China’s Ministry of Information Industry (MII) recently negotiated a reduction in DVD player technology royalties paid by Chinese manufacturers to the 3C alliance, led by Philips, from US$5 to US$3.50, according to DigiTimes. The MII and 3C alliance at the end of 2002 agreed to a royalty of US$5 per DVD player. To increase the willingness of Chinese DVD player makers to pay the royalty, the 3C alliance recently consented to lowering the fee to US$3.50 per unit. However, it will charge an additional royalty of US$0.50 per unit for the next three to five years to make up for royalties not paid in the past.

Apart from the 3C alliance, the 6C alliance and 1C alliance claim royalty fees of US$4 and US$1 per unit, respectively, on DVD player production. The two other alliances, currently negotiating new royalties with the MII, are expected to be also willing to lower their fees.

China’s royalty model, set up with the help of government negotiation, offers a good reference for Taiwanese producers of optical drives and government authorities, the Opto-Electronics & Systems Laboratories under the Industrial Technology Research Institute (ITRI) pointed out.