Music Dies for Chinese CD Makers

China has made music accessible by making stereos, MP3 players and amps cheaply for global brands. It's done the same for musical instruments. Several But now the music may be about to die away. The past three months have seen the demise of a lot of Chinese firms making audio equipment and electronics which the Western world no longer wants to buy. The Chinese manufacturers never made a fortune because they'd licensed the technology from western firms or were doing Original Enterprise Manufacturing (OEM), business jargon for making something for a customer which then sticks their own logo on it. 

Factory boss Mr Tang (he prefers not to give his full name), says his Hongshang International Industrial Co says sales of his MP3 and MP4 players have dropped 30%. HongShang relies on exports for 80% of business. One consolidation is that prices are not affected. It’d be impossible for prices to come down more says Tang: his 2.4 inch-screen Mp3 players are among the cheapest on the market.  The crisis has delayed his plans to shift away from doing OEM for American brands like Emerson and Element, to making Mp3s under his own company name. “The risk is too much, we’d have to invest a lot of money in marketing which we don’t have right now.”

One of China's top makers of CDs, Ke Lan Digital Corporation hasn’t been badly burnt - yet - because it sells its CDs in the Middle East and South Asia. Sales director Ms Peng says the firm is more worried about falling CD prices. A CD cost RMB0.7 in January but sells for RMB0.5 "at most" now. That’s because of a flood of factories into the business, and the ongoing stampede from CDs to Internet downloads. The firm exports 50% of output but will look increasingly to domestic sales, says Peng.

A lot of local firms which started making cheap transistor radios have moved on to higher-value products. But not everyone who’s moved upmarket has stayed above water. Sales are down by almost 30% but prices are up 10% says Mr Yuan Ling from Yi Da Shi Electronics in Shenzhen. He says the hi-fi maker has held steady because exports to Europe, which account for 98% of output, are too high value for the competition hence the firm has been able to hold onto comparatively high prices: up to US$150 for a hi-fi. The firm will begin to target the domestic market in 2009, Yuan Ling tells Beijing Beat, because he sees untapped potential in China's growing middle class.

These are three firms that have survived, but for how long? That will probably depend on how long any global recession lasts. But spare a thought for these companies, they've made it cheaper for the rest of us to listen to, and play, music.