Home theater systems (above 5.1 channels)

	The SP-806 from mainland China's Foshan Dolsonmuse is a 7.1ch home theater system with Surround and EX Surround speakers.

6.1ch and 7.1ch home theater systems have yet to gather wider adoption in China makers’ production agenda pending the release of more A/V sources supporting these audio formats. The limited support is due mainly to China makers’ backing of the mainstream 5.1ch model in home theater systems, speakers and amplifiers. Further, most DVDs still carry Dolby Digital or DTS Surround encoding, while discs encoded in Dolby Digital Surround EX or DTS-ES Discrete 6.1 audio are still far from the mainstream.

The few China suppliers that have been offering 6.1ch or 7.1ch systems since 2007 are doing so just to test market response. Without a clear guarantee of immediate returns, China makers stay reluctant in investing in new models, even as the difference between these higher systems and the popular 5.1ch is only one or two additional rear surround sound speakers. Most China makers, however, are capable and ready to produce systems with more than five channels when demand finally takes off.

Suppliers are banking on Blu-ray technology and its support of Dolby TrueHD and DTS-HD codecs to effect change in the home theater system sector, especially in favor of propagating market acceptance of 7.1ch systems in 2009. The first wave was in the PC sector with the release of new models with built-in Blu-ray ROM drives and 7.1ch sound cards, stimulating demand for 7.1ch multimedia speaker systems.

China has less than 10 suppliers providing 7.1ch multimedia speaker systems that come in mini or desktop configuration and with a standalone or integrated amplifier. Because of the intended PC application, China’s multimedia speaker systems usually have lower power output than traditional home entertainment models, but can be used nonetheless with CD and DVD players, TVs, auxiliary and other devices with the necessary input ports. Suppliers leverage this as a cost advantage to break into the entry-level 6.1ch or 7.1ch home theater market. The selection is varied with models having 7x5W to 7x20W surround sound speakers and 20W to 50W subwoofers. The standard features are 100Hz to 18kHz (±3dB) frequency response range, 60dB to 80dB S/N ratio and 4Ω impedance.

For home entertainment, China’s 6.1ch and 7.1ch home theater systems follow the 5.1ch trend of floor-standing models. Categorized as midrange, these products designed for multichannel amplifiers with HDMI, Blu-ray disc players and high-definition (HD) TVs have 7x50W surround sound speakers and about 100W subwoofers. Other features include 40Hz to 20kHz frequency response, 80dB to 90dB S/N ratio, 8Ω impedance and 0.1 percent THD.

Due to the high technology requirement and expensive licensing fee of a THX certification, only a few China suppliers offer 7.1ch home theater systems based on the standard. However, most makers keep an eye out for demand that can override this costconsideration.

China’s major overseas markets for 7.1ch home theater systems are Australia, North America and other developed regions.
5.1ch systems continue reign
Makers face up to global economic crisis
China makers have mixed backgrounds
Guangdong hosts majority of home theater makers
Hong Kong: Low demand keeps 6.1ch, 7.1ch below ground
Taiwan: 6.1ch, 7.1ch systems based on custom designs

Designed for desktop use and small rooms, entry-level 5.1ch home theater systems usually have two less than 30W front speakers, three less than 10W surround sound speakers and less than 50W subwoofers. These have 100Hz to 18kHz (±3dB) frequency response, 70dB to 80dB S/N ratio and 4Ω impedance. Some models have built-in amplifiers. Entry-level models adopt locally sourced 2in to 4in raw speaker drivers and 5in or 6in subwoofer drivers. PVC is used for the cabinets.

Designed for home entertainment applications, midrange 5.1ch systems have 40W to 100W front speakers, 20W to 50W surround sound speakers and 50W to 100W subwoofers. The other key specifications are 50Hz to 20kHz (±3dB) frequency response, 80dB to 90dB S/N ratio and 8Ω impedance. Components used are 2-way or 3-way speaker drivers; 1in tweeters with silk, aluminum or titanium domes; 3in to 6in midrange drivers; 8in to 10in woofers; and 10in to 12in subwoofers with polypropylene (PP), paper or wool cones. For cabinets, 15mm or 18mm MDF is commonly used and finished in clear lacquer, PVC veneer or striped wood veneer. Most China-made home theater systems belong to this category.

