Prices for both half-height CD-RW and combo drives have dropped sharply since early 2003. Contract manufacturing prices for 52x half-height CD-RW drives have dropped to US$35-40 early this quarter from US$50-60 in the first quarter. The lowest contract price in June is reportedly at US$28, down by about 50% compared to early 2003, according to DigiTimes. Contract prices for half-height combo drives, which many local optical storage companies only started volume production of in the second quarter, are also down to below US$50 this month. The prices were reported to be between US$60 and US$70 early this quarter.

As a result of the dropping prices, most Taiwanese optical storage drive makers project depressed revenues in the second quarter, already the traditional low season. Strong increases in sales are likely in the second half of the year if new recordable DVD drives do well, the companies said.

First-tier optical storage drive makers in Taiwan, including Quanta Storage, BenQ and Lite-On IT, all plan to launch recordable DVD drives in the second half of the year. Initial monthly shipments of the companies are estimated at less than 100,000 units each, sources said.