USB flash drives

	The OSC-020U from Oscar International is a USB flash drive that has digital photo frame function. It measures 74.0x18.9x9.0mm.

Guangdong province accounts for 90 percent of China's USB flash drive production.

Guangdong province in China's southeast region leads the country's USB flash drive manufacturing industry.The province produces about 90 percent of China's USB flash drives and is home to the majority of the country's makers. Its capital, Shenzhen, contributes 80 percent to Guangdong's USB flash drive production.

One of the first few provinces in China to become an innovation zone, Guangdong's tax policies and land and human resources have been luring in many electronics products manufacturers. Many of China's consumer electronics, telecom equipment and computer and peripheral suppliers have established operation bases in Guangdong.

Shenzhen's established supply chain for components and raw materials helps facilitate the product development and production of many products, including USB flash drives. Although suppliers in the special economic zone (SEZ) admitted that the profit margin has been shrinking for the last two years due to the stiff price war, makers will be increasing their production of USB flash drives to meet rising demand and spur continued market growth.

Makers from Guangdong have in-house production capability for most of the processes required to make USB flash drives. Some companies are able to conduct vertical production, while some suppliers subcontract such requirements as mold making.

USB flash drive manufacturers interviewed for this report include Oscar International Group Co. Ltd, Memory Electronics (International) Co. Ltd and Hantat Technology Ltd.

Oscar International started as a trading company then expanded into the manufacture of USB flash drives. The company has a 1500sqm factory with a workforce complement of 100. It handles SMT, manual soldering, insertion, assembly and QC in-house. It subcontracts mold making. The company's monthly output of USB flash drives reaches 150,000 units. It uses only 50 percent of its total capacity for this product line.

Memory Electronics handles all manufacturing processes, except mold making. The company has just built a silkscreen workshop. It increased its monthly output by 20 percent, and now churns out 300,000 units a month. The company is currently concentrating product development and sales efforts on the premiums market.

Hantat conducts all manufacturing processes in-house. The company has recently set up a silkscreen printing department. The company claims that its current products have read and write transmission rates that are 80 percent faster than previous models'.

Many makers in Guangdong cater to the premiums market. Nevertheless, companies offer USB flash drives with large storage capacity. Most suppliers offer models with 1GB memory capacity. About 30 percent of makers, however, produce 2GB units.

Hantat supplies 2GB USB flash drives, which account for about 50 percent of the company's overall output. Fifty percent of these products are offered to premiums clients, and the rest are supplied to makers that request USB products with storage function. Hantat accepts OEM business. It uses chipsets from Hynix.

Hantat offers 8GB models using double chipsets.

About 20 percent of Memory Electronics' USB flash drives feature 2GB capacity. The rest of the company's output are 1GB USB flash drives.

Memory Electronics' R&D focus this year is on high-end, large-capacity drives. The company is also keen on developing sleek enclosure designs. The company's R&D team can release five models in a month.

Oscar International produces mainly 1GB models, which make up about 40 percent of its total USB flash drive production. The company's USB flash drives carry FCC, CE and RoHS certifications.

Oscar International has a 10-member R&D team. It can launch one model a month. Its newest USB flash drive features an enclosure with a transparent slot for logos.

To boost thinning profit margins and differentiate in a market where the use of the same solution yields products with almost the same features and functions, a growing number of suppliers are investing in new enclosure designs. Sleek and trendy housings are the trend, as are slim form factors and novelty shapes.

Besides product development initiatives, Guangdong suppliers are also looking to boost their overseas business to maintain competitiveness.

Oscar International exports all of its USB flash drives. Last year, the company achieved a total revenue exceeding $4.25 million. Oscar International's major markets include the US and Europe.

Hantat ships almost 100 percent of its products to its overseas clients. It projects a 20 percent increase in sales revenue this year to reach $20 million, a 20 percent growth. The company noted an increase in demand for USB flash drives, particularly large-capacity drives, in the US and Europe.

Memory Electronics also focuses on the exports market, shipping about 90 percent of its products overseas. It forecasts that its revenue will increase by 20 percent in 2008, although it anticipates the current price war will worsen in the coming months. OEM buyers represent 75 percent of Memory Electronics' annual sales. The remaining 25 percent comes from ODM. IBM is one of its major OEM clients.

In terms of prices, Guangdong makers noted a steady decline in USB flash drive prices in recent months. A few suppliers said that prices decreased by about 50 percent in just one year. In general, makers expect more price reductions if prices of NAND flash drives and IC controllers keep sliding.

Oscar International prices its 1GB USB flash drives at $5 and its 4GB models at $15 each. The company said that the prices of its products have decreased by 50 percent.