The Zling Studio from Hong Kong's Zoltrix features a 3.6in TFT LCD, an SD/MMC expansion slot and 320x240pixel 30fps video recording in ASF format.

Bluetooth, TV tuning, touchscreens next major trends; prices to continue sliding

Global shipments of portable media players (PMPs) will reach 54.8 million units in 2007 and 96 million units in 2008, based on data from research firm iSuppli. This represents a huge jump from the total shipments of 5.9 million units in 2006. Much of this growth is happening in the flash PMP line, which although not as overcrowded as the MP3 player industry, is as intensely competitive. The flash PMP line controls the low-end and midrange segments of the entire PMP line across Greater China, with hard disk-based PMPs slowly capturing the high-end segment with their larger storage capacity.

Despite the flash PMP's major role in the overall PMP market in Greater China, the industry is increasingly challenged by several issues. Foremost of these is the intensifying price war, which is further fueled by the flood of low-cost PMPs from mainland China. Makers keen to escape the price war are taking the innovation route, in terms of either features and functions or design, but are faced with fluctuating component prices.

The competition has spawned different designs, expanded functionality and add-on features. In addition to larger memory capacity—more models now boast 2GB to 4GB memory—makers are increasing screen sizes and incorporating digital TV tuners. Suppliers expect wireless capability, mainly in the form of Bluetooth, and touchscreens will be available in more new releases.

Prices are expected to continue to decline due to stiff competition and sliding prices of some components.

To cushion the impact of fluctuating flash memory chipset prices, some companies have sorted to releasing PMPs without built-in memory and instead incorporate flash memory card slots.

There are at least 20 suppliers of flash PMPs in Hong Kong. Most companies have a strong background in information technology (IT) and portable digital electronic products, with flash PMPs representing their high-end line of video-capable MP3 players. Almost their entire output is for export, with a few makers also supplying to retailers in Hong Kong and mainland China.

Taiwan makers are keeping their output steady for the rest of 2007. Most makers are concerned that the product line might be replaced by other portable devices that feature multimedia playback such as multimedia-enabled mobile phones.

Mainland China makers, although able to easily offer entry-level flash PMPs at relatively lower costs than their Hong Kong and Taiwan counterparts, continue to face strong domestic competition and design competency issues.

	The AF-Chocolate from mainland China's Affluent supports JPEG, AMV video and several audio formats.

In Hong Kong, flash PMPs with 4GB and 2GB internal memory have taken over the mainstream. Some suppliers offer up to 6GB and 8GB internal memory. Flash PMP models with card slots can further increase the storage capacity by up to 2GB.

1GB and 512MB models continue to be offered for the entry-level segment. A few models with card slots are shipped without internal memory. Flash PMPs with 4GB memory or 4in or 7in displays are categorized as midrange and high-end models.

Many mainland China manufacturers, which focus mostly on midrange products, are likewise increasing the memory of their HDD PMPs. For example, mainstream flash PMPs from Shenzhen TJD Information Co. Ltd feature up to 4GB storage capacity and 2.4in LCDs.

The company sources flash memory chips from Samsung, Hynix and Toshiba.

Affluent International Co. Ltd's flash PMPs have a built-in storage capacity of 128MB to 4GB.

In 2007, Taiwan makers started offering flash PMPs that provide 8GB to 16GB memory. Mainstream capacities are 512MB to 2GB. To avoid the volatile pricing of flash memory chips, most makers incorporate memory card slots instead of built-in flash memory chips.

Zoltrix Technology Ltd of Hong Kong has developed the Zling Studio, which features built-in 512MB to 4GB flash memory, plus an expansion slot for Secure Digital (SD) and MultiMediaCards (MMCs). The unit comes in a slim aluminium housing and has a 3.6in TFT LCD. It plays ASF, AVI, VOB, DAT, WMV, MPEG and MOV videos and records at 320x240pixel 30fps in ASF format. It supports MP3 and WMA audio files, JPEG slideshow and time scheduled TV recording. Calendar function, games and rechargeable Li-polymer battery are included.

Another offering from Zoltrix is the Zling Eva Eye, which features an SD/MMC slot. It has a 2.5in TFT LTPS LCD, 320x240pixel 30fps video recorder, MP3/WMA player and 2MP digital still camera. It comes with TV input and output jacks. It supports time scheduled TV recording, voice recording and photo slideshow. A rechargeable Li-ion battery is included.

