Prices of key CD-ROM drive parts '“ pick-up heads, chipsets and mecha/loaders '“ have long been declining, but the changes were small, keeping component costs stable for CD-ROM drive makers. With contract prices ranging from US$21 to US$23, Taiwan's manufacturers usually fetched a razor-thin profit of US$0.50 per unit.

The price trend was reversed after chipset maker VIA Technologies recently slashed its chipset price by as much as 20% and Mediatek, its main rival, followed suit. According to sources, the resulting price war has lowered chipset prices by half to US$2, bringing down costs and pressuring CD-ROM drive prices. As unit contract prices approach US$20, CD-ROM drive manufacturers say they nonetheless have managed to maintain their previous profitability, thanks to a new drive design that reduces production costs.

Some CD-ROM drive makers caution that the below-US$20 ticker does not apply to the industry as a whole, possibly only a bargain price negotiated by large clients like Dell Computer, Hewlett-Packard (HP) and Compaq Computer. The price quoted to middle and small-sized distributors is between US$21 and US$22.

CD-ROM drive manufacturers also noted that prices of other optical storage devices '“ CD-R and DVD-ROM drives, for instance '“ could track a similar course, as the price war between VIA and MediaTek escalates.