Analysts may have picked 1998 as the year of the DVD-ROM drive, but the rise of the low-cost PC has caused industry watchers and suppliers alike to rethink the transition from CD to DVD.
The high price of the technology, combined with the dearth of DVD-ROM software, has caused some to predict that 1998 sales of DVD-ROM drives will not meet earlier forecasts. And the revision, they say, will push out the crossover from CD-ROM to DVD-ROM until late 1999.
For much of the past three years, Japan's CD-ROM drive vendors have been marshaling their resources for a shift toward higher-margin DVD-ROM products in the belief that the CD-ROM drive is reaching its performance limit. The entrance of Taiwanese vendors into the CD-ROM market-and the subsequent price collapse-appeared to fuel the industry's desire to make a fast transition.
But Japan's strategy has stalled so far this year, leaving suppliers in that country to juggle a growing range of CD-ROM devices even as they try to stimulate demand for their DVD products. Furthermore, the end-of-life claims leveled at the CD-ROM drive market have proved premature as suppliers continue to issue new performance specs.
Analyst Ted Pine of Info-Tech Inc., a market research firm in Woodstock, Vt., originally predicted 6 million DVD-ROM drives would be sold during 1998, but recently stepped down his estimate to 5 million units. InfoTech is now projecting that quarterly sales of DVD-ROM drives will not outstrip those of CD-ROM until the third quarter of 1999, about a year later than initially forecast.
"Matsushita and Toshiba bet on a more rapid transition [to DVD-ROM], but they were blindsided by the sub-$1,000 PC, I think," Pine said.
InfoTech anticipates that 22 million DVD-ROM drives will be sold next year, down from an earlier estimate of 24.2 million units.
Interviewed separately, representatives of Matsushita Electric Corp. of America and Toshiba America Information Systems Inc. said they will continue to manufacture CD-ROM drives until their customers dictate when the final transition should occur. Executives at Hitachi America Ltd., however, said the company's withdrawal from the CD-ROM drive market is under way.
Hitachi is already promoting its DVD products and will stop making its high-speed, 32X CD-ROM line in about three months, according to Werner Glinka, director of marketing for the Brisbane, Calif., company's computer division.
"We're about in the middle of the transition," Glinka said. "We're still in 32X CD-ROM products, but the future is very clearly DVD."
Part of the uncertainty surrounding the transition to DVD-ROM concerns the price of the drive itself. According to Pine, a 32X CD-ROM drive costs about $50 in OEM quantities, roughly half the price of a 2X or 4X DVD-ROM drive that plays CDs at near-32X speeds. In addition, OEMs must buy an MPEG-2 decoder chip or software from a separate supplier to take advantage of DVD-ROM's video capabilities.
In short, the net cost of DVD-ROM optical storage can exceed 10% of a low-end PC's bill-of-materials budget, a ratio that many OEMs find unacceptable, according to Pine.
Executives from Toshiba disagreed with the contention that a DVD-ROM drive is beyond the reach of a sub-$1,000 PC.
Maciek Brzeski, director of optical marketing for the Irvine, Calif., company's disk products division, declined to discuss specific drive pricing, but claimed that prices for older DVD-ROM drives will continue to fall as newer, faster products are introduced.
This price erosion appears destined to follow the same path that has squeezed margins from the CD-ROM drive market, according to observers. The phenomenon is known within industry circles as the "X race," the process through which vendors push out ever-higher-speed drives.
While DVD-ROM technology was originally viewed as a way to escape the speed contest, industry executives concede that new 4X and 5X DVD-ROM drives prove the X race is simply being run on a new track.
Even within the maturing CD-ROM drive market, the need for speed is still great. A year ago, suppliers claimed that CD-ROM drives had peaked at 32X, having hit what was believed to be an insurmountable physical limit. At higher speeds, imperfections in the disk media caused the device to wobble and forced the entire drive to spin down in order to read the data.
However, innovations such as Zen Research Inc.'s multitrack read capabilities now allow CD-ROM drives from Kenwood Corp. to claim "true" 40X status. And Toshiba's Brzeski said his company's 32X and 40X drives use motors that automatically balance the media, compensating for the wobble and spinning drives at a faster constant rate.
The result is that 32X drives are now grudgingly giving way to 40X speeds, while component suppliers such as Cirrus Logic Inc. have developed controllers that allow data to be transferred at up to 45X speeds.
The problem, according to some suppliers, is that the innovations required to achieve such high speeds may mean little to the end consumer.
"We can call it 'super this,' or 'ultra that,' but that's only for the techie multimedia-upgrade kits," said Jim McCaffrey, vice president of sales and marketing for Mitsumi Electronics Corp. in Irving, Texas.
For DVD-ROM suppliers, the most frustrating roadblock to a wholesale industry technology conversion is the software. To date, only 30 or so consumer software titles have been designed for the new DVD-ROM format, according to Pine, with about 100 enterprise software creators distributing their wares in DVD-ROM form.
Furthermore, popular consumer video- game consoles such as Sony Corp.'s PlayStation and the forthcoming Dreamcast console from Sega Ltd. are based on CD-ROM technology, not DVD-ROM.