Zoltrix will release new models with microSD expansion slot before the end of 2007. It plans to convert its remaining models that use SLC flash memory to MLC in order to lower prices.

Hong Kong-based Tvgogo Technology (HK) Ltd has released the DTV35A. It comes with A/V-out jacks for CVBS and PAL systems, and an SD card slot for playing multimedia files. It has a 3.5in QVGA TFT screen, built-in radio and DVB-T receiver. EPG, Teletext and a multilingual OSD are supported. Each unit comes with a Li-polymer battery and remote controller.

The DTV25, also from Tvgogo, features a 2.5in LTPS TFT screen, SD card slot and built-in DVB-T receiver. It comes with an integrated FM radio, mono speaker, touch sensor keys, A/V-out and earphone jacks, and USB port. Brightness, contrast, color and volume settings are digitally controlled. The device supports EPG and Teletext functions, and is available in black and silver.

	Mainland China's Shenzhen TJD has released the SYM-509, which features a 2.4in QVGA screen.

Due to its limited video capability, the flash PMP is generally targeted at the entry-level segment of the entire PMP market—between audio-only MP3 players and hard disk drive (HDD) PMPs. Most interviewed suppliers manufacture both versions.

A few flash PMPs are now able to support multiple video formats, but most support AMV or MTV formats only. Since only low-quality video playback is possible in many models, 2in and smaller screens are sufficient. Few models have larger than 2.5in displays.

The MP-C7095 from Hong Kong's Coby International Ltd plays MP3/WMA audio and AMV video, as well as displays JPEG images and text files. This 9.4mm thin unit features a 1.66in 160x128pixel full-color TFT LCD, touchpad control, USB 2.0 interface and built-in microphone for digital voice recording. It also has an integrated FM radio/recorder, 3.5mm earphone output, rechargeable Li-ion battery and WMDRM10 support.

Another model from Coby is the MP-C7097, which shows AMV video and JPEG images at 128x128pixel resolution, and plays WMA and MP3 music with ID3 tags and synchronized lyrics. The MP-C7097 supports WMDRM10. It features a 1.5in CSTN display, built-in stereo speakers, FM radio/recorder, digital voice recorder, USB 2.0 port, 3.5mm earphone socket and line-in jack for recording from external audio sources. It comes with a rechargeable Li-polymer battery.

Coby is strategically building its brand. Its latest flash PMPs feature sleek designs targeted at the teenage and young professional markets. In early 2007, Coby announced a strategic partnership with independent music retailer eMusic, allowing some of the former's portable entertainment products to be bundled with a trial offer of 50 free downloads from the latter's Website. The deal enables owners of Coby devices to quickly download digital music content from the eMusic catalog directly onto their computer desktops and PMPs.

Zoltrix's colorful Zling Nax series, which is available in glossy white and black, whimsy pink, apple green and dodger blue, supports MP3, WMA and WAV music formats; MTV videos; and JPEG and TXT. It has a 1.8in TFT display, FM radio, built-in Lithium battery and speaker, and USB 2.0 high-speed interface.

To further boost their competitive edge in the crowded supplier market, makers have started combining additional new features in their products. These new features include wireless support mainly in the form of Bluetooth, touchscreens and TV tuners. Some companies are introducing slimmer, more sleek designs and different display sizes.

Taiwan's Dragmaster Enterprise Corp. is incorporating touchscreens and Bluetooth connectivity into its new releases. The company's MP-4038 has a 2.4in touchscreen TFT display and up to 16GB memory.

A-win Computer Corp. offers the MP-743FS, which supports FM broadcast, and e-book and photo viewing functions. The company is incorporating digital TV reception into its new models, besides adding storage capacity.

Jumbo Technology Corp., on the other hand, is focusing on software enhancement to enable scalability for its new flash PMPs.

All interviewed Taiwan companies have their own R&D teams. Each supplier employs at least 10 R&D engineers in its R&D department. Jumbo invests $60,000 to $90,000 in R&D activities every year. Yung Fu Technology Electrical Corp. assigns 22 R&D engineers to work on ID, mechanical, hardware and software designs in-house.

