5 per kilogram and are making production of optical discs almost profitless in spite of a significant increase in orders, Taiwanese makers in the industry pointed out.

The Taiwanese makers originally expected the price level of PC to drop this quarter. However, the halt of production during an annual maintenance period by Teijin Chemical, Mitsubishi Chemical and Bayer, global producers of PC, as well as the Taiwanese producer Formosa Chemicals & Fibre has reduced global supply currently and thereby keep prices at the original high level of US$3.5, according to these Taiwanese makers.

It is uncertain whether and when the price level of PC will fall significantly, but they may have a chance of raising quotations of optical discs in the traditional peak sales period next quarter, these Taiwanese makers indicated.

With optical media selling so well, it is a pity to see that the manufacturers of optical media to start running into profitability issues. Then again, if they cannot lower pricing to compete, this may push some to find other way to attract customers, such as improving quality of their media. Most consumers don't mind paying a little extra if it means their media offers better compatibility, lasts longer, supports faster recording speeds and so on.

Source: DigiTimes - daily IT News