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China challenges foreign standards on next generation

December 10th, 2006 . by Matt

An Enhanced Versatile Disc player

A lot of China skeptics doubt China’s ability to develop the whole country up to a first world standard, but I think that misses the point. Even if China fails to develop vast swathes of its own country, it will begin to dominate whole industries traditionally dominated by other countries, and that will have consequences for everyone.

One of the things that shows China’s growing assertiveness is its willingness to develop local standards that challenge the standards being developed overseas, while showing confidence by not compelling the adoption of the standards domestically. A good example is the Enhanced Versatile Disc, China’s answer to the Blue-ray and HD DVD next generation DVD disc competitors. Here are some details about EVD –

The EVD caused a recent stir. Initially developed by China’s Beijing E-world Technology and the US technology company On2 Technologies, it is supported by leading Chinese consumer electronics manufacturers SVA, Shinco, Amoi, Xiaxin, Yuxing, Skyworth, Nintaus, Malata, Changhong and BBK.

The platform was approved by the Standards Administration of China, and the first EVD devices were unveiled at a special event in Beijing on November 2003. Put simply, it is widely assumed that the concept was devised as a means of eliminating royalty payments made to the DVD Forum by China’s manufacturers in a bid to reduce manufacturing costs. It is reported that Chinese manufacturers need to pay approximately $14 in royalties for every DVD player they make.

Technically, the EVD is based on the existing red laser disc format. However, it uses proprietary compression solutions, developed initially by On2, with chipsets subsequently delivered by LSI Logic, to fit 120 minutes of HD content onto a dual layer 9 Gb DVD. According to the group, the standards body is at present working on a 16 Gb EVD.

The first commercial EVD devices were launched in the Chinese market in January 2004 by manufacturers Shinco, SVA and Amoi. In a bid to push sales and raise the profile of the format, Shinco took the unusual step of announcing negotiations over content for the format from some US studios, including MGM and Fox, and promised 1,600 EVD titles overall in 2004.

But plans were scaled back to 300 titles, with the first titles only appearing in July 2004, and only 50 titles having appeared by the start of September. The studio titles are not expected to be in HD at the moment. Unsurprisingly, this has affected sales, as has the high cost of discs (an EVD movie disc costs twice that of DVD) and players (an EVD player costs twice that of a DVD player). Alhough a target of 200,000 EVD player sales in 2004 was set in January, the average sales figure has been around 1,000 players a week.

Ironically, due to the low take-up, EVD manufacturers have had to make their players compatible with the DVD standard in the interim period, therefore obliging them to pay the $14 DVD royalty on top of $2 per player they already pay for the EVD standard.

The minimal royalties means that this will be very attractive to manufacturers of current DVD players when they decide to convert their facilities. Furthermore because EVD uses a red laser (the same laser type as the DVD player), the conversion of DVD producing factories to EVD factories should be a simple and low cost process. China currently produces 70% of the worlds DVD players.

China has a history of bucking the trend when it comes to formats for viewing films. VCD’s remained popular in China and SE Asia a long time after DVD players appeared, and many China made DVD players include VCD compatibility because of this. VCD’s never caught on in America, Europe, or Japan because of its lack of anti piracy features.

It seems likely that EVD will probably become a local standard in China, quite possibly muscling out the blue-ray and HD DVD formats out of the Chinese market. Certainly the price tag will appeal to the consumer in China and SE Asia. The point of the EVD is not whether the standard will be exported out of China, but that Blue-ray or HD DVD, whichever comes out on top in that battle, might find that they have lost China and potentially other countries in Asia as markets for their machines. To lose a market like China at this stage of its development means the loss of a lot of potential money, countless billions. It also means that if Chinese companies were to secure their home market with their own home grown standard, then they may feel confident enough to try to export a new standard to foreign countries when the future battle for market share in optical disc technology occurs.

2 Responses to “China challenges foreign standards on next generation”

  1. comment number 1 by: tomato

    I don’t know about this, Matt…China seems still much disorganized, and even if with strong internal demand of one billion people, it’s probaby wasting lots because of the heavy burden of the social system.

    In the short run, people might profit, but in the long run, the system may collapse on them, like Russia. In fact, all present developed countries have rather extensive and organized system of contract enforcement for fair-play. Can China be the exception to this, or will it construct a totally new kind of civilization?

  2. comment number 2 by: ponta

    I China surpasses Japan in research spending

    ,technologically China will soon keep up with other nations,, I guess..
    Economically China will keep up with USA in 2020, it is said.
    The problem with China is domestic politics and international relations.
    When people become richer, the next thing they want to do is to change the politics. The point is whether CCP can deal with the pressure from people.
    When the nation become richer, China will confront USA. The point is what the strategies of both countries are.

    But anyway yes, Chinese market has a lot to do so that the market can function stably.