Hong Kong's Zoltrix will release a flash PMP with phone function in 2008. The model will also be capable of playing downloaded games. Tvgogo, meanwhile, is developing all-in-one portable entertainment devices.

Mainland China's Shenzhen TJD plans to launch a flash PMP with built-in TV tuner. It also plans to enlarge its products' display sizes to 3.5in. For its basic flash PMPs, the company will adopt 2.8in displays. Its R&D team completes a new product every three months, with a minimum budget of about $26,000.

Kinwei Technologies Co. Ltd will emphasize ID in the future. Every month, at least two new products are released by its R&D team.

Affluent's R&D team also focuses on ID and production update. The team can launch a new product in 15 days. Normally, about 15 new products are developed every year.

BTL International Development Ltd produces flash PMPs with 1.8in, 2in and 2.4in screen sizes. The company's R&D team handles ID, PCB design and circuitry. It takes about a month for the team to release one new product.

	Taiwan's Yung Fu has released the ML-617, which incorporates a card slot for SD, MMC and MS cards.

Most mainland China makers expect prices will decline during H2 2007. Some suppliers predict that flash PMP prices will drop by at least $5 in Q4 2007.

In Hong Kong, flash PMP prices range from $35 to $36 for 1GB units, $41 to $42 for 2GB units, $57 to $59 for 4GB versions, and $77 to $88 for 8GB versions. Top-of-the-line models are in the $100 to $150 range. A big chunk of the unit price is accounted for by the internal memory. Unit prices of models without internal memory range from $10 to $30.

Taiwan's prices for entry-level models vary by memory and panel sizes. Models with built-in flash memory of 128MB to 2GB are about $20 more expensive that units with no built-in flash memory.

Midrange and high-end models, which typically support MP4 video playback and TV-out, are priced from $20 to $40 each. High-end models, which may also include 2MP cameras, TV in-and-out connection and other value-added functions, are priced above $60.

Although the general trend is toward higher density and lower per-megabit cost, the supply of NAND flash chips continues to be volatile. Memory IC makers from South Korea and Taiwan have not managed to improve supply as successfully as they have with density. Mild shortage since early 2007 has been hurting small and medium-sized suppliers, which cannot leverage large-volume orders unlike tier-one manufacturers.

Some suppliers have been forced to increase prices by 5 percent to 10 percent since the start of 2007. Fortunately, supply and prices of NAND flash memory are expected to begin to improve by Q4 2007.

Controller chip prices, on the other hand, continue to decline. iSuppli projects average selling prices (ASPs) for controller ICs to decline by 30 percent in 2007 due to overproduction. Mainland China's Actions Semiconductor is the main supplier of controller chips to Hong Kong makers. Most suppliers rely on multiple suppliers, purchasing controller ICs from Taiwan, South Korea and the United States.

LCD panels are mostly sourced from Taiwan and South Korean suppliers. An internal DVB tuner costs about $40, and an analog TV tuner is $6 to $10 each.

Hong Kong suppliers aim to grab a larger share of the international market despite the tightening competition. As experienced exporters to North America and Europe, the suppliers are licensees of relevant technologies from Sisvel, Thomson and Microsoft.

Coby, which has been manufacturing personal electronics products since 1999, is seeking to expand its distribution network in Europe. The company supplies flash PMPs to OEM buyers; its Coby-branded products go to retail channels. North America is its main export market.

Coby can produce up to 300,000 flash PMPs monthly. The company owns a 9,200sqm factory in Shenzhen, Guangdong province, and has partner factories. Its key R&D projects, such as the designs of its digital entertainment products, are carried out in New York.

Zoltrix projects its output of flash PMPs will reach 30,000 units during 2007. The company has been manufacturing multimedia products such as PC add-on cards and accessories, USB flash drives, MP3 players, modems, digital cameras and TV tuners for the past 18 years. It has branches in Germany, Italy, Israel, Jordan, Dubai and at least 15 other locations worldwide.

Zoltrix owns a 20,000sqm ISO 9001-registered factory in Dongguan, Guangdong capable of producing 2,000 flash PMPs daily. Fifty percent of its flash PMP output is shipped to OEM customers.

Tvgogo has been a supplier of portable A/V products since 1998. It owns factories in Shenzhen and Dongguan, where it manufactures digital photo frames, portable DVD players and DVB-T TVs in addition to PMPs. It can turn out up to 300,000 PMPs monthly. Aside from product development and manufacturing services, Tvgogo also provides purchasing and trading services to overseas buyers.

