Electronics Production | November 18, 2004

"The Chinese are coming"

“The Chinese are coming”. That certainly seems to be the opinion of many in the auto industry, concerned that a combination of low prices and technically good products will allow Chinese suppliers such as Desay, Foryou, Jensor and Red Star to erode the traditional OEM auto audio head unit business.
However, while the Chinese may be arriving in force, they collectively face a very worthy opponent. Fortress Tier One.

Although the aftermarket for audio head units is crowded, the OEM channel has surprisingly few successful players, with many well known companies still playing only a supporting role after several years of trying. In addition, OEMs have a history of purchasing from established, local, suppliers, thereby raising further the barrier to new entrants. For example, Delphi and Visteon lead the North American market; Blaupunkt and Siemens VDO lead in Western Europe, while in Japan the OEMs buy from Japanese suppliers with few exceptions.

Sub-$100 MP3 compatible audio head units from the likes of Red Star and Jensor have already proved a hit in the aftermarket and DVD/CDV-based infotainment head units are on offer too. It is surely only a matter of time before Chinese sourced navigation systems are introduced. In the aftermarket, price, brand and features are often the leading issues, with the customer deciding which to prioritise. However when OEMs consider suppliers, brand can give way to other issues such as liability, reliability, supply and quality, often at the expense of features. On top of these issues, price reigns supreme.

Long term, the Chinese certainly are coming, but in the short term, the smart money surely still rests with Fortress Tier One.


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