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Taiwan's 3rd-largest Optical-Disk Maker Applies for Corporate Restructuring

Aug 05, 2008 | By Philip Liu

Taipei, Aug. 5, 2008 (CENS)--Prodisc Technology Inc., the world's fourth largest and Taiwan's third-largest optical-disk maker, filed for corporate restructuring yesterday (Aug. 4) and will exit the market, a move expected to give a relief to other makers in the line from the throat-cutting competition which has plagued the optical-disk market for five years.

Two major beneficiaries of the development will be CMC Magnetics and Ritek Corp., the two leading Taiwanese optical-disk makers, which may be able to hike their prices for the second time this year in the fourth quarter and turn their operations into black in the quarter.

Prodisc boasts a global market share of 11%, trailing CMC Magnetics, Ritek, and India's MBI. Its exit, therefore, may reverse the glut in the market, which is suffering from 10% excess supply, thereby ending the bearish market which has lasted five years.

Therefore, CMC Magnetics and Ritek may be able to raise their prices again in the fourth quarter, following the 10% hike in response to the increase in materials prices this month.

As a result, Robert Wong, chairman of CMC Magnetics, pointed out that his company may be able to turn profitable in the fourth quarter, for the first time in many years, when many makers in the line have gone under. Following the implementation of the macro economic control policy in China, some 100 makers in the line have called it quit this year, helping to rectify the imbalance between supply and demand in the market.

Prodisc blamed the prolonged sluggish market and the demand of high royalties by Philips for its decision to seek court approval of corporate restructuring and bankruptcy protection. The company revealed that its liabilities now top NT$8.6 billion.

Prodisc pointed out that the provisional seizure of the company's banking accounts by Philips for the controversy over royalty payment has dealt a serious blow to the company's credit standing, inflicting serious difficulty on the company in fund maneuvering.

At of the end of June, the company only had NT$85.8 million worth of liquid assets in hands, a far cry from the need of NT$500 million to repay its short-term loans and payable negotiable instruments, giving the company no other choice but to seek corporate restructuring.

Prodisc is the second major Taiwanese optical-disk maker having filed for corporate restructuring recently, following the move of Optodisc Technology Corp. last year.


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