The United Kingdom, United States, Australia, Germany and Taiwan are Tvgogo's main export markets. It also sells to Hong Kong retail channels.

Most Taiwan manufacturers expect that the flash PMP market will remain stable, if not slightly decrease due to intense competition. As such, all interviewed companies mainly offer ODM services.

Yung Fu's H1 2007 monthly capacity was 150,000 flash PMPs. It expects stable output and export volumes in H2 2007. Yung Fu runs a 20,000sqm factory in Tainan, Taiwan with six production lines.

About 80 percent of Yung Fu's sales revenue comes from exports. Its products are distributed mainly to the United States and Europe, together accounting for 70 percent of the entire sales revenue. Other markets include East Asia, and Central and South America.

A-win mainly exports to the Central and South America, and South Africa. In H1 2007, the company had a monthly capacity of 60,000 flash PMPs, and output averaged at 30,000 units a month. These figures will be maintained for the rest of 2007.

Dragmaster's monthly flash PMP output reached 20,000 units in 2006. The company expects this figure to stay the same for the rest of 2007. Dragmaster is putting more focus on digital photo frames.

Jumbo had a monthly output of about 20,000 units in 2006 and H1 2007. Jumbo forecasts a 10 percent increase in output volume in H2 2007.

Kinwei's flash PMP output accounts for 80 percent of its production. All of its flash PMPs are exported, with about 80 percent carrying OEM brands. The main export markets are Europe, North America and South America. Some of Kinwei's OEM clients sell popular brands in Germany, France and the United States.

Kinwei's monthly output averages at 80,000 flash PMPs, against a monthly capacity of 600,000 units. The company completes PCB making, SMT, soldering, component insertion, assemblies and packaging in its factory, and subcontracts mold making and plastic injection molding.

Kinwei noted two factors driving the line. The first revolves around hot product trends relating to larger displays and larger storage capacity. The other is product quality, which could spell success or failure in the international market. Kinwei solves issues pertaining to the latter by sending out replacement parts for its products to smoothen overseas business.

Shenzhen TJD's flash PMPs account for two-thirds of its entire annual output. About 90 percent of output is exported, all of which goes to OEMs. The company ships to Europe, and North and South America.

Shenzhen TJD runs two factories in Shenzhen that cover a land area of 3,500sqm. The company is in the process of acquiring an ISO 9001 registration. The facility houses 16 production lines and 340 workers. It accomplishes in-house surface mounting, soldering, assemblies and packaging. The company outsources mold making. Shenzhen TJD has a monthly capacity of 250,000 flash PMPs. In 2007, the company expects overall sales to increase by 20 percent over 2006.

Shenzhen TJD highlighted the importance of innovative designs in securing a niche in the export regions. However, as flash memory density growth currently can not accelerate as fast as hard drives', the storage capacity of flash PMPs remains limited compared with that of hard drives.

PMPs take up 50 percent of Affluent's entire production. It is an entirely export- and OEM-based company, serving OEMs such as Volvo and Opel who would arrange for PMPs as gifts for their clients. Export business is focused on the U.S. and South American markets.

Affluent's Shenzhen factory covers a land area of 1,300sqm and has about 200 workers, including 15 QC workers and five R&D staff. Its in-house processes include component insertion, surface mounting, soldering, assemblies and packaging. Mold design and making are outsourced. Affluent's monthly output is 20,000 flash PMPs.

Besides stiff competition in the supplier market, Affluent points to the appreciation of the RMB and the need for mold design and mold making capability as key challenges for the company this period.

BTL International specializes in personal digital products. The manufacturer's entire production consists of 60 percent to 70 percent PMPs and 30 percentto 40 percent MP3 players and other fashionable electronic products.

All of BTL Internationa's products are exported to Europe, South America, North America, Southeast Asia and Japan. OEM clients, such as HSBC and Wal-Mart, absorb a collective 60 percent of the company's entire output.

BTL International has just moved to a new 3,000sqm factory, which has about 400 workers, including 40 QC team members and 20 R&D engineers. Its monthly capacity is 100,000 units. It can handle surface mounting, soldering, assemblies and packaging, with mold making being outsourced.