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Report: Toshiba Eating High Cost of First HD DVD Players

5 Jul, 2006 By: Erik Gruenwedel

In its zeal to jump-start HD DVD at retail in advance of rival Blu-ray Disc, consumer electronics manufacturer Toshiba Corp. apparently turned a blind eye to the bottom line.

A report by El Segundo, Calif.-based research firm iSuppli Corp. said the cost of materials for Toshiba's HD-A1 HD DVD player approaches $700 — about $200 more than the $499 price at the player's U.S. launch in April.

Toshiba also markets an HD-XA1 player for $799.

Samsung Electronics Co. late last month bowed the first Blu-ray player for $999, with Sony Corp. pledging the launch of a similarly priced Blu-ray player this month.

ISuppli estimated the HD-A1 used about $607 in materials, which excludes the costs for manufacturing, testing, cables, remote control and packaging.

The report said Toshiba used more expensive microprocessors — from Intel Corp. (Pentium 4), Broadcom Corp. and Analog Devices Inc. — than are typically used in comparable consumer electronics products. The HD-A1 also used about $125 alone in memory software, according to the report.

“The Toshiba HD-A1 is basically a combination of a low-end PC and a high-end DVD player,” said Andrew Rassweiler, teardown services manager and senior analyst for iSuppli.

The report said Toshiba expected to recoup first-run HD-A1 cost overruns with subsequent products, but questioned why the company priced the unit so far below the Blu-ray player.

“It's unusual to find this level of subsidization outside of the video game console and mobile-phone markets,” said Chris Cotty, senior analyst, consumer electronics at iSuppli.

A Toshiba spokesperson was not immediately available for comment.

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