Ten major Chinese television makers have founded a new company to develop cutting-edge technology and improve the bottom line by negotiating reductions in patent fees with foreign rivals.

The Shenzhen Zhongcai Union Technological Co. Ltd, set up on Monday, will compile a pool of digital TV patents and integrate domestic and international intellectual property right resources for China's TV industry, said Luo Qiulin, general manager of the company.

The company will also help Chinese TV makers negotiate digital TV patent fees with foreign patent holders, he said.

The ten shareholders include the nation's largest TV maker TCL and other manufacturers like Changhong, Haier, and Xoceco, each of whom has contributed one million yuan (130,000 U.S. dollars), according to China Securities Journal.

The TV makers will share technologies and enhance the nation's R&D (research and development) capacity in the TV industry, said an analyst with Hisense, one of the shareholders.

"There are more than 400 patents in the pool and more will be added from the ten makers and beyond," said an insider.

According to the U.S. digital TV switching timetable, all sets sold from March 1 this year must conform to the technical requirements of the U.S. Advanced Television Systems Committee, or ATSC standard.

The China Chamber of Commerce for Import and Export of Machinery and Electronic Products said in a report that five of the more than 170 patent holders of the ATSC standard, including Sony, Thomson and Tri-Vision, have demanded Chinese producers pay ten U.S. dollars per set sold in the United States.

"The ATSC charges about 30 U.S. dollars of patent fees for each TV set sold," said TCL chairman Li Dongsheng.

"Every year, Chinese TV makers have to pay one billion U.S. dollars of patent fees, consuming one third of their annual profit," he said.

The fees are a heavy burden for China's TV industry as its profit margin is very thin, said Bai Weimin, with the products bureau of the Ministry of Information.

Chinese manufacturers price CRT sets at 61 U.S. dollars on average and LCD TVs at 320 U.S. dollars. Gross profits are only 10 percent of the price, and the patent fee wipes out profits for Chinese producers, Bai said.

"As a result, some firms may have to retreat from the U.S. market."

Since the early 1990s, China's color TV producers have paid five to seven U.S. dollars in patent fees to foreign appliance makers like Thomson, Sony and Tri-Vision for each TV set they sold.

Analysts said TCL and Xiamen Overseas Chinese Electronic Co., Ltd. (Xoceco) were expected to be hit hardest as they had the largest share of TV exports to the United States.

Xoceco spokesman Wei Zili said, "Domestic TV producers should accelerate the development of core technologies. This is the ultimate solution."

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