Cheaper DVD recorders may not be under the tree this Christmas, but Taiwan chip makers hope to make the consumer machines the stocking stuffer of choice by next winter. Aiming to sharply lower the cost of DVD recorders, the island's top two optical chip makers are preparing chip sets that should make the machines more attractive to consumers by the second half of next year as greater competition and higher volumes drive IC prices down. "After that, there won't be any reason for recordables to be so expensive," said Chin Wu, president of ALi Corp., formerly known as Acer Laboratories Inc. Currently, DVD recorders from Panasonic and Philips sell for between $600 and $1,000 at places like Circuit City. Once the Taiwanese enter the market, Wu believes that can come down to under $300 by the end of next year.

ALi will release samples of its DVD read and write processor in the first quarter, with an integrated TV encoder and compatibility with DVD+RW/-RW formats. The chip will link with its in-house analog front-end chip, for reading RF data from a laser detector and converting it to digital format, and a MPEG-2 encoder/decoder for data compression and decompression, which was developed in-house from its own intellectual property. Small-volume production of the chip set may start by the end of the second quarter.

MediaTek Inc. plans samples for the third quarter next year. Its offering will be similar to ALi's, except that it will use a third-party MPEG-2 encoder/decoder.

Both companies will also spin their DVD-R IP into offerings for the PC market at around the same time. The new chips come at a time of increasing competition for MediaTek, which has seen ALi nip away at its DVD player market share and newcomer Via Technologies Inc. slash its margins on more mature CD-ROM chips.

To fight back, the company launched a highly integrated CD-RW/DVD-ROM chip, with an MPEG-2 decoder on board for the DVD player market. MediaTek started shipping the chips in March and will soon release a follow-on with an integrated TV encoder and progressive-scan functionality.

Tighter fit

ALi isn't far behind. Its chip will hit mass production in September and will also integrate a TV encoder and MPEG-2 decoder, which has traditionally been a discrete chip market dominated by ESS Technology Inc. For its part, ESS is also planning a single-chip solution, using its MPEG-2 IP and a DVD servo controller from ALi.

As the more tightly packed silicon hits the market, it's likely the transition to smaller pc-boards will speed up. The integrated chips help cut down on the amount of DRAM and flash memory, therefore reducing system cost. "Yet it has taken some time for the design to catch on because it went from a front-end/back-end solution to a single PCB solution," said Yu Ming-to, an executive at MediaTek.

ALi's Wu agreed. "In the past, the loader supplier manufactured the loader with the servo controller and sold it to small and medium-sized companies. Then they chose their own MPEG-2 solution" from a range of component suppliers, he said.

But the change is taking place, Yu said, and that should help spur the market for portable DVD players.