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Reshuffle of digital player market impending
Last Updated(Beijing Time):2006-05-10 09:41

By Hu Hongjun

"The industry is now in its hard time." An analyst in the IT industry told the reporter when referring to the domestic industries of digital products like MP3 players. Data have also proven such a point: more than 200 domestic MP3 player brands disappeared from the market in 2005.

However, when most enterprises are withdrawing from the field one after another, enterprises like Beijing Zhongheng Xingye Technology Group Co., Ltd. producing DEC, and Beijing Huaqi Information Digital Technology Co., Ltd. producing Aigo have strengthened their investment and begun to march towards new fields such as MP4 players, trying to establish new market advantages through technological innovation.

On the 2006 International Consumer Electronics Show (CES) held in Las Vegas early this year, flash MP4 players that Zhongheng DEC exhibited for the first time greatly astonished US consumers and international experts on digital products. Statistics show that some domestic enterprises have seized more shares in the market of MP3 players than their foreign ones, holding the leading position.

Domestic enterprises running into difficulties

Undeniably, the hardship encountered by domestic enterprises is closely related with the falling of profits in such fields like MP3 players. Industrial insiders told the reporter that lured by high profits, domestic manufacturers had swarmed to produce MP3 players since 2002. Take Shenzhen as an example, there were over 200 manufacturers having registered to produce MP3 players, and some respective manufacturers even produce MP3 players for five or six original equipment manufacturers with their respective brands. "At that time, they did make a lot of money."

From 2004 on, along with the large scale price reduction of domestic and foreign mainstream brands, "products originally sold at around RMB1,000 yuan are now only worth RMB200~300 yuan." As the industrial profits dropped down sharply, numerous enterprises like family workshops had withdrawn from the industry in succession. Statistics indicated that in 2005, more than 100 MP3 factories shut down only in South China, and such a trend still keeps going. 

As for the misfortunes experienced by domestic enterprises, Qin Yaliang, President of DEC Beijing Zhongheng Xingye Technology Group Company, said frankly: "We did work under a little pressure." He expressed: "It's only a temporary situation that some domestic MP3 player manufacturers can make a good living without technology. Although some manufacturers have opened the market and developed brands with large amounts of money, it's the product itself that finally counts."

It is a must to find a foothold on technology innovation

Analysts inside the industry believed that in the present market of MP3 players, domestic brands are deadly short of revolutionary products, and all new technologies and transferred achievements are held by foreign brands. To reverse the situation, domestic enterprises must possess their own core technologies and transfer such technologies into products rapidly. Only by doing so can the products of domestic enterprises hold a leading position in terms of technology and function, and then extricate themselves from difficulties.

Since 2000, DEC Zhongheng has been focusing on the production and R&D of digital products, and gradually nailed down its thinking for the sake of development as "taking technology as the forerunner and innovation as the driving force to promote application industrialization". In 2002, DEC Zhongheng started up its strategic transformation and began to create its own brands, and marched into the market of digital imaging, consumer electronics, education for individuals, and information appliances. It has gradually developed its product systems centering on MP3 players, MP4 players, multimedia study machine, and DVD players on motor vehicles while introducing in succession a series of high-tech products advanced in technology and application.

Research and development is the guarantee of innovation. To improve its capability to make independent innovations, DEC Zhongheng invests tens of millions of yuan to track and research key technologies every year in virtue of its particular advantage in cooperating with foreign brands. Early as in 2001, the company established a large-scale R&D center -- Shenzhen Zhongheng Xingye Technology Research Co., Ltd. in Shenzhen as the group's key technology base; meanwhile, it also set up two technology R&D centers in Beijing and South Korea respectively.

After many years of technology reserve, DEC Zhongheng has occupied the frontier digital technology in the domestic market and won considerable shares in the market. Its MP4 player products have always been ranking among the top three in the industry.

Optimistic prospect for the digital field

Although being greatly affected by such factors as price war and falling profits, Qin Yaliang still embraces an optimistic view toward the prospect of digital products like MP3 players, "On one hand, the market space of personal digital products like MP3 players is still enormous; on the other hand, new market spaces like that of MP4 players have emerged."
Data show that at present, the market scale of MP4 players in China has approached RMB1 billion yuan and continues to grow at a rate of 300 percent; by the year 2008, the figure will soar to RMB10 billion yuan.

Huge business opportunities have incurred new competitions. It is known that such giants as Apple, Archos, Sony, Microsoft, Intel and AMD have all begun their struggle for the market.

Meanwhile, a batch of domestic MP3 player enterprises including Aigo, Zarva and DEC Zhongheng have also entered into the market one after another. Huaqi Information Digital Technology Company combined the concept of Chinese culture with digital products and designed such cartoons as "Four Seasons" to play on its MP4 products. Personnel in charge from that company told the reporter: "Another cartoon reflecting the Chinese culture, 'Classic of Poetry', is now being under production and will soon be put forth to the public."

While in the field of MP4 players, DEC Zhongheng is also smashing the monopoly of foreign brands in the market of high-end MP4 players through constant technology innovations and it has realized a breakthrough of domestic high-end products. In order to settle the problem that the price of MP4 products remains high, DEC Zhongheng attaches great importance to the practicability of its products and continues to upgrade its production techniques; at the same time, it reduces the manufacture cost and sales prices, thus winning the competitive advantages in the market price war by reducing the prices from over RMB1,000 yuan to around RMB600 yuan. As to the competitiveness and opportunities in the future, Qin was fully confident: "Although most key technologies of digital products like MP3 players are possessed by Japan and South Korea, domestic digital manufacturers still have a lot to do."

He believed that manufacturers are not simply challenged in terms of the ability to follow technology but also in terms of the ability to apply and integrate techniques and the ability to make comprehensive innovations. Therefore, domestic enterprises should master the integration of products that involve several technological platforms and make great efforts in independent innovation in doing that, thus realizing the real growing up of domestic digital brands. 
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