The 1GB D-621 model from Shenzhen CDT of mainland China boasts an OLED screen and stainless steel housing and supports MP3, WMA and WMV formats.

Bigger storage and improved audio outputare among the features integrated into the line.

The flash MP3 player line remains alive in mainland China and Taiwan manufacturing circles despite stiff competition, shrinking profit margins and an industry settling into maturity. Makers continue investing in R&D to further improve the line and ensure that several new products with add-ons are released periodically.

On the mainland, the production of a basic flash MP3 player with music playback as its only function dropped significantly in H1 2007. This prompted makers to direct their efforts to portable media player (PMP) production. Storage capacity and screen size are also top concerns for mainland manufacturers.

Taiwan has also begun the shift to flash MP3 players with video support. Several other features are being integrated into the line. Despite market saturation, Taiwan makers forecast that output will remain stable. All contacted companies have their own R&D teams for sustained product development.

Statistics from iSuppli indicate that consumers will snap up 268.6 million MP3/PMP players in 2011, a compound annual growth rate (CAGR) of 13 percent from 2005. The revenue of global MP3/PMP makers will increase from $14 billion to $21.5 billion in the same period, with 7.4 percent CAGR. IC design houses such as mainland China’s Actions and South Korea’s Telechips have enjoyed a fast growth rate to finally challenge market leaders like SigmaTel and PortalPlayer. Today, a new batch of competitors—Fuzhou Rockchip, Chipnuts and Anyka—are entering the market to further intensify competition that not only includes established makers in Taiwan but global heavyweights NXP, Samsung, TI and Atmel as well.

	The B205 from mainland China's Shenzhen Thomson is a 1GB flash MP3 player that supports MP3, WMA and WAV audio formats and has voice recorder.

Flash MP3 players with 256MB and 512MB continue to lose market share in mainland China, with 1GB products now leading the line. Aside from storage capacity upgrades, cosmetic design and function integration are also the main R&D focus of interviewed makers.

Suppliers no longer promote single-function products. A player from the mainland could now offer voice recorder, video playback, clock, speaker, game, synchronized lyric display and text viewer capability. Aside from MP3, WMA and WAV formats, current models also support TXT, ASF, Ogg Vorbis, MTV/AMV video, JPEG, GIF, SWF, MPEG-4 and AVI. Supplementary functions include plug-and-play, FM radio with preset channels, multiple language support, camera, DVB-T, and GPS receiver and navigator.

Since video capability is one of the selling points of the line, mainland manufacturers have also enhanced the products’ screen quality and size. In 2006, 1.8in units were the mainstream; a year later, TFT-LCD screen sizes of more than 2in have taken their place.

However, market competition—becoming more pronounced of late—has motivated mainland makers to look for other ways to differentiate their products from their rivals. This caused another product development to be initiated in H2 2007: enhancing sound quality.

One maker optimistic of the flash MP3 player line is Beijing Newman Ideal Digital Technology Co. Ltd, which expects a better market performance in the coming months. It is enhancing its R&D resources through more investments to speed up new product releases. Just last July, the company introduced the R70 PMP with up to 4GB storage. The product’s 2.8in TFT-LCD panel provides camera and camcorder support. Beijing Newman has also released a new version of its MiniAll VX1000 super multimedia box.

	A-win of Taiwan has released the TMP-743FS, which supports FM broadcasts, e-books and photo viewing.

The separation of the controller IC and audio chip has helped improve sound in makers’ high-capacity offerings. Adding support for lossless compression formats such as APE and FLAC has also contributed to sound enhancement.

The D-621 is one new product with enhanced sound. The 1GB model from Shenzhen CDT boasts an OLED screen and stainless steel housing. It supports MP3, WMA and WMV formats, multiple languages and multiple playing modes with seven sound effects. The rechargeable Li-ion battery can keep a running time of at least 8hrs.

Shenzhen Thomson Digital Technology Co. Ltd released the B205, a 1GB flash MP3 player that uses one AAA alkaline battery. The model supports MP3, WMA and WAV audio formats and has a voice recorder. The company launched products supporting APE and FLAC this year, but currently has increasingly shifted production capacity to video MP3 and MP4 players.

For Taiwan makers, intense price competition with mainland China players and the risk of being gradually replaced by convergence devices are two key issues. According to interviewed manufacturers, entry-level, single-function flash MP3 players face the biggest threat posed by the more sophisticated, high-capacity mobile devices.

Like their counterparts from the mainland, Taiwan suppliers have begun introducing enhancements—video handling, extended memory and touchscreen design—to their flash MP3 players to stay relevant.

Video function tops the enhancement being introduced to the line. In addition to photo viewing, manufacturers are also adding digital camera, digital TV and MPEG-4 playback features into flash-based MP3 players.

Higher-capacity models with memory card readers are the main features of flash-based MP3 players from Taiwan. According to A-win Computer Corp., boosting capacity to 3GB and 4GB allows for added functionality. The company’s MP-743FS supports FM broadcasts, e-books and photo viewing.

