Consumer electronics maker Victor Co. of Japan Ltd. (JVC) said it may outsource production of low-end DVD recorders because it is difficult to log a profit from manufacturing them on its own.
JVC, which posted a group net loss of 1.86 billion yen (approx. U.S. $17.26 million) in the business year ended March 31, 2005 due to sliding prices of DVD recorders, TVs, and other products, said it would continue to produce its high-end models by itself.
"We are considering outsourcing production of low-priced DVD recorders, specifically those not equipped with a hard disc drive," a JVC spokesman said. "The main reason is that price competition is especially tough in the low end of the market."
The spokesman said that nothing concrete had been decided and declined to comment on which companies it was considering outsourcing production to under an original equipment manufacturer agreement.
However, MM Research Institute (MMRI) analyst Akihisa Ishizuka said it was likely that JVC would choose Osaka-based Funai Electric Co. Ltd., which produces low-end DVD recorders for Mitsubishi Electric Corp.
JVC, owned 52.4 percent by Panasonic firm Matsushita Electric Industrial Co. Ltd., was the seventh-largest player in the Japanese DVD recorder market in the business year ended March 31, with 5 percent of unit shipments, according to MMRI.
Matsushita was the leader with 27 percent, followed by Sony Corp. at 20.6 percent, Toshiba Corp. at 15.6 percent, Sharp Corp. at 10.2 percent, Pioneer Corp. at 9.6 percent, and Mitsubishi Electric at 7.0 percent.
Mr. Ishizuka said it was unlikely the top producers, such as Matsushita, Sony, or Pioneer, would also look to outsource production of low-end models to boost profitability.
"The major players have been making efforts to raise their in-house ratio of parts production for DVD recorders and would probably not find huge merit in such a move," he said.
Japan accounts for more than half of the global DVD recorder market. DVD recorders have been slow to take off in other markets such as the U.S., where TV set-top boxes with hard drives, such as those made by TiVo Inc., are popular.
Although JVC has suffered from intense price competition in the low end of the market, it has found some success with high-end models, including so-called combo devices that can record/play on both DVD and VHS and have hard-disc drives. (Reuters)
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