ESS Technology International Inc said a new type of home video product, the MPEG4 player, is going to replace the current video CD (VCD) player because of better image quality, convenient operation and low cost.

As a leading supplier of silicon solutions for digital audio, video and imaging consumer electronics, the US chip maker has introduced the new solution of VCD plus MPEG4 to Chinese manufacturers and expects sales volume of the new products could account for more than 50 percent of the total VCD player shipment in Chinese market.

"The image quality will be as good as DVD player displays but the cost will be nearly the same as the VCD player," said Victor Ren, vice-president of marketing of ESS. "The operation also becomes more convenient because one disk could play a whole movie rather than two as the traditional VCD player requires," he said.

According to Ren, the new product is expected to be on the market in September.

"We have reached common ground with manufacturers that prices of MPEG4 players, more functional than VCD players, will be higher by a range of 10 to 15 percent, a reasonable and acceptable level to attract potential consumers," said Ren.

He estimated that 10,000 to 20,000 units of the MPEG4 players could be sold in one or two months. Currently, a VCD player costs 200 to 300 yuan (US$24.20 to US$36.20) in China.

Although shares of ESS, a NASDAQ-listed company, recently plunged because of weak demand in the video market, the company has grabbed a good share of the rising VCD player market in Asian and East European countries.

The total shipment of VCD players in China was 23 million units in 2003 28 percent up from a year earlier, according to Ren. In India, growth reached 100 percent from 2002's 9 million units to 18 million units in 2003. In East Europe, 15 million units of VCD players were sold last year, representing a year-on-year increase of 30 percent.

"Surveys showed that the entire VCD products market recorded more than 40 percent growth last year, which means the new product still has much room to develop," said Ren.

While DVD players, more costly at around 1,000 yuan (US$120.8), have been widely purchased in urban areas of China for family entertainment, VCD players are still the most chosen for people in the nation's rural areas, more populous than urban areas.

Struggling Chinese VCD player manufacturers, whose profit has been razor thin amid fierce competition in the domestic market, said that the new products will create new value in domestic and overseas markets. Nearly 60 percent of the exported products go to other Asian countries.

MPEG4 was the fourth version developed by Moving Pictures Experts Group (MPEG) in late 1998. It is now widely used in computers for on-line movie watching, video phones and video emails. MPEG1 is primarily used in VCD players and MPEG2 in DVD players.

(China Daily August 10, 2004)