MP3 and MP4 players also feature a touch panel design for ease of use. Dragmaster Enterprise Corp’s MP-4038 has a 2.4in TFT touchscreen display.

Flash-based MP3 players introduced this year can support up to 8GB to 16GB memory size, but mainstream models have 512MB to 2GB storage capacity. To avoid being affected by the fluctuation in flash memory prices, most manufacturers in Taiwan add a memory card slot for external memory expansion. Dragmaster is adding Bluetooth features to its new models to allow wireless communication.

Yung Fu Technology Electrical Corp.’s ML-617 features a 7in LCD, calendar and clock display, a multi-card reader for SD/MMC/MS formats, a slideshow for photos in JPEG format, USB host, rechargeable Li-ion battery, A/V input, TV output and remote control. The model supports MPEG-1, MPEG-2, MP3 and MPEG-4 playback. The model also supports rotation, photo zoom and photo thumbnail functions.

Though already a mature market, the flash MP3 player line is still being challenged by several factors that can dictate pricing for the next several years. The interviewed companies in Taiwan have different opinions about the price trend in the next 12 months. For short-term valuation, some companies expect Apple iPhone sales to bring up the costs of flash memory, and as a result drive up the cost of flash-based MP3 players. However, a long-term scenario has the price of the players decreasing.

Since April 2007, both single-level cell and multilevel cell NAND memory prices have skyrocketed. Many brands in mainland China have revised their selling price to keep material costs down. This is not good news for the MP3 player manufacturers in the region, whose anti-risk capability is less than foreign brands. Already, orders for some of the makers have shown a dent.

For the current MP3 player market, interviewed makers have expressed hope of exploring more export opportunities abroad amid fierce competition at home.

For mainland China, companies that provide MP3/MP4 IC solutions and OEM makers are developing rapidly, and the supply chain is becoming mature. Manufacturers have established strong markets in Europe, Africa, the Middle East, Southeast Asia and India.

As one of the well-known OEM MP3 player makers, Shenzhen CDT has worked with OEM/ODM customers from Germany, Austria, Australia, Hong Kong and Taiwan since 2002. Half of its production is shipped abroad.

Shenzhen Luckystar Digital Technology Co. Ltd exported 95 percent of its products in 2007, with Wal-Mart, Carrefour and Best Buy among its big customers. Export destinations include Europe, North America, Russia, the Middle East and Southeast Asia.

Beijing Newman is also active in other Asian countries. The company attended this year’s Computer Electronics World Expo in Vietnam, which it considers an important market on the continent. Already, Beijing Newman has established special policies to support distributors and resellers in the area.

In Taiwan, all of the companies contacted said they mainly offer ODM services. The makers do not promote their own brand due to intense competition. Companies on the island are all export-oriented.

The United States still remains the biggest market for Taiwan makers. A-win mainly exports to South and Central America and South Africa. Dragmaster’s sales mainly come from Europe, the U.S. and the Middle East.

About 80 percent of Yung Fu’s sales revenue is from exports. The maker ships products mainly to North America and Europe, accounting for 70 percent of sales revenue. The remaining 30 percent is generated by contracts from East Asia and Central and South America.

Most of Yung Fu’s products are sold under OEM terms and contribute to 90 percent of sales; the company’s own Lasonic brand accounts for the remaining 10 percent.

Most of the interviewed mainland China manufacturers’ production processes are done in-house, and monthly output remains steady. Shenzhen CDT adopts chipsets from SigmaTel, Sunplus and Actions, depending on the model. Its MP3 and PMP production output is 300,000 units per month. In 2006, it achieved a sales revenue of $75 million.

Shenzhen Thomson’s controller ICs are from Winbond, Philips, Actions and Rockchip. The maker’s plastic injection, silkscreen, SMT, assembly and testing are done in-house.

In Taiwan, most manufacturers have production facilities located in mainland China to lower production costs. They expect the market to remain stable or slightly slow down due to maturity and intense competition. In addition, the product line is facing the risk of being replaced by other devices, such as high-end mobile phones.

Taiwan manufacturers are investing heavily in R&D to ensure the regular release of new models. All the contacted companies have their own R&D teams.

A-win and Dragmaster employ about 10 R&D engineers each. Yung Fu assigns 22 R&D engineers to work on mechanical, hardware and software designs in-house. Its engineers can conduct firmware adjustment and upgrade, as well as user interface design. The company has 12 QC workers, and 120 to 130 employees who work six production lines at its 20,000sqm factory in Tainan.

A-win’s monthly output of high-capacity flash MP3 players was about 60,000 units in 2006. The company forecasts the output to remain stable in 2007 citing a mature product line. It sources its key components and raw materials from mainland China.

Dragmaster, with a monthly output of about 20,000 units last year, also sees a stable output for this year. The company sources ICs, flash memory, LEDs and OLEDs from the mainland. It plans to add two SMT machines.