Representing the DVD 3C Group - which comprises itself, Sony and Pioneer, three major DVD technology and format developers - Philips says the agreement is a "good sign" that all sides are working together in a more globalized market.

"We believe in an open environment where we need to share technology development and set global standards together with Chinese companies," said Johan van Splunter, chief executive officer of Philips' Asia-Pacific operations.

According to Splunter, who refused to disclose details of the coming agreement, Philips has tried to accommodate Chinese requirements after a round of negotiations.

Previous domestic media reports revealed that the 3C Group expects US$5 of royalty payment for each DVD player built by domestic makers.

Splunter said the agreement is largely based on the fact that the Chinese Government recognizes the need to respect intellectual property rights on a global perspective.

The Chinese Audio Industry Association (CAIA), which represents the domestic makers of DVD players, confirms the up-and-coming licensing contract.

"We have been trying to earn conditions as favorable as possible for domestic companies but it's up to them to decide about accepting the agreement or not," said a CAIA official who refused to be named.

The settlement comes after a similar agreement was reached in April between domestic DVD player makers and the 6C Group, representing another half a dozen leading developers of DVD technology and formats.

Under the April agreement, the domestic makers are expected to pay 4 percent of the net sales price of each DVD player or US$4 per player as a royalty for patents.

As an immediate result of the deal, the average export price of homemade DVD players increased by about US$10, according to a number of major domestic manufacturers like Shinco and Skyworth.

Analysts estimate that the export price of domestically made DVD players will grow by about US$20 if the 3C Group royalty, as well as other related global technology providers like MPEG Lab, is added to the overall cost.

Official statistics show that China, now accounting for nearly 25 percent of the global DVD player market, exported 10.5 million DVD players last year, reporting a 275 per cent growth on a yearly basis.

"The royalty payment will of course bring some negative effects to our exports but we have to also protect intellectual property," said Xue Qiaogen, chief engineer of Shanghai-based SVA Video Player Co Ltd.

Analysts said domestic manufacturers need help in developing core technologies for popular electronics products.

（China Daily September 5, 2002）