In high-end models, the front speakers have more than 100W power output, 40Hz to 20kHz (±3dB) frequency response, 95dB S/N ratio and 8Ω impedance. The surround sound speakers have more than 50W power output, 60Hz to 20kHz (±3dB) frequency response, 85dB S/N ratio and 8Ω impedance. The subwoofers have more than 100W power output and 30Hz to 200Hz (±3dB) frequency response. Two-way or 4-way speaker drivers used in high-end models are either sourced from established local makers, such as Guangzhou HiVi Electrical Appliances Co. Ltd and Shanghai Silver Flute Sound Co., or Europe. High-end models use 18mm HDF or real wood for cabinets, and piano paint finish or real wood veneer.

Models with THX certification are available from some China makers such as Guangzhou HiVi and Dongguan Qisheng Electronics Industrial Co. Ltd.

Elsewhere in the spectrum, wireless models have so far met a mixed market response. The performance-to-price ratio tack gained attention for some enhanced compact desktop models in the high end, moving them away from their entry-level springboard. For the majority of products in this sector, however, the problem in audio quality due to this transmission technology remains the overriding barrier in widespread adoption. But in the multimedia environment atleast, such as with PCs, mobile phones and other enabled devices, Bluetooth speakers have found their niche.

Other configurations such as TV table speakers and sound bars have further expanded buyer options, but they are showing no signs of overtaking 5.1ch systems in the mainstream.

Most China makers expect stable prices during the year. A reduction of 3 to 5 percent is even possible for existing models. Serving as buffer in this situation is the decline in metal cost, especially of copper, a key transformer material, which has offset the increase in labor cost in H2 2008.

	From Hong Kong, Bobolink Industrial Ltd's DHW-420 home theater system has 340W RMS total output and piano-finish panels.

Amid cuts in global spending due to the economic crisis, the home theater system industry in China is feeling the crunch for this high-end product line. Makers estimate declining export sales at 10 to 50 percent based on shipments to Western Europe, South Africa and the US.

To stem the tide, most existing manufacturers, especially tier-one companies, have started looking for other markets such as Southeast Asia, specifically India, South America and the Middle East. Others are adjusting their marketing strategies to keep their hold on established markets. One such company is Foshan Dolsonmuse Electronic Co. Ltd, which has taken advantage of the downtrend in traditional home theater systems to promote the same high-quality but lower-priced desktop versions popular with its customers in Europe. This approach clinched a 20 to 30 percent increase in export revenue for such makers in H2 2008.

	Hong Kong maker Sun Union Audio Ltd's XA home theater system has Parc Audio drivers with paper cone from Japan.

About 300 manufacturers are engaged in the production of home theater systems in China, and include those offering speakers and amplifiers as well. From 100 to 150 dedicated home theater system makers two or three years ago, the number has shrunk to between 50 and 60. Some makers have lowered their output of home theater systems, while others have shifted focus to other A/V lines such as PC speaker systems, car audio systems or stage speaker systems. This realignment has also relegated small makers to the sidelines as competition gears up to better performance-to-price ratio that midsize and large manufacturers can provide. At present, midsize companies represent more than 50 percent of China’s supplier base.

Comprising China’s active manufacturers of home theater systems are speaker specialists, DVD and TV makers, and small companies involved mainly in product assembly.

The speaker specialists are mostly midsize companies, and the rest are large players with more than 10 years’ experience in audio products. Traditional home theater systems, also called living room systems, are their major products, with R&D always focused on enhanced sound quality. These makers, which account for most of China’s home theater system output, mainly derive much of their business from OEM customers and exports. In terms of annual sales revenue, midsize companies generate $5 million to $10 million; large players exceed $10 million. Among the leading companies in this category are Shenzhen Bao’an Fenda Industrial Co. Ltd, CAV Audio China Inc. and Gh Grandhigh Electronics Co. Ltd.

The majority of these manufacturers handle production and R&D processes such as PCB assembly, wooden and plastic cabinet design and making, cabinet surface finishing, final assembly and system adjustment. Some of them can also produce their own raw speakers. Factories have injection molding machines, wood processing machinery, auto insertion machines, wave soldering machines and SMT machines. Some midsize companies outsource SMT to save on cost. Most makers have soundproof rooms that are equipped with electroacoustic testing systems such as the Liberty Audiosuite analysis and Daas acoustic measurement system.

