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Toshiba losing on every HD DVD player sold |
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Friday, 23 June 2006 |
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 Toshiba is intent on getting an early lead in the battle for the next generation of DVD technology and they are willing to take a loss on every unit they sell according to market research firm iSuppli Corp .
iSuppli reached that conclusion after they recently dissected Toshiba’s new HD-A1 HD-DVD player and priced all of its components.
According to the company's teardown analysis, the Bill-of-Materials (BOM) costs alone for the HD-A1 exceeds its $499 U.S. retail price. The HD-A1’s estimated U.S. $674 cost figure excludes costs for manufacturing, testing, cables, remote control and packaging. Those additional costs could easily push the total cost of the HD-A1 to more than U.S. $700 per unit.
The research firm’s findings suggest that Toshiba is subsidizing the HD-A1 in an attempt to gain early market share over players that use the rival Blu-ray high-definition DVD standard. Initial Blu-ray players are scheduled for launch by Samsung Electronics Co. Ltd., Sony Corp. and others this summer. These products will have retail prices starting at $999.
One of the reasons the HD-A1 is so expensive to build according to iSuppli is the players inefficient design and expensive components. “The Toshiba HD-A1 is basically a combination of a low-end PC and a high-end DVD player,” notes Andrew Rassweiler, teardown services manager and senior analyst for iSuppli. For example, the HD-A1 utilizes an Intel Corp. Pentium 4 as the main microprocessor instead of much more cost-effective Application Specific Standard Product (ASSP) semiconductors typically used in consumer-electronics products.  Toshiba HD A1 Player $499 U.S.
According to Chris Crotty, a senior analyst at iSuppli, the level of subsidization for the HD-A1 is very unusual. He says this type of subsidization is normally only found in the video-game console and mobile-phone markets where sellers can recoup their losses through subsequent game sales or subscription fees. It's not clear how the subsidization of the HD-A1 can be recouped by Toshiba and Mr. Crotty wonders if Tohsiba "pricing its player so much less than Blu-ray is worth the financial risk,”
Reviews of the HD DVD player to date have been mixed with users generally praising the picture quality while complaining about long start up times.
The Toshiba HD-A1 retails in Canada for $699 CDN, however, the player has been seen in stores on-sale for as low as $595 CDN suggesting that even with the sizable subsidy, sales are weak.
iSuppli forecasts that factory shipments of all next generation DVD equipment—both HD-DVD and Blu-ray—will climb to 65 million units in 2010, up from 1.6 million units in 2006. But unlike other industry experts, iSuppli’s Crotty doesn’t foresee a clear winner in the battle between HD-DVD and Blu-ray.
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