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DVD Player Maker's Margins just $1
callipygian-showsyst writes "This news.com story tells how Chinese DVD player manufacturers are only making $1 margins per player! The story says that 'Commoditization is hitting China's DVD player manufacturers hard, according to researcher iSuppli, Between January and May, the average selling price of a DVD player exported out of the Guangdong province came to $40.80, leaving just about $1 in profit margins for the manufacturers.'
You wonder if other business, like low-end PCs hardware, are in similar trouble."
...since they sell their hardware at a loss. (Granted, they get money from the service subscription.) Microsoft loses billions of dollars on the XBox, to sell games. This is common, and will be getting moreso. It won't be long before hardware is essentially free, and the software/services you buy are where the money is generated.
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That is the 'new' economy.. Forget the days of high profit items for most industries that
are technology related.
This is a byproduct of more efficient manufacturing, and in many cases, *fair* competition..
( something that we don't currently have in this country , but that is a different subject )
Don't expect this trend to change any anytime soon either...
Too bad it also means fewer jobs to make the money to buy the cheap items... Since it takes fewer people to make the same # of items it did 10 years ago.
---- Booth was a patriot ----
You play to the strengths of the manufacturing of each country, take out the middleman, and we no longer have to pay inflated costs for everything.
Kind of wierd to think that it's cheaper to get something made and shipped halfway around the world than it is next door, but if it makes a dollar go farther in this economy I'm all for it.
is kind of like the dot com bubble of sorts. A few people made the risky investment, and made a lot of money off it due to the availability of cheap labor, lots of natural resources, an interested government etc. Then the gold rush started, and people just poured money into China without thinking in the long term, they were told that China was a guarenteed gold mine. This led to a glut of over production(not just in DVDs, but almost any commodity you can think of), and now people have to fight eachother off with lower and lower margins to survive. That is what happens in a commodity market. They knew that getting into the business, and now we are supposed to feel bad for them?
I for one will not be crying because they were too stupid to plan more than a month ahead.
That's a $1 profit per player to the owner(s). That's plenty to live off of. This is a no-story. The workers are still getting paid, and that amount is already accounted for with this $1 figure.
Enjoy your stay.
If those players were made in the US or even Japan they would start at $100 a piece. If you're an unemployed electrical engineer in the US / Western Europe (and I know there's quite a few), relieve the boredom with a $35 multi-region DVD player.
Welcome to globalisation too - those Chinese manufacturers _are_ in it for the money
"It's not your information. It's information about you" - John Ford, Vice President, Equifax
The CEO can only give himself a -1- million dollar bonus this year, and the stockholders are barely taking in any dividends! They better start cutting wages!
Let's not forget that one can hate his government, but love his country.
Think of the iTunes Music Store, which isn't making much money but is selling tons of Apple hardware in the form of beautiful, beautiful iPods.
Fair is defined as a level playing field. If we are playing a game of soccer, and your team cheats, the match was not fair. If no one cheats, it is a fair match. It is not required that our teams like each other: it's quite possible to play a fair match against someone you absolutely despise.
Fair competition is the same. If a government is heavily subsidizing a company, that's not fair competition. If a group of companies is colluding to drive a competitor out of business, that's not fair competition. If lots of people are making the same thing, thereby driving down prices, that's fair competition.
What you seem to be looking for is no competition, wherein either a government or cartel sets prices, rather than the market. That has nothing to do with fair competition, and is really about the exact opposite.
10 PRINT CHR$(205.5+RND(1)); : GOTO 10
At least close to perfect competition since in perfect competition, the profitsare zero. I don't really see how this is a problem.
Once you figure in shipping costs, customs & foreign legal costs, time delay, and sometimes translation problems sometimes changing how you operate in the USA can actually be cheaper.
I remember reading how MPC computers (formerly Micron) was considering outsourcing like dell and gateway have done. They took a different approach, and are doing much better. They have found that they can compete while staying in the USA and not outsourcing anything. Of course, the fact that they're not in a high-rent area of the USA probably helps. The cost of living in areas like California and NYC really skews the numbers.
I don't read AC A human right
``You wonder if other business, like low-end PCs hardware, are in similar trouble.''
