CMC Magnetics and Ritek, the top two producers of optical discs in Taiwan, have lowered OEM quotations for 8x DVD+R/-R discs from US$0.20 to US$0.18 for retail chains and distributors in the US, according to industry sources.
The price reduction was due to CMC and Ritek wanting to clear their inventories of 8x DVD+R/-R discs as quickly as possible, for many second-tier Taiwanese makers have begun volume production of 8x DVD+R/-R discs, according to the sources. CMC and Ritek have been shifting production to high-end 16x DVD+R/-R discs to avoid price competition with these relatively small makers, the sources pointed out.
Because of the price cut, CMC’s estimated October revenues of NT$2.735 billion rose by only 1.03% from September of this year while Ritek’s October estimate of NT$2.219 billion slipped slightly even though this quarter is traditionally the peak sales period, the sources indicated.
Ritek and CMC claim that they're trying to get rid of old stock now that second tier manufacturers of media are making large volumes of 8x DVDRs. Many of you are probably already noticing that most of these second tier manufacturers have been making 8x DVDRs in large volumes for most of this year or longer!! In fact many are switching to 16x media themselves at this point!!
So why *ARE* Ritek and CMC dropping their prices? Perhaps it's a generous christmas gift for the world? Or maybe BestBuy bought the two CEO's a couple of new cars each?? Or maybe it's the fact that CMC and Ritek have bank bonds in excess of 200 million USD each, coming to term in the early new year (2006)? I don't know about you guys, but my money's on that last one
Although we've heard nothing publically about it, sources deep within the industry have reported to me that CMC has to make good on a ~$250 million USD bank bond, and Ritek a ~$200 million USD bank bond, early next year, and have become completely desperate to sell all their available product ASAP in order to make shareholders happy, and keep the books LOOKING good. Of course this will come back to haunt them in the long run, since they're losing money left right and centre with these prices already, but these companies tend to not look at the future when the present is messed up.
So what does this mean for distributors and OEM customers? Nothing much for the moment actually. Most current distributors of Ritek already know better then to buy in at the first price drop, and I'm sure most of CMC's bigger customers are aware of this too. It's expected that as the new year gets closer and the bank's deadline begins creeping up on them, we can expect a "second wave" of price drops! Likely we'll see $0.15 USD for 8x DVDRs.
So what does this mean for the average consumer? While, lower prices for sure.... but also lower quality. Both Ritek and CMC will be attempting to liquidate as much product as possible, so it won't be too surprising to see B grade product mixed with A Grade product in order to fill orders. Also, manufacturing machines will probably be pushed harder then usual to lower overall production costs, and create more product to blow out.
So at this point I'd like to say don't stock up now, but wait.... wait just a couple more months (boxing day will be great I'm sure), and into the new year we should see some incredible prices! But remember that you also get what you pay for!
To those of you who are small time distributors, I've received word that Ritek and CMC are so desperate for sales, that if you pay cash you can actually negotiate pretty close or even to the same price as the big distributors.... but shhhhh, don't tell Meritline!