03.28.2001
Taiwan CD-R makers face EU dumping investigation

• Approximately 36 Taiwanese CD-R makers met yesterday to discuss ways of responding to the survey on dumping to be held soon by the European Union (E.U.). The meeting was coordinated by both the International Trading Bureau of the Ministry of Economic Affairs and by the Chinese National Federation of Industries. Reports indicate that the European Union has decided to investigate whether Taiwan CD-R makers dumped CD-R in European markets during 2000. With the EU to begin within the next month, expectations are that results will be announced Jan. 2002.

• The Industrial Technology Information Service (ITIS) has recently predicted that 2001 CD-R ASP will be around US$0.27, below the levels of US$0.31 in 2000 and US$0.7 in 1999. Our projections indicate a 2001 CD-R ASP of around US$0.25. ITIS further expects Taiwan CD-R makers to maintain gross margins at 25% for the rest of 2001. We do not believe that gross margin is a valid criteria for judging CD-R maker profitability, due to the fact that royalty expenses are included within selling expenses, instead of being included within the cost of good sold. The latest Philips (Holland) royalty requirements are that royalties should total between 15-20% of current Taiwan ASP. Taiwan CD-R makers hope to reduce royalties to around 3% of ASP. Taiwan CD-R makers expect to resolve this continuing dispute when they finalise a deal in late March or early April 2001.

• We believe that CD-R sector stock performance in 2001 reflects the stabilization of CD-R ASP, as well as improving sentiment about utilization levels. Given the current market conditions, we recommend an investment strategy of NEUTRAL for the CD-R sector.

MathaChen@Primasia.com +886-[0]2-2547-8878