Yes, they are. This is why they try to squeeze every cent out of everything, leaving us with motherboards with leaking capacitors, harddrives with 1 year MTBF, memory errors, etc. Those of us who run cheap PC hardware, anyway.
Please correct me if I got my facts wrong.
Nope... so far I'm quite pleased with the products from China.
If construction was anything like programming, an incorrectly fitted lock would bring down the entire building...
... China wants control of future standards. They would rather sell razor blades than handles. Until they actually produce a substantial volume of actual content, they can't do much, however. If the government were to forbit the manufacture of foreign designs to eliminate imposed royalties, manufacture would just resume in India, and China would just have their own proprietary standard. See stories over the lsat year regarding the Chinese optical media standard, the spat over wireless protocols, etc.
Really, profit isn't the point.
The first objective is to create jobs. Especially in a socialist/communist country, it doesn't really matter whether the company makes big profits, it matters that they provide good jobs to the people. So, if the company pays the workers $2 per DVD player more than a US-owned company in China would, and makes a $1 profit per DVD player, then a US-owned company in China making the same DVD player would make three times the profit.
The second point is to build up specialization. Making DVD players takes much more skill and training than making bamboo furniture for export. This encourages Chinese kids to stay in school longer because better jobs are available, which increases the net national education, which leads to more innovation and development.
The third, and most important point, is to take over the world. Take a look at the Chinese currency. China's been making more and more stuff for export, and the US has been importing more and more from China. So, you would expect the Chinese RenMinBi to have increased in value compared to the US dollar over the last decade -- but it didn't, really.
The reason that the RenMinBi has not dramatically increased in value compared to the US dollar is that China has been systematically buying (investing in) US companies with their new US dollars just as fast as those US dollars are coming in from the US. This is called a "balance of trade deficit" for the US. It's not sustainable for China to keep doing this, but very soon the communists will OWN capitalism.
Forget this cold war shit, the best way to beat the capitalist pigs is to play by their rules (internationally), buy them out, and it's working.
It wouldn't matter much in a war. If their copies were good enough, and close enough to top of the line, and they could pump out ten to one on the copies, it might be sorta hard to fight them. One thing is for sure, given their huge industrial expansion that is poised right now to outstrip the rest of the planet in raw material needs and in energy requirements, something is gonna give. It's one thing for-say-a US dominated coalition to go in and takeover and sorta run a small nation like iraq, with total air superiority, etc, quite another with a nation the size of china. All the projections I have seen show china starting around 2010 to be up a very large stump when it comes to energy needs. They are going to not only want but *need* this huge amount of petroleum, right when a lot of even the larger fields are peaked out every place but a few nations in the middle east. I don't see them remaining passive about it for too much longer.
I also think the west bankrolling their industrial expansion will be proven to be the most critical geopolitical strategic blunder ever in the history books of the future. The western bankers got away with it when they bankrolled all sides in the leadup to ww2, and we saw what happened then. This time, the only difference is the scale is much larger, and the technology available-even crummy copies- is much more lethal.
But, we'll see. Maybe the Mr. Fusion backyard reactor will be perfected, and the chinese overlord leaders will all automagically turn into really nice guys in the next decade.
The theory where we started to bankroll them was that if we forced them to be trading partners, there would be no incentive for them to want to hurt their trading partners then. My concern is that if you look at what they buy from the west, it's all geared to make them independent from the west. Like I said, they buy factories and machine tools, why we close factories and machinists get older and are forced out of work. We buy walmart stuff from them, they buy *infrastructure expansion* products, so that they can make their own infrastructure expansion products. They are switching to vertically integrated manufacturing, while we are dropping to mere assembly of outside produced components, almost busywork.
I know that is simplistic, but it's based on a lot of research I have done over the years and just noticing where "stuff" comes from now. I mean, you have to give them some credit, they are a space power now, we've shipped them airplane factories and technology, they are manufacturing a deep sea navy with some advanced weaponry especially designed to counter the carrier battle group, etc. It looks like they are serious to me. And you look at projected population and various demographical demands, then the released reserve numbers for various raw materials around the world, and the conclusion is inescapable. We have a world poised on the brink of a 10 gallon need and desire and at best around 2 gallons remaining. That's why I said something's gonna give.
And I sincerely hope I am wrong.