BEIJING, Sept. 28 -- Dozens of MP3 player manufacturers in Shenzhen are bowing out as fierce competition has severely squeezed their profit margins.

    The prices of low-end MP3 brands dropped to under 200 yuan (US$25) for a 128M player, while well-known brands like Samsung and Netac are also dropping rapidly.

    ¡°Manufacturers of low-end brands now earn only 10 yuan from each unit,¡± said Jimmy Xiong, manager of an electronic products trading company.

    ¡°Such a low profit cannot keep a MP3 manufacturer alive,¡± said a manufacturer at Shenzhen Tianjian Industrial Zone. The situation is worsened by the high return repair rate as many factories cut prices at the cost of products quality. The high repair bills have forced many factories to be closed down.

    Wang Jinchi, vice secretary general of Shenzhen Electronic Chamber of Commerce, estimates there are 200 to 300 MP3 player manufacturers in Shenzhen. Some industry insiders say the number could be as big as 700 to 800 at the prime time of the industry.

    Manufacturing MP3 players was highly profitable back in 2001, when an MP3 player could bring 200 to 300 yuan in profit for its producer. The profit dropped to 80 to 90 yuan in 2002 and 30 to 40 yuan in 2004 for most small-sized manufacturers.

    Over 80 percent of the MP3 players on the mainland are produced in Guangdong and at least one third of Guangdong¡¯s MP3 players are produced in Shenzhen.

    Most of the factories are individually-run workshops without experience in making stereos. When competition heats up, they can only resort to price wars.

    ¡°The rise and down of the MP3 industry is the repetition of China¡¯s DVD and VCD industries, which had been severely damaged by fierce price wars and disorderly competition,¡± said Xu Yanjun, secretary general of Shenzhen Electronics Industries Association.

    James Wang, a MP3 trader, said the MP3 player producers should have spent more on brand building and management. Most MP3 producers in Shenzhen are original equipment manufacturers, which earn the smallest profit share in the whole industrial chain.

    It¡¯s not easy to protect a brand from pirates. Wang Jinchi said this month he helped uncover an underground MP3 player factory in Shenzhen that produced several counterfeit MP3 brands.

    Pan Guangyu, whose company entered the industry in 2002 and has become one of the biggest MP3 producer, said: ¡°The elimination of smaller factories is good for the market order.¡± Pan said the government should try to help the smaller MP3 makers turn to other products, just as the Bao¡¯an District Government did to the VCD and DVD player factories.

    (Source: Shenzhen Daily/Agencies)