DVD and TV makers usually offer home theater systems either as a standalone product or standby option to go with their respective main products. To this end, these makers stress compatibility in external and internal designs between these product lines. Desay A&V Science and Technology Co. Ltd and Shinco Group are among the makers in this group.

Though with their own factories, small makers only conduct QC process besides final assembly. Some of them produce high-end home theater systems targeted at the hi-fi audiophile market, and others focus on entry-level mini multimedia systems for PCs.

About 80 percent of home theater manufacturers in China are based in Guangdong province, specifically in Guangzhou, Zhuhai, Zhongshan, Dongguan and Shenzhen. The first three cities have been the line’s traditional manufacturing centers since the 1990s, while more multimedia speaker makers are based in Dongguan and Shenzhen.

The other makers are found in the eastern part of China, such as in the provinces of Zhejiang, Jiangsu and Fujian and the cities of Shanghai, Beijing and Tianjin.

Zhejiang is China’s established production hub of raw speakers and electroacoustic components, as well as its wood processing center. Some Zhejiang-based suppliers also provide OEM services for end-product home theater systems. Jiangsu and Fujian are hosts to some Taiwan-owned factories. There are also foreign-invested facilities as well as major China players in Beijing, Shanghai and the province of Sichuan. Among these companies are Pioneer China Holding Co. Ltd and Sichuan Hushan Electronic Co. Ltd.

Hong Kong has more than 50 speaker suppliers, most of which focus on the entry-level and midrange segments. About 20 offer home theater systems, dominated by 5.1ch models. The current consensus among most suppliers is that 5.1.ch systems would continue to be the mainstream home theater setup for at least the short term. Few have ready 6.1ch or 7.1ch models in their catalogs, though most suppliers are willing to undertake OEM/ODM projects if requested.

The ongoing financial crisis has dampened development plans for pricy high-end speaker systems in anticipation of a cut-down on consumer luxury spending. Though going upmarket has been the long-term development strategy of many Hong Kong suppliers, there is a greater preference toward developing hi-fi and high-end 5.1ch home theater systems, rather than stepping up the technology ladder with 6.1ch and 7.1ch systems.

Production cost has been one of the main deterrents against 6.1ch and 7.1ch systems. Home theater systems above 5.1ch not only have more speaker units, these also integrate a more complex and expensive receiver board.
Another discouragement is that most movies are mastered in 5.1ch only, not 6.1ch or 7.1ch. Only a few high-profile movies include additional remixing in higher configurations. At present, few film studios have shown interest in including 6.1ch and 7.1ch remixes in their titles.

Lastly, higher configurations such as 6.1ch and 7.1ch are recommended mainly for large viewing rooms, unlike 5.1ch home theater systems that are suited for most average-sized homes. Also, unlike 5.1ch, installing a 6.1ch or 7.1ch home theater system may entail a redesign of the whole viewing room because of the rear speakers that have to be placed behind the viewers.

On the other hand, the shift from DVD to Blu-Ray is building minor anticipation in some suppliers. Some recent releases on the high-capacity disc format include a 7.1ch mix via DTS-HD Master Audio, DTS-HD High Resolution Audio and other technologies. Eventually, the base of 7.1ch-mastered Blu-Ray disc owners is projected to increase significantly enough to create demand for 7.1ch home theater systems.

Most 6.1ch and 7.1ch home theater systems in Taiwan are based on custom designs in terms of power output and audio effects, as well as materials used and form factors. Makers are hard put at making standard quotes due to this highly variable feature combination, but they may well be more than $300.

Taiwan’s home theater system industry is shrinking due to the fallout from the price competition with their mainland China counterparts. More 2ch and 2.1ch speakers with enhanced audio quality and functionality are also encroaching into the traditional turf of 5.1ch systems, especially in the entry-level segment.

Nevertheless, 5.1ch home theater systems remain the dominant line and have the support of between 20 and 30 manufacturers. Of this supplier base, five companies, including Multistar Industries Co. Ltd, offer 6.1ch and 7.1ch systems. This low turnout is due to limited demand for these higher systems.

To maintain a market foothold while keeping up with trends in digital audio, makers emphasize compatibility with expanding home entertainment electronics as more homes are equipped with digital TVs, game consoles and even karaoke machines. This consideration encompasses cabinet design to make home theater systems blend well with other electronics in the home setup.